Before the pandemic airlines were earning billions of dollars a year in change fees. This fee could range up to $200 per person per flight. But now things are changing as the airlines want people to fly and they are waiving the change fees.
Due to the pandemic air travel was at a halt. And there was no demand for air travel starting in March. So the airlines allowed the passengers to change flight plans without paying fees. j
But it was considered a temporary change until Sunday. When United Airlines announced that it would not charge most of its change fees for good.
United Airlines Decision
“When we hear from customers about where we can improve, getting rid of this fee is often the top request,” said United CEO Scott Kirby. “Following previous tough times, airlines made difficult decisions to survive, sometimes at the expense of customer service. United Airlines won’t be following that same playbook as we come out of this crisis.”
Other Airlines Following the Suit
However, Delta Air Lines and American Airlines also said on Monday afternoon that they are also dropping most change fees permanently.
“We’ve said before that we need to approach flexibility differently than this industry has in the past. And today’s announcement builds on that promise to ensure we’re offering industry-leading flexibility, space, and care to our customers,” said Delta CEO Ed Bastian.
“American Airlines is offering more flexibility and ease than ever before, should travel plans change,” said American’s Chief Revenue Officer Vasu Raja.
Southwest, the fourth largest US airline never had change fees. Moreover, many small airlines are also planning to drop change fees. Now that the big four that account for more than 80% of domestic air travel don’t have the fees, things might change.
“This is a huge move,” industry consultant Michael Boyd said after United’s decision. “The other major airlines will have to follow suit.”
Previous mode of work
However, in 2019 airlines altogether earned about $2.8 billion from change fees. Dropping the lucrative fees underscores that the balance of power between airlines and passengers rests firmly with customers today. That doesn’t happen too often, noted Philip Baggaley, the chief credit analyst for airlines at Standard & Poor’s.
The airlines are taking these actions as at the start of summer air travel was rebounding but in July it started dropping. Noticing the drop in air travel airlines are doing anything possible that might be keeping people from booking.
“The airlines are in a position where they are not generating a lot of revenue,” said Helane Becker, an airline analyst at Cowen. “If this gets people to book, that’s a huge positive for them.”
Becker said that business travelers were the ones who were paying the most fees in the past. But most business travel remains grounded, only about 5% of pre-COVID levels by her estimate.
“Even if you want to travel on business, I’m not sure that corporate clients want you in their office,” she said.
And businesses have discovered they don’t need as much air travel as they did in the past.
“The airlines want to retain as much traffic as they can from people who are otherwise willing to hit the Zoom and Skype button,” said airline consultant Boyd.
In addition, he said, “When times were good, the airlines wanted to have people think twice before they canceled,” said Becker. “Now, [the end of change fees] this gives people the confidence they can book, cancel, and rebook.”