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 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?
That happened to Deborah Campbell, a reader who recently canceled a booking on a US Airways flight. The airline issued her a credit for $111, which is what she had paid for her original ticket. But to use the credit, she would have to pay US Airways a $150 change fee. “Paying the fee isn’t practical,” she said.
When a ticket-change fee exceeds the original fare, what’s the justification? According to aviation analyst Michael Miller, the surcharge is based on a median fare, so some vouchers won’t be worth keeping, while others will be.
Airlines hooked on fees
Passengers who complain about high change fees should familiarize themselves with the economics of the airline industry, he suggested. It typically costs $20,000 for an airline to operate a one-hour flight. “So there’s a lot of risk every flight,” he said.
But privately, airline insiders acknowledge that the fees more than cover their revenue dilution. They also admit that change fees aren’t just a significant revenue source for the major airlines; in fact, these companies have built their business models around them and similar fees, such as luggage fees and other ancillary charges.
In short, the fees are a source of major profit. And the airline industry is hooked.
Well, not all of it. One major airline — Southwest — doesn’t charge any change fees but still manages to run a profitable business. How does it do that?
“We have opted to develop consumer-friendly policies,” explained Southwest spokeswoman Linda Rutherford. Those policies, she said, bring new customers to Southwest — passengers who “think they were dealt with unfairly by another airline” — which increases the company’s profits. “Not having a change fee goes straight to the bottom line,” she said.
It’s unlikely that Southwest’s competitors would see a jump in business if they dropped their change fees. In the near term, they would almost certainly see a precipitous decline in profits as $2 billion got sucked out the cabin door. But how about over the long term? There’s only one way to tell: They’d have to try it.
In the meantime, if you’re worried about paying a hefty change fee or having the entire value of your ticket nullified, there are a few easy steps you can take. The easiest, obviously, is not to change your travel plans. But that’s not always practical.
Travel insurance is yet another option. But you have to read the fine print, and unless it’s an expensive overseas flight, it may not be worth the extra money. Another way around the fees: Flash your frequent-flier program card, and a smile, and see if you can talk your way out of it.
If your card is the right color and your smile is bright enough, it might work.
Reservation, charge, no room
Q: My family is a member of Marriott Vacation Club International and we have a timeshare with them. As part of that purchase, we were told that we have the ability to purchase “getaways” for either a week or a weekend. (A getaway is simply a low-cost way to rent an unsold timeshare condo like a hotel room.)
My wife contacted Interval Travel, which handles reservations for Marriott, to purchase a getaway at a Marriott Vacation Club resort in Orlando. Interval told her that there were no Marriott properties available for getaways at that time, but instead suggested another property called Westgate Vacation Villas in Kissimmee, Fla.
We paid $339 for four nights at Westgate. We received a booking confirmation by mail the day before the getaway was to begin and it appeared to be in order. It wasn’t. When I reached the front desk, they advised me that they had no record whatsoever of our reservation. Eventually, they offered us a “spare” room but only after sitting through a sales presentation.
Once I opened the room, a strong smell of mold and mildew blew out at us. The room had clearly not been maintained, the air conditioning was not on and the air quality was intolerable. With the added complication of severe allergies in our family, there was no way that we could possibly stay in this room.
I was told that there were no other rooms available and that nothing could be done. I told the desk agent that we could not stay in that room due to its condition, and she apologized and said that the only option would be to leave the resort. She then printed me a “zero balance” receipt to show that I had not stayed, and told me that I needed to seek refund from Interval for this experience. I’ve called Interval repeatedly since then, but it has told me there are no refunds for its getaways. Can you help? — Mike Ray, Bradenton, Fla.
A: If you had a confirmation, you should have had a room. It’s as simple as that.
A review of your paperwork, which you sent along with your letter, suggests the website kicked out an invalid reservation (your confirmation number was a suspicious-looking “009999999”). But I wouldn’t have known to look for that, and neither would anyone else who isn’t familiar with the resort’s reservation system.
But Westgate didn’t just lose your vacation. The website Marriott Vacation Club sent you to for your reservation kept your money, even though it didn’t offer you the room you were promised. Let’s not even get started on the mandatory sales presentation — highly inappropriate, given your circumstances.
Calling the resort and the website was an understandable response, but it didn’t help your case. I would have started with a short, cordial e-mail to Marriott Vacation Club, which after all referred you to Interval and Westgate. Marriott would have passed your complaint along to the appropriate parties, ensuring a faster resolution.
Why not phone calls? Well, picking up the phone works when you’re standing at the front desk and there’s no reservation. Again, I would have begun with Marriott Vacation Club, since it apparently got you into this.
You might have also considered calling the hotel before leaving for Orlando to double-check your reservation. By doing that, I’m certain this problem could have been fixed before you checked in.
You might be wondering: If you have to call the hotel, then what good is the paper a reservation is printed on? That would be a fair question. The reservations systems that handle hotel and timeshare bookings are far from perfect. You’re better off calling to confirm, just as you would for an airline reservation.
I’m a little mystified by how you could be charged for a reservation you never had, but I’m willing to chalk that up to the same reservation system that churned out a nonexistent booking. Things like this happen.
I contacted Marriott Vacation Club on your behalf, and you received a full refund for the room you couldn’t use.
Christopher Elliott: , celliott@ngs.org
