My ticket price dropped - can I get a refund?
Jan 16, 2012, 2:39 pm
#16
FlyerTalk Evangelist
Join Date: Jul 2001
Location: Phoenix, AZ
Programs: HH Gold, AA Gold
Posts: 10,457
Why do US legacy carriers have the current pricing model? Well, it dates back to the period after deregulation. In the 1980's, any number of new carriers with very low labor costs (new carriers with non-union employees) popped up, offering very low fares to garner market share. The US legacy carriers had much a higher cost structure (due to union employees, substantial aircraft and airport investments, complex computer systems, etc).
The result was that the legacy carriers had to find a way to offer the very low fares, but still protect their higher revenue travelers. The first reaction was to build advance purchase "fences" around their fares (60 day, 30 day, 21 day, 14 day, 7 day, 3 day, and walk-up). The longer the advance purchase, the lower the fare. Initially, there were no cancellation penalties.
However, the smart people gamed the system. The last minute business traveler might as well buy a cheap 14 day adv purchase ticket. If their plans changed, they could just buy-up to the next available fare. Hence, the airlines made the fares non-refundable, but changable with a $50 cancellation fee. That seemed reasonable at the time, because many fares were even higher than they are today.
The cancellation fees increased as airlines began to see them as revenue sources and the rest is history.
The result was that the legacy carriers had to find a way to offer the very low fares, but still protect their higher revenue travelers. The first reaction was to build advance purchase "fences" around their fares (60 day, 30 day, 21 day, 14 day, 7 day, 3 day, and walk-up). The longer the advance purchase, the lower the fare. Initially, there were no cancellation penalties.
However, the smart people gamed the system. The last minute business traveler might as well buy a cheap 14 day adv purchase ticket. If their plans changed, they could just buy-up to the next available fare. Hence, the airlines made the fares non-refundable, but changable with a $50 cancellation fee. That seemed reasonable at the time, because many fares were even higher than they are today.
The cancellation fees increased as airlines began to see them as revenue sources and the rest is history.
Jan 16, 2012, 4:10 pm
#17
Join Date: Sep 2006
Location: PHL
Programs: Former long-time US GP; now AA dirt
Posts: 4,904
I think the implosion of the global financial market and the cost of fuel has a bit more to do with US' current stock prices than the presence or absence of a fee. One could argue that it's the change fees, baggage fees and various other fees that have kept the stock at just losing 80% and not 90% or more.
Last edited by tommyleo; Jan 16, 2012 at 4:30 pm
