Demand for travel in the United States continues to stagnate at historically low levels. That’s seen many airlines become more flexible with their ticketing rules. American Airlines is no exception. Yesterday the Dallas-based airline announced it would waive change fees for travel through to the start of 2021. Best of all, it opens up an interesting loophole.
A surprisingly flexible policy from American Airlines
On Tuesday, American Airlines announced it would waive changes fees on tickets booked and paid for by September 30 for travel through to December 31, 2020. The waiver is valid across all of the airline’s fares, including all AAdvantage award tickets.
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There is a caveat. Customers must pay any fare difference when rebooking. That will catch out a few passengers who snagged a bargain airfare. But there is also a terrific get out of jail free card in American Airlines’ new waiver policy. The policy allows customers to change their origin and destination cities.
That’s the kind of rule that allows passengers to extract maximum value out of their tickets. For example, if you were ticketed to fly from New York to Chicago but can find a seat on a flight from New York to Las Vegas at the same price point, you can reroute that Chicago ticket. Las Vegas is around 2,800 kilometers further west.
The trick, of course, is not to have to pay any fare difference.
American Airlines needs to stimulate demand
It is a generous policy from American Airlines, but it comes at a time when the airline needs revenue and passengers. By early August, daily passenger numbers across the broader US airline industry were hovering around 700,000 passengers. That might sound a lot, but it about 25% of the August 2019 level.
The problem American Airlines faces (as do other airlines) is that they operate in a highly capital intensive industry, eating up millions of dollars every day. That wouldn’t be such an issue if American Airlines were generating its usual amounts of revenue. But it isn’t. Far fewer people are flying, and airlines are discounting fares to stimulate demand. Discounting further drives down revenue.
It isn’t a great operating environment for any airline. But the real kicker for airlines is nobody knows how long the travel downturn will last.
Maybe they’ll find a vaccine in October, and travel demand will be turbocharged. Perhaps they won’t find a vaccine, and travel demand will remain in the doldrums for an extended time. Nobody knows, and it is this uncertainty, the absence of a timeline, that’s adversely impacting American Airlines.
The policy part of a multifaceted approach by American Airlines
In the meantime, the airline wants to encourage as many people to travel as they can. Their strategy to achieve this is multifaceted. There is the blunt discounting tool. Passenger safety concerns get assuaged by ramped up aircraft cleaning and strict hygiene protocols at airports. Finally, by offering flexibility around tickets, such as waiving change fees, reluctant passengers could be persuaded to open their wallets and buy a ticket.
Each individual airline ticket bought contributes to American Airlines’ revenues. Ultimately, this latest announcement is a shrewd move by the airline. They are not making it any easier to get a refund, just relaxing ticketing restrictions and rules. But it is a win for both passengers and American Airlines. Passengers get some flexibility, and American Airlines gets your money.