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Recent Changes In the Airline Industry

By March 26, 2012 No Comments

A number of changes have occurred within the airline industry in the last month. Some, like the merger of United and Continental, have been very visible, while others have gone by unnoticed. And yet, many these changes will have long lasting impacts upon both the industry and its travelers.

With the United merger, we have seen the combining of two very large companies—including tens of thousands of employees, thousands of aircraft, hundreds of airport facilities, numerous policies, two frequent flier programs, and their reservations systems. Most of these changes will result in subtle differences that won’t seem all too unusual. However, there is one very noticeable change, that I haven’t seen mentioned in the media, and that is the change in the policy concerning exchanges and change fees.

Prior to the merger, United permitted travelers to make a change on a nonrefundable ticket with the payment of a change fee. If the new fare was lower than the original fare, then the change fee could be deducted from the difference. For example, if the initial ticket was a $850.00 round trip ticket between Spokane and Savannah and the new ticket was a $500.00 round trip ticket between Spokane and Denver, then the $150.00 change fee could be deducted from the $350.00 residual amount, leaving $200.00 on a nonrefundable credit:

$850.00 (old ticket) – $500.00 (new ticket) = $350.00 (residual amount) – $150.00 (change fee) = $200.00 in credit

This credit would be valid for a set period of time, generally one year from the date of issuance of the original ticket. But the change that occurred on March 3rd, however, is that United adopted Continental’s policy of not permitting the change fee to be deducted from that difference, instead the change fee is charged at the time of the exchange. This means that in order to make an exchange one has to initially pay more money out of pocket, however in the end, the traveler winds up with a larger credit. So in the above example, the math would change to:

$850.00 (old ticket) + $150.00 (change fee) = $1000 (initial out of pocket expense) – $500.00 (new ticket) = $500.00 in credit

While this may not seem like a big deal to some folks, to others, having to pay that extra fee out of pocket, is a bit of a burden.

There is also one disturbing aspect to this change that I have yet to mention.
United has made this new policy retroactive to all nonrefundable tickets, regardless of the date of issuance. This means that tickets issue last October, under the old rules, are now subject to the new rules, which I think has the potential for legal action by some travelers since it seems to be in violation of United’s contract of carriage which states the following points:

RULE 3 APPLICATION OF CONTRACT
A)    These rules constitute the conditions of carriage upon which UA agrees to provide Domestic and International Carriage and are expressly agreed to by the Passenger. These Rules are also the tariffs filed by UA in accordance with certain government regulations.

E)    Except as otherwise provided within specific fare rules, transportation is subject to the Contract of Carriage and charges in effect on the date on which the Ticket is issued. References to pages, rules, items and notes are coterminous and include revisions, supplements and reissues thereof.

F)    Where the Ticket has been purchased and issued before the effective date of an increase in the applicable fare, the increase will not be collected, provided there is no change in Origin, Destination, Stopover point(s), flight(s) or dates shown on the original Ticket.

K)    Except where provided otherwise by law, UA‘s conditions of carriage, rules and tariffs are subject to change without notice, provided that no such change shall apply to Tickets issued prior to the effective date of such change.

This break from tradition and their long standing contract of carriage could have long term implications if it becomes normal for airlines to change the rules after the consumer has purchased their tickets.

While United made the biggest and most noticeable changes, Delta has also worked in a couple of changes worth noting. First, they have modified their international baggage policies. They have lowered the fee for a second checked bag for coach travelers and increased the fee for the third through tenth bags and for overweight bags. Additionally, they have added a second checked bag fee for transpacific flights. These changes can be viewed here.

The other and potentially more interesting change is that Delta has rolled out a new product for select domestic flights between Detroit, Orlando, Ft. Myers, Ft. Lauderdale, and Tampa. The new product is called Basic Economy and it creates a new type of fare.  This fare is nonrefundable and non-changeable, except in the case of involuntary changes, like irregular operations. This product cannot be combined with refundable or changeable fares, nor does this product allow advance seat assignments. Currently this option is only available to the identified markets, however if successful, I would expect to see Delta expand in the future. If that happens, don’t be surprised to see other carriers come out with similar products. Currently the cost difference between this new Basic Economy ticket and the standard nonrefundable ticket is less than $10.00 in each direction. That could change fairly quickly and if it does, don’t be surprised if the difference increases to more than $50.00 in each direction.

The good news is that agents at Christopherson Business Travel are aware of this new product and can offer these choices to travelers. The bad news is that currently, travel sites such as Orbitz don’t make an obvious differentiation between the two types of fares, so travelers booking online will have to be very careful and read the fare rules in order to avoid getting stuck with a non-changeable ticket.

At the same time, Delta is rolling out what they call Trip Extras. This allows travelers to purchase a variety of “extras,” such as additional SkyMiles and/or 24 hour Wi-Fi Passes, which allow unlimited Wi-Fi on all GoGo-equipped Delta flights. It also allows travelers to purchase priority boarding. Delta offers packages that combine various options, such as the LIFT package that combines Priority Boarding and an extra 1000 miles, or the ASCEND package that includes Priority Boarding and the 24 hour Wi-Fi pass. These extra services are currently available for purchase at Delta.com and at the kiosks.  Once purchased, they are nonrefundable and non-changeable.

As you can see, the one constant in the airline industry is change.

 

 

 

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