What's behind all those airline change fees?
Friday, November 5, 2010; 11:06 AM
Dotti Cahill thought she had a $150 ticket credit on Delta Air Lines.
She thought wrong.
When Cahill phoned the airline to redeem the credit, which she'd received when she'd had to change a flight while helping her daughter move to Detroit, a representative gave her the surprising bad news: To use it, she'd have to pay a $150 change fee.
In other words, her voucher was worthless.
"These fees are a joke," said Cahill, a nurse who lives in Jacksonville, Fla. "Airlines can change flights and cancel them and move you to different flights without giving us anything - but if we need to change a flight, it's $150."
Cahill wonders - as do a lot of other passengers - how airlines came up with the $150 change fee to begin with. Does it really cost $150 to fix a seat reservation? Or is there more to the number?
Change fees are a healthy source of revenue for the U.S. airline industry. During the first half of 2010, the 19 largest domestic airlines collected $1.1 billion in cancellation and change fees, according to the Transportation Department. Delta made the most ($347 million) followed by American Airlines ($235 million), United Airlines ($158 million) and US Airways ($128 million).
The change fees have come a long way in just a few years. In 2009, airlines took in $2.4 billion in cancellation and change fees from their passengers. By comparison, they charged only $418 million in 1999, and in 1990, just $51 million.
The fees don't cover just the cost of changing a reservation or making a new one, according to airlines and analysts. The cost of making an actual change is a fraction of the expenses covered by the fee, perhaps just a few dollars.
"We have the change fee policy to protect against revenue dilution," said Morgan Durrant, a Delta spokesman. "In other words, it helps us retain revenue that otherwise could have been lost through another sale."
Delta is basically saying that the fee will cover the cost of your seat if you cancel it and no one else buys it. Which is a fine argument to make, unless the airline can resell the seat - and then protection against revenue dilution becomes double dipping.
But what if the cost of a change fee exceeds the price of a ticket?