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By Tracy Rucinski and Laurence Frost
CHICAGO/PARIS, Sept 3 (Reuters) - A radical bid to revive
air travel demand by permanently sacrificing billions of dollars
in fees to change tickets has left U.S. airlines isolated, as
foreign rivals fear the tactic would undermine the higher fares
paid by premium travellers.
The COVID-19 crisis has weakened one of the core elements of
the airline playbook: price many fares attractively low, then
charge for ticket changes. And meanwhile charge a hefty premium
to those wanting more flexibility: typically business
passengers.
"For the fee model to work, you have to have a passenger to
nickel-and-dime," said John Zhang, professor of marketing at the
University of Pennsylvania's Wharton School. Airlines may soon
"walk back other fees as well," he added.
Citi data shows U.S. carriers last year earned $2.8 billion
or 1.1% of revenue from cancellations and change fees.
American Airlines, Delta Air Lines and
United Airlines have all permanently axed the charges on
domestic travel in recent days, followed by Alaska Airlines.
"It's a revenue loss, but the bet is that this is going to
win over customers," said ICF consultant Carlos Ozores.
The move comes as U.S. and European passenger traffic
remains more than 80% below 2019 levels, July data from global
industry body IATA shows, with Asia-Pacific down 72%.
While airlines globally have suspended change fees during
the pandemic, those outside the U.S. are resisting making the
concessions permanent.
Lufthansa has announced a waiver until year-end,
while Air France-KLM has set no date for a resumption
of fees and says it is unlikely to make them permanent.
Low-cost carriers EasyJet and Ryanair also
said there were no plans for lasting fee changes.
Analysts say restoring fees could prove near-impossible
through the weak northern-hemisphere winter - and will only get
tougher as consumers increasingly take new terms for granted.
But much could depend on an expected wave of industry
consolidation, reducing competition in some markets as weaker
airlines shrink or fold, Citi analyst Mark Manduca said.
"Once that happens we'll be in a better place to assess the
bargaining power between airline and customer," he said, adding
that surviving airlines that emerge fewer and stronger may
swiftly end any "free-lunch mentality".
Australia's Qantas Airways Ltd dismissed
suggestions that temporary concessions could stay.
Axing fees would undermine the value to a corporate customer
of paying more upfront for flexibility, Qantas Chief Executive
Alan Joyce told the CAPA Australia Pacific Aviation Summit.
"If every airfare is going to be flexible, your revenue
management system I think fundamentally breaks down," Joyce
said, backed by Qatar Airways counterpart Akbar al-Baker.
Some observers also question the eye-catching permanency of
the U.S. fee waivers, predicting that airlines will find a way
to bring them back.
"It's almost impossible they won't do that once demand is
higher, only it might be a 'transfer' fee instead of a 'change'
fee," said Zhang. "This isn't a forever kind of thing."
(Reporting by Tracy Rucinski and Laurence Frost; additional
reporting by Jamie Freed in Sydney; editing by Tim Hepher and
Barbara Lewis)
