Christopher Elliott is outraged by mileage award cancel and redeposit fees.
[Peter DeForest] saved up enough frequent flier miles on Virgin America, an airline with a stellar reputation for taking care of its customers, to fly himself and a companion from San Francisco to Las Vegas. But shortly before the trip, his companion fell ill. He asked Virgin if he could cancel the trip and get his miles back.
Sure, a representative told him. If he paid the airline a $100 per reservation “redeposit fee.”
Seriously?
“It’s ridiculous,” he says. “It’s nearly the value of the points themselves.”
I agree with him.
I actually agree with Elliott who agrees with DeForest, at least that redeposit fees can be counterproductive — a bad idea — though hopefully for more nuanced reasons than Elliott suggests.
Award tickets were once a reward for loyalty rather than just an alternative currency with which to pay a fare.
As such, customers were to be given every courtesy as a way of thanking them for past business.
And in that model, charging them a fee to cancel a ticket when one of the travelers falls ill makes no sense at all — you’re sticking it to that customer when they’re already down, and that has the opposite effect of making them feel valued and appreciated.
Elliott acknowledges that Virgin America is less onerous than industry standard. United led the way this summer with increases to $200 change fees on award tickets.
Southwest, in contrast, doesn’t charge a cancellation and redeposit fee.
Contra Elliott, the way the fee makes sense isn’t as a revenue generator but as a disincentive to book travel you aren’t highly likely to take — tying up inventory in the process that might have gone to satisfy the demands of another frequent flyer or sold.
But these fees can also backfire — not only undermining loyalty, but also encouraging members not to cancel award tickets they’ve bookked (since they get little back for doing so) and denying the airline the ability to re-sell the seat. The airline, though, can then compensate by building into their models a higher no-show rate and can of course continue to sell tickets…
I’m not a frequent flier on Virgin, but I kind of wish I were.
..By way of full disclosure, I’m not one of those bloggers who study loyalty program rules as if they’re holy scripture. I respond to complaints and try to solve them. So I suggested DeForest contact Virgin in writing, to make sure this wasn’t a misunderstanding.
In other words, I am a travel writer who doesn’t know much about the subjects I write about. And my past statements that all frequent flyer programs are scams? Well, that doesn’t mean I don’t want to belong to them! Or, well, at least Virgin America’s.
When thinking about the value of these programs, let’s not forget that airlines offer award tickets that are far more flexible than paid tickets. Very few paid tickets are refundable even with the payment of a fee. Here for the cost of $100 the customer gets his form of payment back.
That means award tickets make a great hedge. You can lock in a trip, and all that’s on the line is the cost of the redeposit fee, rather than the full cost of airfare in miles or money.
What’s more, award tickets tend to be more changeable. With many airlines you can make changes after booking — not just to date and time, but even destination and airlines.
So while I don’t love redeposit fees, $100 is better than $200. But for a revenue-based program like Virgin America’s, when redeeming points as a credit towards airfare, that may be too high.
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People who continue to get outraged by award ticketing policies and fees are ridiculous. They are entitled to be outraged, of course, but I am entitled to think they are whining and ridiculous.
It is now easier to earn miles/points and go to more places on more airlines than ever before for almost anyone with good credit. If one doesn’t have good credit, tough luck.
Loyalty programs were called such because they rewarded loyalty. These programs, much as life and the airlines, have evolved over time to be more of incentive programs rather than loyalty programs.
Airlines are in business to make a profit, not afford those who play mile/point games the chance to travel for as little as possible. The award ticket options are available to people for charging more to credit cards, and that is the way it is today. Because of more credit card earning options, the airlines continually devalue their points to accommodate. That’s business. That’s change.
In the early loyalty program days, those who FLEW the most earned the most miles and got the best award tickets and award availability. In the new incentive program days, those who SPEND the most earn the most miles and get the best award tickets and award availability. What’s the big deal? Big spenders always got the best, and they still do. Business travelers don’t necessarily benefit as much as they once did, but it wasn’t the business travelers who most often were paying for their tickets, either.
If you don’t like it, please feel free to stop flying any airline and/or using the award tickets.
Christopher Elliott might be the second most tedious person on Earth. After Malcolm Gladwell, of course.
Elliot doesn’t even consider the proposition that a redeposit fee *may* have fundamental incentive effects on booking & canceling, or with discriminatory pricing (that he so deplores, despite the cross-subsidization therein) that a seat taken until day of departure then canceled has cost the airline real money. Instead of focuses on the cost the actually re-deposit the miles, as if that was relevant. The seen and the unseen.
This all fits a consistent pattern for Chris Elliot in looking at travel through a lens of economic illiteracy: unwilling to accept trade-offs, seeing visible costs and ignoring less visible costs, and hand-waving incentive effects.
A serious argument would start by conceding the theoretical possibility of the incentive effects of no cancelation fee to affect yields, then proceed to argue that the costs to the consumer of various sorts outstrip this. From there, it would take into account the compensating differentials on the value of the miles if no fees existed.
Given all of the second-order effects, I just cannot see how anyone can possibly make claims on what is “too high” or “too low”. If Virgin miles carried no cancelation fee but their award chart was double, would the fee be “appropriate”? If the cancelation fee was double but their award chart was halved, is the fee even more “too high”?
His whole analysis, as usual, is just junk if you ask me.
You say:
“When thinking about the value of these programs, let’s not forget that airlines offer award tickets that are far more flexible than paid tickets. Very few paid tickets are refundable even with the payment of a fee. Here for the cost of $100 the customer gets his form of payment back.”
Were Mr. Elliott permitted to run the aviation (into the ground) I would expect that he would require that the customer be entitled to a penalty free refund on PAID tickets.
In such a parallel universe, it all makes sense, in a demented way.
It’s like a fine that is given for being human – all of us need to be able to change plans, travel later, travel on short notice. Airlines punish human behavior when they are supposed to be rewarding us for loyalty. It’s irritating and reverses the good will they would have engendered by not fining us for being human.
Why should there be any fees related to changing our mind? We will travel just as much in the long run. It seems these utterly counterproductive fines do produce revenue which probably should be in the ticket price to begin with.
The airlines are just looking for ANY way to get additional funds. I booked my 25 yr old son on awards miles on AA from ORD to PHX but was only able to get the red-eye back but throuogh MIA….( should have used 25k anytime miles when I booked it but that’s another story). I noticed a bunch of open seats on the afternoon direct flight so I called AA Platinum desk, offering up 12,500 more miles to change the award flight…the attendant said no problem and then after checking the flight, assigning a seat and 20 minutes on the phone, she tells me ok, $150 change fee, 12,500 miles AND a $75 expedite fee. So…she wanted $225 and 12,5000 miles for me to change a one way award ticket….I told her, does that really make sense…I can just book a one way on Southwest…She understood, said she was sorry …I responded…”No wonder airlines get a bad rap, I just made my 2MM miler award w American and this is what I get for my loyalty, etc”.. We hung up…and …wow, she called me back 10 minutes later and said she will talk to her supervisor…after 30 more minutes on the phone, she made the change for only the additional 12,500 miles..Don’t know what made her change her mind but didn’t expect that!!!Are things changing with C/S????