COVID-19

Airlines waive change fees in hopes of spurring reservations

Andy Uhler Sep 1, 2020
Heard on: Marketplace Morning Report
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A passenger waits for a United Airlines flight to begin. Demand for air travel has been curtailed by the coronavirus. Justin Sullivan/Getty Images
COVID-19

Airlines waive change fees in hopes of spurring reservations

Andy Uhler Sep 1, 2020
A passenger waits for a United Airlines flight to begin. Demand for air travel has been curtailed by the coronavirus. Justin Sullivan/Getty Images
HTML EMBED:
COPY

United Airlines announced it would no longer charge fees to ticket holders for canceling or changing most domestic flights, becoming the first U.S. carrier to do so. Shortly afterward, Delta and American said they would do the same thing. Airlines want folks to buy tickets in these uncertain times, but in waiving the fees, they’re also cutting a significant revenue stream.

U.S. airlines generated almost $3 billion in revenue from change and cancellation fees last year, according to the Transportation Department. Robert W. Mann is an airline industry analyst.

“It is historically a lot of revenue, but a lot of it is collecting that revenue from customers who are no longer around,” he said.

Like business customers who aren’t flying right now. He said the calculus for airlines here is all about generating demand.

“We can eliminate the uncertainty for customers who we really would like to book travel in advance,” Mann said. “And then we can also, you know, give ourselves another opportunity to upsell.”

Upsell because the change fees won’t be waived for basic economy tickets.

Zach Griff covers the airline industry for the travel website The Points Guy. He said what airlines need right now is working capital.

“Any money that the airline gets right now is money,” Griff said. “They’re burning cash, millions of dollars of cash each day, and they’re still working on trying to trim that back down to zero.”

So, he said, airlines need folks to make future investments in travel even if customers have to change or cancel a flight.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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