Elimination Of Change Fees Is Huge For Customer Loyalty

When change fees were $200, a lot of customers didn’t bother using their credits. You might think that’s better for an airline but it’s not. The customer probably resented the airline they gave money to and got nothing in return (other than the right to fly on the itinerary they purchased – but that’s not usually how the customer sees it).

There’s the obvious way in which eliminating change fees fosters loyalty, and a less obvious way.

  • When a customer buys a $200 ticket and cancels their trip they still have a $200 credit. That’s big enough to use again, and they haven’t lost a big chunk of their investment to be angry about. That means the passenger is much more likely to make a subsequent purchase from the airline, and the more times a customer chooses an airline the more likely they are to keep choosing it, all else being equal.

  • But it goes much farther than that. Once there are no change fees on the majority of tickets, a customer doesn’t just have to decide who has the best deal or schedule right now. If their plans are at all uncertain (and uncertainty has risen relative to 2019) they also need to consider what airline they want to have a credit with in case they have to cancel.

Living in Austin, JetBlue or Alaska might have a great flight to Boston or San Diego, but do I really want to wind up with a JetBlue or Alaska credit that I have to use within a year. Alaska maybe. I’d much rather have an American Airlines or Southwest credit, so I have to factor in how re-usable a ticket is if I deviate from the carriers I usually fly. I might take a less convenient flight or even pay a little more for the potential to have a more useful credit than a less useful one.

The elimination of change fees means I have a built in reason to choose a carrier again, while avoiding a reason to resent that airline. But it also means a strong reason to stick with the carrier I already fly most. So this simple change locks in customer loyalty.

It also makes sense, then, why – though basic economy tickets have become more flexible since their introduction – airlines don’t worry so much about the loyalty effects on these fares. They do want to differentiate them from other fares, so segment the market, but if their model is that basic economy fares are all about customers choosing on price alone then they aren’t think about how to convert them into repeat buyers. That’s probably a mistake, but at least it’s a coherent one.

Remember that customers are loyal enough to Southwest to go to the airline’s website – their flights aren’t even options through consumer online travel agency websites. So they go out of their way to choose Southwest, and Southwest carries more domestic passengers than any other airline.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. @ Gary — This post makes me nervous. Is there something you aren’t telling us that may be coming from our friends at AA (like the return of change fees)?

  2. Change fees were nothing more but a way to rip off travelers. They should have been legislated out years ago – now the airlines are touting the removal of “change fees” as some kind of gratuitous gesture on their part – which is bullshit. I refused to fly on any airline that imposed these insidious “fees” – which is another reason why I only fly Southwest. Now the airlines need to get rid of the absurd rip off “bag fees”.

  3. I have booked and flown Delta many more times in the last year than normal, all due to no change fee. Since Southwest had $0 and AA had much lower change fees on award tickets, I always went with one of them. This was great when Southwest cancelled and we were able to book Delta same day and get home.

  4. @david Miller … legislated out ? Yea … it’s what we all need. Gov’t running more of our businesses. Vote with your wallet … be careful what you wish for, last thing we need is govt involvement

  5. SMR- yeah I said “legislated out” and I mean it. There are many other things that should rightfully be legislated out, but for seemingly forever, the government has not governed for what is right but for whatever lobbyist is paying them. The current cesspool in control now is a classic example, being composed of “pork harvesters” who are more concerned with padding their wallets than governing for the people and the nation. President Trump was asked early what he found to be the most disturbing thing about Congress and he said “the corruption” and he was and is still right. Until the “swamp” is removed, America will not have the government for the people – just the government for the corrupt DemocRat politicians that are ruining America. I am sure that some moronic liberal will now dispute what I have said here – it doesn’t matter because all can now see just how corrupt the socialist DemocRats are. These are the same bastards who shut down small businesses and ruined millions of jobs – and now they want you to reelect them. Anyone voting for these traitors is a traitor to America themselves. MAGA

  6. Sadly they’ve all reimposed change fees on international flights. For a while UA had done so, but not BA, so BA got my loyalty. Now they all have them.

  7. Fees are being reintroduced slowly but surely as we exit the worst of the pandemic. Companies no longer have to beg us and they’ve received BILLIONS in money to keep them going. They are no longer begging for our business. We are scrambling for theirs.

    Sadly, companies aren’t concerned about loyalty. As an EXP on AA for over 10 years, I no longer fly them. I fly Southwest. If I can’t fly Southwest, I’ll fly the cheaper option that makes sense. Never again will I be a slave to a specific brand. I love Southwest as it just makes sense. No bag fees, no cancellation fees, etc.

  8. Every single one of these airlines is continually keeping track per day how much a zero change fee is costing them in revenue. With packed planes, relatively high fares, and what seems like unending demand (although I heard somewhere September bookings are not great), there seems little incentive to use no change fees to drive demand, and if anything they might appreciate depressing demand a little bit and creating some slack in the system, so the real question is which airline will have the balls to go back to it first. My bet is Delta.

  9. Let’s remember that Southwest has long touted not having change fees, United has the largest overlap with Southwest of any US airline, and United knows full well that they are at a disadvantage to WN given that UA has traditionally had change fees.

    To no one’s surprise, UA used the covid pandemic to line up its change fees with Southwest even though Delta execs said pre-pandemic they were looking at change fees.

    Southwest doesn’t fly internationally and other carriers don’t care about what WN does with its fares. In some cases, US carriers would be undercutting their own joint venture partners if they ditched all change fees – even though UA would like to say it has no change fees on either international or domestic.

    The basic thesis is correct – people don’t want to feel ripped off and are loyal to companies that don’t nickel and dime them.

    And, Gary, these industry impact types of articles are the kinds of articles that are worth coming to you to read rather than the anecodotal, single source “look how bad someone or an event” was.

  10. I have about 400k of AA miles. But fly Southwest most of the time while domestic. Why? So easy to cancel or change a flight without fees or calling the airline. A 5 minute on line process. So totally flexible, like my schedules. And I have companion pass – a real money saver for those that fly with their spouse quite a bit each year. Would I fly SWA as they are now for 8+ hours – likely not as seats are all cramped. But for 4 hours or less, not a big deal.
    On the other hand, non frequent flyers often will not select an airline due to cancellation fee policies as most do not even think about it when making a reservation (until the first time they are hit).

  11. Southwest has operated this way forever. Why did the other airlines decide to copy Southwest only now? It must be the radical change in customer mix, with more leisure travel and less business travel. Did business travelers not care about change fees?

  12. Nobody likes fees, and I am no exception, but change fees were one airline charge I could always somewhat understand, if not support. What I never understood was the steep price to make a change, on the same airline, which always seemed to me geared to cause customer behaviors that airlines should logically want to discourage. To me a (somewhat imperfect analogy) is college early admission practices – colleges love them (among other reasons) because they allow predictability in attendance numbers, ergo easier budgeting, planning, etc. It seems to me – particularly in view of multiple airline logistics meltdowns we’ve witnessed in the post (ish)-pandemic era, that an airline should want to encourage customers to buy early, so that they have the revenue (“bird in the hand…”), and can more accurately predict & plan for PAX load, routing, crew placement, etc. But a steep change fee is a disincentive to customers buying early, because plans change, fare pricing fluctuates, etc. If the fees were more reasonable, the effect on customer behavior wouldn’t likely be as marked. Something like 10% of the fare, for instance, probably wouldn’t raise too much ire. Or a set fee in the $25-50 range. But when the change fee is more than your trip cost you in the first place (especially when you buy o/w fares, as many do), yup – that’s galling.

  13. Change fees ofen exceeding the cost of the trip were the single reason I was hesitating in buying tickets. Now that they are gone I do book more.

    I looked at going to Europe but shamefully found change fees to go there, so am going to Mexico instead.

  14. @david miller: your rant makes no sense. Republicans are all for deregulation, Democrats want consumer protection. The twice-impeached, disgraced former guy focused on things that would benefit him or his donors personally like tax cuts for the very wealthy; for example, he gutted the Consumer Financial Protection Bureau by putting one of his merry band of miscreants in charge.

  15. I would be thrilled to see Avianca LifeMiles get rid of their $200 cancellation/change fees, or even reduce them to $25 or even $50.
    I can only conclude that they consider this a rich vein of revenue (yankee dollars) which has a whiff of immorality about it, not that any airline knows much about morals.

  16. This is a great point but doesn’t even address the incremental revenue concept. People with a $200 credit are more likely to buy even more expensive tickets, because they only look at the incremental $$, the $200 is a sunk cost. And of course it is often much more than $200 already sunk. And they may pay for reserved seats and other perks.

    Southwest has made a killing for years because people will pay more to have flexible tickets. I know I have. Credits have value, and people don’t worry about the breakage (which I’m sure is substantial). I would rather pay an extra $20 to fly WN than be forced to flush $100-200 on American if I need to cancel a trip.

    But isn’t it ironic that airlines will forgo hundreds of millions in “change fee” revenue but are now penny pinching on elite perks which really cost very little? Too many airline execs are still penny wise pound foolish. This will not work well for them when business travelers fill planes again, esp as they have massively devalued mileage programs.

  17. @InvaderZim – no point bringing your gun to a knife fight with a mouth breathing troglodyte like David Miller…he’s like Louie Gohmert’s dumber younger brother.

  18. UA-NYC — Keep voting DemocRat moron, as you wade in the sewage that they have turned New York into. Intellectually you would are equivalent to a pus filled pimple on Gohmert’s ass.

  19. @David Cuck Miller – will take NYC in all its messy dynamic glory over whatever swampy backwards Alabama sh!thole you have lived your whole life in thinking it was Valhalla.

  20. UA-NYC — FYI, I was born and lived in New York and left because of morons like you who havn’t a clue as to how ignorant you are. Please stay there and enjoy being shit on by the DemocRats as they continue destroying New York. Next time you look into a mirror, take a second, look hard and let it sink in that the image you see is an complete idiot.

  21. Good, we don’t need mouth breathing cucks like David Miller in NYC, mean IQ likely went up a half a point too upon your departure. Enjoy life in your Taker state.

  22. UA-NYC – we certainly don’t need any more ignorant, lying morons like you – stay in New York with the rest of the DemocRat sheep – you are made for each other.

  23. Just to be clear @David Miller, would you be good enough to let me know which sh!thole state you have exiled yourself to so I may update my personal no-fly list?
    Thanks, that would be great!

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