Delta Airlines Can Reduce Extreme Change Fees And Variable Freight Prices

Just before the pandemic, airline analysts were abuzz with hints from Delta Airlines

that he could rethink the costs of switching airlines. Airplane seats are perhaps the most variable priced product in the world. As satirist Dave Barry noted, “Federal law requires that two people on an airplane do not pay the same price for their seats.” We see both an extreme application of price discrimination (hoping to charge customers different amounts for the same depending on factors that predict their willingness to pay) and also the vagaries of a product which, s’ it is not used as intended, disappears with its lost potential value.

Ultimately, the pandemic prompted most airlines to drop change fees, and several, including Delta and United, have said the removal was permanent, at least on overseas flights.

Part of the variability has been the trade-off between travel flexibility and cost. On most airlines, very few tickets are refundable if canceled or unused, and the cost of refundable tickets is so much higher than only a passenger who changes flights almost every time they travel. would buy them in advance. All other tickets had a change or cancellation cost, usually the fare difference plus a change fee of around $ 200. This difference in fare can also be extreme, because as a flight approaches, only the most expensive fare classes are offered for sale. Some airlines offer same-day changes to elite passengers with no change fees, but the “fare difference” fee can eclipse them.

It is found not only in the air, but also on rail. If you’re willing to commit to a specific trip and buy in advance, you can pay a lot less for a flexible or last-minute ticket. On the other hand, things like local public transport don’t try to make prices variable at all. Southwest Airlines

has always been much more reasonable in terms of changes – although this also increases prices closer to a flight, in most cases it allows fares to be reused as credit for future flights.

There’s an odd psychology to this, and these fees make the commute a lot more painful than it should be. You are stupid if you buy anything other than the cheapest and inflexible tickets, because even if every now and then you just have to throw that money away and buy new tickets that are expensive to change, you will pay less than buying new ones. expensive tickets every time. Our minds don’t like it, however, and recoil at what appears to be huge additional costs for often minor schedule changes.

The key to this is to understand that all of these change fees are no longer there just to price discriminate, they are major revenues for the airlines as well. In fact, airlines are increasingly good at predicting flight loads that much of the time, when a passenger cancels a seat, they easily fill it up again, losing very little revenue to the seats. empty. Airlines could actually measure how often they lose revenue due to a cancellation or change, and charge just that amount, plus a reasonable mark-up, turning it into a service charge rather than a source of loss. income.

Of course, once they offered much more flexible travel, they would make more changes, so that should be factored into the final price. They might have different change fees for different routes, or they might keep a universal one to keep things simple, as long as it’s revenue neutral.

Being revenue neutral should address the issue of revenue losses due to changes, but this does not fully address the desire of airlines to apply differential pricing. They want only the most cost-conscious passengers to get the cheapest tickets. They want richer passengers and business passengers to pay more. One of the main ways has been to expect business passengers to be much more interested in flexibility and to pay the price for it. (The old classic method of differentiation of insisting on the round-trip ticket for weekend stays has for the most part disappeared.) Business passengers need to be able to change their plans, while business passengers non-retired vacationers seldom do so. On the other hand, leisure passengers often care more about price than when traveling, and are the only ones to benefit from the huge savings that can result from flights on different days or longer connections. These non-professional passengers would like a way to prove their lack of wealth (or at least the lack of corporate budget) and have access to low fares subsidized by business passengers.

A key difference today is that business travelers often have to stick to their schedules. They want low risk of flight delays and missed connections and they want nonstop flights where possible. Leisure travelers sometimes have to fly on specific days (to be home for work, for example), but many have a wider range of options.

Let the airline change your flight in exchange for a cheaper or more flexible ticket

One potential option would be to give passengers more flexibility to change flights, but also to give the Airline company the possibility, with notice, to modify the flight. Imagine a ticket that allows the airline, with sufficient notice, to delay your flight by a certain number of hours or even a day. Few business passengers would tolerate this, but many leisure passengers could, if they were sufficiently warned and low prices and other benefits in return. Airlines could then move passengers to make sure they fill the planes. They should offer equivalent seats and class of service, but could make longer connections if necessary. Hotels, rental cars and other services should partner with the airline to make sure they can be changed, or that the hotel can be arranged cheaply when you are staying extra days in a business. remote location.

This is especially true for retired passengers and certain types of self-employed workers. This is also true for many in the new era of “working from home” where they could perhaps leave a few days earlier for a trip and work in the hotel if it saved them a lot on the ticket. airplane.

Consider people flying on a cruise or excursion. Many would agree to let the airline get them to the cruise one, two, or zero days before the cruise, if they are given sufficient notice. Likewise, they might be able to agree to a day or two late in the return, if the hotel was organized. Those whose plans have changed might pay a revenue neutral fee to insist on the preferred day. Done well, this could give airlines a large number of passengers that they can move between flights on short notice to fill empty seats and balance the load, in return for appropriate discounts.

Passengers don’t need to be pushed into weird flights, although some will tolerate it. For example, you can book a flight for “Any flight Wednesday to Saturday” inexpensively, then view a list of all flights and uncheck the ones that are not acceptable, as long as you leave a minimum number of choices. on the acceptable list. . Then the airline would put you on the flight with empty seats and notify you the day before. The airline would track demand on all of your possible flights and make sure at least one is never filled and gives you those seats. They would try to get your preferred flights but would not guarantee it.

It works for flights where the passenger does not fear an unexpected day in either location. At home, it’s easy. If the distance means staying with family or in a second home, that’s just as easy. If it is a hotel, passengers should be happy to spend a few extra days at the other location, starting their trip early. They might even have the right to move the return flight earlier so that the duration of the trip stays the same. It is not good for office workers with a fixed vacation period, but can meet the needs of the modern flex-time employee working from home.

The result could be a win-win. Passengers get cheaper and more flexible tickets, and airlines move passengers to unused seats from seats they think or know can sell for a higher price.

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