A political pundit once observed, “90 percent of the problems in Washington are the result of screw-ups rather than evil intentions.” And it seems to me that you could apply that statement to airlines as well as Washington: Although sloppy service, delays, slow baggage delivery, missed connections, and such lead to much frustration and misery, most of those lapses are not deliberate. Unfortunately, however, some of the frustrations you face with airlines are deliberate — especially those many annoying rules — and do seem to be the result of real “evil intentions.” As one obviously ticked reader recently emailed us:
“At what point did the flying public just roll over and say ‘okay, keep my money'”? Is there any other industry or service that if services are not rendered that you don’t get money back? The airlines have far more lobbying power than the public does, and they just continue to hike the fees. Is there anywhere we can go to address this? Do the airlines they feel they have been ‘fair’ to passengers? It seems their policies loom over passengers, who have no choice.”
The short answer might surprise you: “Without without some of those rules, you’d pay a lot more to fly.” Others, however, are real annoyances.
Stick it to Business Travelers
One of the fundamental driving forces behind the airlines’ pricing rules is to charge business travelers more than ordinary consumers for what amounts to the same services. It’s the market economy equivalent of the Marxist concept “from each according to his ability to pay.” Specific tactics are based on the industry’s generalization that business travelers demand far more flexibility than consumers. Specifically, says the industry, business travelers want the ability to:
- Make to make travel arrangements at the last minute,
- Change plans right up to flight time,
- Catch a different return flight if their destination schedule changes,
- Reserve multiple flights for each trip; take the first one they can catch, and no-show for the others,
- Cancel or reschedule trips if someone’s plans have to change, and
- Be home weekends.
Like almost all such generalizations, these are not perfect: Some business travelers don’t need all that flexibility, and some consumers do need some flexibility. On balance, however, the airlines figure that these assumptions work well enough to be used as a basis for price discrimination.
Enter the Restrictions
Ticket restrictions are the main tools airlines apply to “discount” airfares aimed at consumers to make them unattractive or impractical for business travelers:
- Advance-purchase makes late bookers and late changers pay top dollar,
- Nonrefundability discourages reserving multiple flights for the same trip and, along with advance purchase, imposes a stiff financial penalty on last-minute itinerary changes.
- Saturday-night stay puts a stiff financial penalty on returning home for a weekend.
- Mandatory round-trip purchase is necessary to enable the Saturday-night stay requirement.
- Limited allocations of low-fare seats removes low-fare options on flights at popular business times.
Taken together, these restrictions were, for many years, remarkably effective in maintaining a huge price gap between “business” fares and the lowest consumer “discount” fares. In the 1980s, average business fares ranged as high as four times average consumer fares. However, some of the larger low-fare lines did not feel the need for such restrictions, and the resulting increasing availability of less-restricted fares has dropped that gap down to around two-to-one or so. Even so, the system still favors consumers who can accommodate to some or all of the restrictions.
The Nonrefundability Conundrum
It’s easy to see how many travelers could resent nonrefundability—after all, as our reader suggests, what other industry charges for services not rendered? Theater and event tickets are also nonrefundable, but at least you can resell them.
The airline situation, however, is not that black and white. When “discount” tickets were first introduced, many of the cheapest were totally nonrefundable except in extreme cases, usually requiring a doctor’s note. But the airlines quickly found that (1) case-by-case enforcement was cumbersome, haphazard, and inconsistent, and (2) “desktop forgery” made it all too easy to generate a doctor’s note. As a result, the airlines decided to switch from totally nonrefundable to reusable: You don’t get your money back, but you can use the dollar value of your cancelled ticket toward a future flight.
That system worked well for quite a few years. Recently, however, the airlines have been hiking their fees to re-use tickets fees to re-use tickets to as much as $150 on domestic trips and more than that overseas. In effect, reusability is morphing back to something close to total nonrefundability. All in all, what was once a reasonable system is again becoming onerous and unfair.
Fare Splits Benefit Consumers
You often hear travelers whine that, to be “fair” to everyone, airlines should “sell every seat for the same fare.” Maybe, but as a typical consumer, you’d lose on that proposition. Almost all low-end consumer fares are well below the average fare an airline needs to break even—let alone make a profit. So in a “one fare fits all” price regime, you’d wind up paying a lot more for your air travel than you do now.
The sad part is, of course, that the restrictions designed to penalize business travelers also penalize many ordinary consumers. Although the low-fare airlines have eased that burden considerably, it’s still there. Nevertheless, I suspect a large majority of consumers would prefer the current system.
Other rules are aimed at a mix of objectives—pampering business travelers to protecting revenues.
- Travelers on consumer fares either can’t reserve seats in advance at all or have only a limited choice of “available” seats, because those airlines reserve the “best” seats—aisles and windows at the front of the cabin—for business travelers on high-price tickets.
- Prohibition on “hidden city” hidden city tickets is designed to protect high-fare revenues for trips to/from the big airlines’ “fortress hubs.”
- No-stopover rules on cheap tickets are there because airlines want to sell you two separate tickets, not one cheaper one.
- Rules preventing name changes on tickets were originally designed to prevent scalpers from buying up peak-time tickets and reselling them at gouge prices. Now, security is an added concern. (Nevertheless, a few corporate contracts allow name changes in limited circumstances.)
The Bottom Line
On balance, I’d say that the restrictions on purchase of many cheap tickets are probably beneficial to consumers, although it’s clear that they do damage some consumers. Other rules, however, provide no consumer benefits at all, and the airlines impose them mainly “because they can.”
I see little chance of any legislative or regulatory adjustments to these rules. Consumers’ best option remains to vote with their cash—or credit cards—and patronize the lines with few or no restrictions whenever possible.
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