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United Raises Change Fee to $150

You’ll read about this elsewhere, but United just raised their ticket change fee on domestic flights to $150 from $100.  Expect other majors to follow.  Remember that JetBlue only charges $40 for a change, and Southwest doesn’t charge anything.

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  1. $150 is brutal, especially for leisure travellers (family of 4 would be looking at $600). I’m surprised that nobody has figured out a way to discriminate against biz travellers on this. Like why not have a $50 change fee for itineraries with a Sat. night stay? I suspect few leisure travellers change their itineraries given the high fee, and they can still make money selling you into a higher fare bucket.

  2. At least in the past, airlines have varied the change fee based on route/fare. I haven’t seen that in a while, but I know that airlines were matching JetBlue’s $25 (back in the day) change fee on routes where they competed.

  3. I honestly disagree with all of these comments. Why should we expect charges to remain the same after our own gas tanks have increased their weekly expense at our own pockets?

    The airline industry as we all have loved it in the past is long gone? Do you expect service at greyhound equal to a first class in Singapore Airlines? No? Why do you expect it if you are paying pennies? I sincerely think we users can continue yearning the old days of airline service, but then, we must accept the multiple regulations of this awfully “de-regulated” industry are taking its toll not only with the legacy airlines, but with all those new low cost entrants. It makes me wonder how much they are cutting corners to please wallstreet if ALL legacy airlines posted losses. Let’s be realisti, keep it fair and adjust to this new industry, otherwise, there will be none left.

  4. In response to Jose, “Why should we expect charges to remain the same after our own gas tanks have increased their weekly expense at our own pockets?”

    These aren’t fuel charges we are talking about. These are penalty fees for changing tickets. Due to overbooking, planes go out as full as ever.

    The story here is really bad market planning. Some junior financial analyst figures that you increase the change fee by $50, suddenly you add $5 million to the bottom line. Brilliant!

    Except it isn’t.

    Due to the difficulty in measuring lost sales, United is structurally underestimating the number of sales lost due to the $150 change fee. With a $150 change fee, supply demand economics tells us that more consumers will think twice before clicking “purchase” on United.

    Southwest happily scoops up consumer airline dollars time after time as consumers don’t hesitate to buy a Southwest ticket knowing they can change when they need to. Somehow, despite no change fee, Southwest consistently manages to have some of the heaviest loadings in the industry.

    United will actually decrease their overall profitability due to the $150 change fee even while they will probably award a nice bonus to the financial analyst who proposed the change fee increase.

    And we continue to wonder why United is in such deep trouble?

  5. Ben,

    I agree with your market planning analysis.

    I don’t agree though with the comparison between Southwest and United. Nor I agree that we should continue expecting airlines to honor old pricing rules if we want airlines healthy (industry rules most likely will change to keep carriers afloat).

    While Southwest may be carrying more domestic passengers than any legacy carrier now a days, the business model for these last ones is changing to a worldwide carrier model more than ever. Southwest will not be able to carry anyone to Rio De Janeiro, nor to Taipei, nor to Paris. The role of fees is to help balance their earnings with domestic traffic, but the real revenue is coming from the international operations. These domestic flights are becoming more feeders for hub departing international flights than ever before. As a matter of fact, the carriers are now getting their earnings from these international destinations (originating customers from international points visiting/coming to the USA) due to the weak dollar rather than from their domestic networks or the USA originating customer traveling internationally.

    I do think Southwest will gain some market share from UA’s move. But I expect all carriers, including the low cost ones, will increase their fees as a result of the rapid rise in oil prices that ultimately hit everyone’s bottom line, including our very own homes.

    And yes, UA is in trouble, but I honestly believe low cost carriers will be in more trouble in the long term if there are no fares & fees increases.

  6. I don’t know — I tend to agree with Ben on this one.

    At the end of the day, you have to sell a product people want to buy. Does anyone want to buy an airline ticket with a $150 change fee? I don’t think so. They do it because there’s no reasonable alternative.

    I don’t see other sectors of the travel industry doing this kind of stuff. Heck, you can still usually reserve a car with no guarantee whatsoever, much less a “change fee.” This move essentially makes all leisure tickets non-refundable. I personally don’t believe travel should be non-refundable. Stuff happens. Plans change. It’s a crummy system.

    Obviously, though, given the insane price of jet fuel, airlines have to raise revenue. I’d much rather see them do it by raising fares or, if they prefer, impose a fuel surcharge. I think pax would understand this. I’m sure there are some business models which say you can raise fares fast enough, and maybe if you showed me the data I could be persuaded, but I’ve got a bad feeling when you make the travel conditions onerous. Like people decide not to travel.

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