Fly

United drops its $200 flight change fee, then Delta and American (had to) follow

Snacks / Monday, August 31, 2020

Pandemics, fires, and hurricanes... The chances of you having to change your flight in 2020 are... high. In August, TSA checkpoint passenger volumes hit their highest levels since March. But even at these highs, travel is still down ~60% from last year. Now airlines are turning to revolutionary (for them) ways to attract passengers:

  • On Sunday, United said it'll permanently scrap its $200 change fee for domestic flights.
  • Delta and American predictably followed suit yesterday and dropped change fees.
  • Southwest would've done it too, except it already doesn't charge them.

Why kill a profit puppy?... For decades, airlines have raked in big bucks from profitable add-ons like luggage fees. Add-on fees have 5X'd over the past decade and made up 15% of US airlines' sales last year.

  • Sounds counter-intuitive: You'd think that airlines would ramp up fees during a downturn. But in a pandemic, those change fees are sales-killers.
  • Airlines are desperate to get customers back, especially since their $25B government bailout expires on October 1st. Massive layoffs are on the horizon — American already warned it's cutting 19K jobs.

Oligopoly players move together... In a monopoly, 1 company controls a sector/service. In an oligopoly, a few dominate. In the US, 4 airlines control 80% of the flight market (#oligopular). Once United dropped its change fee, Delta and American followed ASAP. Oligopoly players can't afford to have 1 rival snag an advantage with customers. But they also maintain leverage over customers by acting together (if everyone charges fees, you have no choice). This time it worked in customers' favor.

Get Your News

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.