Carriers Reverse Their Nonrefundable Ticket Policies

American Airlines, followed by Continental and Delta airlines, last week eased restrictions on nonrefundable tickets by allowing travelers to rebook their itineraries up to one year after their original ticket was issued. Northwest Airlines went a step further, eliminating the requirement to cancel a nonrefundable reservation prior to scheduled departure.

Previously, customers using such fares were forced to make any intended changes before the original departure date or lose the full value of the ticket, a policy established by US Airways almost exactly one year ago and matched by the other Big Six U.S. carriers.

The new developments represent a rare positive for travel managers in their airline relationships.

"I am thrilled to see the airlines coming back to work with us," said Suzanne Fletcher, director of travel and meetings for Federal Way, Wash.-based Weyerhaeuser. "The airlines have been in survival mode, and that is understandable, but it is about time they did something to really help the corporate travel manager."

The airlines last year, in further restricting nonrefundable tickets, hoped to move business travelers back to higher-price, less-restrictive fare buckets by rebuilding proverbial fare fences meant to segment leisure and business customers (BTN, Sept. 9, 2002). According to American Express, the airlines failed to achieve that goal. The travel management company said 54 percent of all tickets purchased by its business travel customer base through the second quarter of this year were in nonrefundable fare classes, up roughly 10 percent from a year earlier and more than double from 2000 levels.

As stipulated in the newly relaxed policies—except in the case of Northwest—customers still must cancel their original reservation prior to departure date and still are subject to applicable change fees, generally $100 per modification. The carriers also require customers not only to rebook but also to begin travel within a year of original ticket issuance.

Said Northwest in a statement: "Since customers will no longer be required to identify a travel date in advance when changing their tickets, many customers are expected to save on change fees that would have been paid through making multiple changes under the previous policy."

At press time, codesharing alliance partners United and US Airways had not announced matching policies, nor had any other majors taken the extra step back to the more customer-friendly rules announced by Northwest.

Late last summer, many travel managers cried foul when the major carriers declared nonrefundable tickets devoid of all value once the originally ticketed flight departed. It was, they said, another example of carriers nickel and diming their passengers and inconveniencing their best customers—business travelers. In fact, the heavier restrictions primarily came as a response to increasing usage of cheaper, nonrefundable fares by business travelers, partly driven by corporate travel policies that require travelers to book the lowest logical airfare.

"It was a huge impact to my company, taken together with the removal of discounts on lower-bucket fares," said Fletcher, who also chairs the National Business Travel Association aviation committee. "The new changes will make a substantial difference to us."

American, which had been allowing changes on nonrefundable tickets since 1992, last August stated the more restrictive policy was aimed at simplifying processes and lowering operating costs.

"Our new policy allows customers to rebook on their own timetable without losing the value of their nonrefundable tickets and without facing multiple change fees," American vice president of revenue management Scott Nason said last week, adding that business customers "especially will appreciate the flexibility."

Terry Trippler, airfare expert at Trippler & Associates in Minneapolis, said American finally listened to the market. "If any airline during this major industry correction has heard the message, it is American," he said. "The 'use it or lose it' policy is a bad one and American realizes that customer service has to return in some form." Trippler noted that American "had to do something" following its decision to revert to standard seating on certain airplanes while rival JetBlue Airways rolls out a roomier seating configuration.

Travel management companies, in the wake of the restrictions instituted last year, developed or enhanced ticket tracking software that alerts travelers before the date of an issued nonrefundable ticket and reports on any unused segments. Such software will remain important if the other Big Six carriers do not match Northwest's less restrictive policy. In either case, alert systems, generally e-mail based, at least will minimize the number of change fees incurred.

"Carriers are very inflexible on that but there are a few exceptions," said Management Alternatives vice president John Heilner, speaking this month at the NBTA convention in Dallas. "If you are important enough to the airline, and if you can prove the point by showing a low-cost carrier option may not have been matched, there may be an opportunity to get waivers, as the preferred carrier wants to compete against the low-cost carrier. But they are inflexible 95 percent of the time."