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Why Wouldn't Delta Incentivize Vouchers over Refunds?

Why Wouldn't Delta Incentivize Vouchers over Refunds?

Old Jun 15, 20, 7:45 am
  #1  
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Why Wouldn't Delta Incentivize Vouchers over Refunds?

Yes, a bit of playing "Armchair CEO" here, but as the question notes, I wonder why Delta isn't incentivizing vouchers over refunds as a way to hold on to cash when travelers are otherwise entitled to full refunds. I will note that some European airlines are doing this in cases where you would be entitled to a refund and not just a voucher (I believe KLM is one such example) Some hotels are doing the same. I had to cancel a hotel reservation in Ireland booked through hotels.com. I paid in advance but reservation could be canceled. Hotels.com offered a 25% additional value if I took a voucher instead of a cash refund. I strongly considered it but only use hotels.com for some international hotel bookings where I can get better deals and I won't have any international bookings out of my own pocket for a while so I opted for the cash refund in this case.

I'm not necessarily suggesting DL offer a 25% incentive but it did make me wonder why DL isn't offering something similar (perhaps they did consider it and based on their own internal calculations have decided this is not the route to go). I already canceled my DL tickets to Europe for a refund, I was talking to my parents this weekend who also had a trip to Europe later this year that they are canceling for a combination of factors and due to the schedule changes in their flights, would be entitled to a refund. They asked me if they were better off taking a voucher or getting a refund. Without hesitation, I said, "take the refund". Had DL been offering a strong incentive when I canceled my flights, given that I book enough with DL and will continue to do so, I would have possibly taken an option for a voucher with a decent incentive. But with absolutely zero return, there's zero incentive to allow DL to hold on to the cash in the form of a voucher as an interest free loan that eventually expires as well versus getting a refund. If DL offered a reasonable incentive in exchange for taking a voucher, I wonder if more frequent-flyer types who know they will eventually fly (and even some non-frequent flyers) would instead opt for a voucher.
ATOBTTR is offline  
Old Jun 15, 20, 9:09 am
  #2  
 
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I agree. I've taken 2 refunds and if instead DL had offered a voucher with a meaningful incentive (at least 10%) and with an expiration date in 2022, I would've been happy to take the voucher over a refund.
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Old Jun 15, 20, 2:27 pm
  #3  
 
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Armchair CEO response: Notwithstanding Delta's high cash burn rate ($50M/day, expected to drop to $0 by end of year), they also have/had a $6B on hand at end of Q1, projected $10B liquidity at end of Q2, and the government basically covering payroll through fall. Perhaps DL thinks it can afford the refunds vs taking a 10% hit to income on new sales when travel recovers. Also, DL doesn't make it obvious that flights are refund eligible (cancellation language talks enthusiastically about how your vouchers are good until 2022 or whatever) so I suspect the majority of refund eligible travelers aren't even aware they can ask for a refund.

In short: DL doesn't think it needs to offer an incentive.
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Old Jun 15, 20, 2:27 pm
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Originally Posted by ATOBTTR View Post
in cases where you would be entitled to a refund and not just a voucher (I believe KLM is one such example)
Note that AF/KL only offers the 15% extra when:
- they canceled your flights
- rebooked before Oct 31st 2020
- new flights must be before June 15th 2021

Still quite restrictive IMO and people are still complaining about this...
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Old Jun 15, 20, 3:34 pm
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Originally Posted by bennos View Post
Armchair CEO response: Notwithstanding Delta's high cash burn rate ($50M/day, expected to drop to $0 by end of year), they also have/had a $6B on hand at end of Q1, projected $10B liquidity at end of Q2, and the government basically covering payroll through fall. Perhaps DL thinks it can afford the refunds vs taking a 10% hit to income on new sales when travel recovers. Also, DL doesn't make it obvious that flights are refund eligible (cancellation language talks enthusiastically about how your vouchers are good until 2022 or whatever) so I suspect the majority of refund eligible travelers aren't even aware they can ask for a refund.

In short: DL doesn't think it needs to offer an incentive.
I like your analysis, not that I'm expert enough to really know better. I will point out that in Dec 2019, Delta sold gift cards (which don't expire) through Costco at a 10% discount. I'm sure that promotion is easier to limit the scope of (only offer X gift cards). I am sitting on $2k now, in fact, unable to fly this year so far, but they don't expire. I dunno if I would be pleased if I had 12-18 mo like a voucher to lock in 10%.
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Old Jun 15, 20, 5:55 pm
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The middle ground could be only offer the 10% if customer asks for the refund (e.g., donít volunteer the information for someone already willing to take the voucher but use it as an option for someone directly asking for a refund). Similar to a CC company and the yearly song and dance with annual fees and incentives to stay.
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Old Jun 15, 20, 11:17 pm
  #7  
 
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They clearly think they can afford to refund the cash. The hard part is that at best they had a general ~17% profit margin before, and this mechanism gives that all away.
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Old Jun 16, 20, 1:58 am
  #8  
 
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Originally Posted by tbaiyun View Post
Note that AF/KL only offers the 15% extra when:
- they canceled your flights
- rebooked before Oct 31st 2020
- new flights must be before June 15th 2021

Still quite restrictive IMO and people are still complaining about this...
Plus you forgot another restriction:
- the flight must be more expensive than your previous flight (if it's 5%, you'll get 5% extra voucher value, 10% gets 10%, 15% gets 15% and all above get 15% as well), otherwise you will just get your voucher value.

Besides this, AF/KL have been trying to break European EC261 laws/rules by:
-First only offering a voucher (without any extra 15%)
-Then claiming "all flights cancelled as of May 15" are eligible for a refund (everyone else with flights cancelled before that is sh*t out of luck). If you choose a voucher, it will be 15% extra in value
-FINALLY adhered to the rules and provided refunds for anyone whose flight was cancelled.
-THEN proceeded to p*ss people off again by imposing strict limitations on that extra 15% in value (thus making it effectively worthless, causing many to eventually chose for a refund in the end)
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Old Jun 16, 20, 7:53 am
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Frankly between the alternatives of having $X in cash and an $X loan to Delta that yields somewhere in the 5-7% range, Iíll take the cash.
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Old Jun 16, 20, 11:21 am
  #10  
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Originally Posted by bennos View Post
Armchair CEO response: Notwithstanding Delta's high cash burn rate ($50M/day, expected to drop to $0 by end of year), they also have/had a $6B on hand at end of Q1, projected $10B liquidity at end of Q2, and the government basically covering payroll through fall. Perhaps DL thinks it can afford the refunds vs taking a 10% hit to income on new sales when travel recovers. Also, DL doesn't make it obvious that flights are refund eligible (cancellation language talks enthusiastically about how your vouchers are good until 2022 or whatever) so I suspect the majority of refund eligible travelers aren't even aware they can ask for a refund.
That's definitely true and a fair point. I had a trip to SXM that was canceled. DL emailed me about the cancellation and let me know the voucher will be placed in my account. Technically I'd qualify for a refund based on the canceled flight and I know I can fight it and demand a refund in lieu of the voucher, though in this particular case, I have opted to just stick with the voucher because the payment for the ticket came from multiple sources (Multiple gift cards used, a CC, and later used Pay With Miles to upgrade one of the segments to F) to where a refund would be going all over the place and would be a lot to keep track of. Just easier to keep it all on one voucher for now.
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