Christopher Elliott is outraged by mileage award cancel and redeposit fees.
[Peter DeForest] saved up enough frequent flier miles on Virgin America, an airline with a stellar reputation for taking care of its customers, to fly himself and a companion from San Francisco to Las Vegas. But shortly before the trip, his companion fell ill. He asked Virgin if he could cancel the trip and get his miles back.
Sure, a representative told him. If he paid the airline a $100 per reservation “redeposit fee.”
“It’s ridiculous,” he says. “It’s nearly the value of the points themselves.”
I agree with him.
I actually agree with Elliott who agrees with DeForest, at least that redeposit fees can be counterproductive — a bad idea — though hopefully for more nuanced reasons than Elliott suggests.
Award tickets were once a reward for loyalty rather than just an alternative currency with which to pay a fare.
As such, customers were to be given every courtesy as a way of thanking them for past business.
And in that model, charging them a fee to cancel a ticket when one of the travelers falls ill makes no sense at all — you’re sticking it to that customer when they’re already down, and that has the opposite effect of making them feel valued and appreciated.
Elliott acknowledges that Virgin America is less onerous than industry standard. United led the way this summer with increases to $200 change fees on award tickets.
Southwest, in contrast, doesn’t charge a cancellation and redeposit fee.
Contra Elliott, the way the fee makes sense isn’t as a revenue generator but as a disincentive to book travel you aren’t highly likely to take — tying up inventory in the process that might have gone to satisfy the demands of another frequent flyer or sold.
But these fees can also backfire — not only undermining loyalty, but also encouraging members not to cancel award tickets they’ve bookked (since they get little back for doing so) and denying the airline the ability to re-sell the seat. The airline, though, can then compensate by building into their models a higher no-show rate and can of course continue to sell tickets…
I’m not a frequent flier on Virgin, but I kind of wish I were.
..By way of full disclosure, I’m not one of those bloggers who study loyalty program rules as if they’re holy scripture. I respond to complaints and try to solve them. So I suggested DeForest contact Virgin in writing, to make sure this wasn’t a misunderstanding.
In other words, I am a travel writer who doesn’t know much about the subjects I write about. And my past statements that all frequent flyer programs are scams? Well, that doesn’t mean I don’t want to belong to them! Or, well, at least Virgin America’s.
When thinking about the value of these programs, let’s not forget that airlines offer award tickets that are far more flexible than paid tickets. Very few paid tickets are refundable even with the payment of a fee. Here for the cost of $100 the customer gets his form of payment back.
That means award tickets make a great hedge. You can lock in a trip, and all that’s on the line is the cost of the redeposit fee, rather than the full cost of airfare in miles or money.
What’s more, award tickets tend to be more changeable. With many airlines you can make changes after booking — not just to date and time, but even destination and airlines.
So while I don’t love redeposit fees, $100 is better than $200. But for a revenue-based program like Virgin America’s, when redeeming points as a credit towards airfare, that may be too high.