Elimination Of Change Fees Is Huge For Customer Loyalty

When change fees were $200, a lot of customers didn’t bother using their credits. You might think that’s better for an airline but it’s not. The customer probably resented the airline they gave money to and got nothing in return (other than the right to fly on the itinerary they purchased – but that’s not usually how the customer sees it).

There’s the obvious way in which eliminating change fees fosters loyalty, and a less obvious way.

  • When a customer buys a $200 ticket and cancels their trip they still have a $200 credit. That’s big enough to use again, and they haven’t lost a big chunk of their investment to be angry about. That means the passenger is much more likely to make a subsequent purchase from the airline, and the more times a customer chooses an airline the more likely they are to keep choosing it, all else being equal.

  • But it goes much farther than that. Once there are no change fees on the majority of tickets, a customer doesn’t just have to decide who has the best deal or schedule right now. If their plans are at all uncertain (and uncertainty has risen relative to 2019) they also need to consider what airline they want to have a credit with in case they have to cancel.

Living in Austin, JetBlue or Alaska might have a great flight to Boston or San Diego, but do I really want to wind up with a JetBlue or Alaska credit that I have to use within a year. Alaska maybe. I’d much rather have an American Airlines or Southwest credit, so I have to factor in how re-usable a ticket is if I deviate from the carriers I usually fly. I might take a less convenient flight or even pay a little more for the potential to have a more useful credit than a less useful one.

The elimination of change fees means I have a built in reason to choose a carrier again, while avoiding a reason to resent that airline. But it also means a strong reason to stick with the carrier I already fly most. So this simple change locks in customer loyalty.

It also makes sense, then, why – though basic economy tickets have become more flexible since their introduction – airlines don’t worry so much about the loyalty effects on these fares. They do want to differentiate them from other fares, so segment the market, but if their model is that basic economy fares are all about customers choosing on price alone then they aren’t think about how to convert them into repeat buyers. That’s probably a mistake, but at least it’s a coherent one.

Remember that customers are loyal enough to Southwest to go to the airline’s website – their flights aren’t even options through consumer online travel agency websites. So they go out of their way to choose Southwest, and Southwest carries more domestic passengers than any other airline.

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