Dominos falling: Delta, American dropping flight change fees

A couple of days ago I looked at the surprising news that United Airlines had been struck with a sudden fit of generosity, eliminating all of their fees for passengers who need to reschedule their flights. The change was described as being permanent. At the time, I noted that the major airlines have traditionally worked as a sort of hidden trust, collaborating on pricing and services while divvying up the country into various “hub” zones. But I wondered at the time if this sort of announcement, obviously designed to lure customers away from their competitors, would spread to the rest of the airlines.

As the saying goes, that didn’t take long at all. Only 48 hours later, Delta and American have similarly dropped all of their rescheduling fees. So today we should be asking ourselves whether this is a sign of true competition in the industry, benefitting travelers by saving them some money on fees, or if the whole thing was coordinated from the beginning, with United just being the first one to push out the big reveal. Probably not, because the announcement from Delta and American has one very big string attached to it, which we’ll get to in a moment. (Associated Press)

This could be the final boarding call for the $200 ticket-change fee that has enraged so many U.S. airline travelers over the past decade.

Delta Air Lines and American Airlines said Monday that they are dropping the fee on most tickets for domestic flights, copying United Airlines’ move one day earlier.

Southwest Airlines didn’t levy change fees to start with, so Monday’s announcements mean that the four biggest U.S. carriers will have roughly similar policies.

Before you get too excited, here’s the catch I referenced above. Delta and American have permanently dropped change fees for all domestic flights for premium and most economy fares, but not the cheapest seats, known as basic economy. Guess what. Basic economy accounts for the vast majority of the seats sold on all of these airlines. Unless you’re a business traveler or someone who is well enough off to be able to afford first class (or at least the economy seats with extra legroom), you’re probably using a booking app that helps you search for the lowest fares. And those are always the basic economy seats.

It probably won’t take people very long to notice this difference. The first time they need to change flights due to an emergency or change of plans, they’ll get hit with the $200 fee and be reminded all over again why they hate dealing with the airlines. And sooner or later, somebody will point out that United isn’t charging that fee. Suddenly, the savvy shoppers among them will start refining their ticket searches with a preference for United.

Assuming that effect takes hold, it shouldn’t be too long before Delta and American throw in the towel and drop the fees entirely. And if that’s the case, some true competition may actually be creeping into this business. That would represent one of the greatest benefits to consumers we could hope for under the circumstances.

But would it really deliver any tangible benefits? As the linked report goes on to note, all of these airlines have made a ton of cash off of those flight change fees. In just the past decade, they report that Delta collected $8.2 billion, American a bit less than $7 billion, and United charged almost $6.5 billion. They’re a business with a bottom line to protect, so they’re not just going to soak up losses in those amounts. They’re going to make the money back somehow, either in higher fares, new, additional fees or simply cramming the seats even closer together so they can jam more people in if air travel patterns return to previous levels.

I’m not trying to be too much of a Debby Downer here, but these things just seem predictable. The airlines are scoring some good headlines right now for “helping people” by dropping fees. But experience teaches us that this probably isn’t going to last.