Airlines Increasing Bottom Line with Cancellation Fees
Tuesday, August 4th, 2009
As the major U.S. airlines continue to struggle during the economic downturn, many have started imposing extra baggage fees and other fees to increase their bottom line. However, the majority are cashing in another way: cancellation fees. In a recent report by the Wall Street Journal, many airlines are making the most of traveler's cancellations and mistakes by imposing surcharges with high price penalties for cancelling a flight. According to the Wall Street Journal, "change and cancellation fees amount to an added 3.2% of U.S. airline passenger revenue, totaling $527.6 million for the first quarter." This extra cash flow is significant for airlines such as American Airlines, JetBlue and U.S. Airways who are still trying to find ways to increase their bottom line. The revenue losses in the past year for major airlines amount to millions of dollars for the year, which is why many airlines have started opening up new revenue streams with extra baggage fees, increased booking fees, and now, even higher cancellation fees. Another area that consumers need to be aware of is transfer fees. Some airlines are imposing additional transfer fees for any passenger that modifies their ticket once purchased.
Travelers who purchase insurance may be able to offset a portion of these fees, but in many cases, a self-imposed cancellation is not eligible for a refund through major travel insurance providers. Airlines do have the freedom to impose charges based on a percentage of the travel ticket cost, or in the form of a flat-fee penalty. These penalties and charges are listed on the airlines' website, but are often hidden amongst the terms and conditions when booking through an online travel agency. Travelers are advised to read through all of the disclosures and terms before confirming their reservation to avoid paying fees that can cost in excess of $150 per ticket, in some cases.