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Originally published Tuesday, April 22, 2014 at 12:37 PM

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Airlines cash in on unused tickets, change fees

Customers paid airlines in the United States a total of $2.5 billion in cancellation fees in 2012 — and airlines won’t say how much they make off unused tickets.

The New York Times


Here is the explanation for why I booked two one-way trips for the same day, from two different cities 2,500 miles apart. It involves parrots and construction workers.

A few weeks ago, I went online to compare fares for a one-way flight to New York, departing on April 18, and a one-way flight back home on American Airlines on the 22nd.

I share my home office with two parrots. As I was trying to book flights, Rosie, a bossy and talkative African gray, was reprimanding the other parrot, Petey, a big, dumb, excitable macaw, who was shrieking at some workmen outside noisily removing part of our roof in a renovation.

“Petey! Stop that screaming right now!” Rosie, who actually speaks in sentences, warned her feathered friend, as she always does when he carries on.

Ignoring her, Petey kept shrieking. The phone rang, twice. A worker banged on the door with a question. I returned to my reservations screen, head down and distracted.

A few days later, when I reviewed my itinerary, I realized that I had inadvertently booked a one-way flight on United Airlines to New York — and also a one-way flight on American from New York to Tucson — both on the 18th.

Oops. I had to cancel the mistakenly booked American flight. Fare: $212. If I want to rebook that ticket within the year allowed, the penalty fee to change it will be $200. So I’ve lost the value of the ticket, except for $12 that might be salvaged in the unlikely event that the fare is higher later on.

Take that $212 (and American certainly will), consider that business travelers often change itineraries after booking and “we’re talking billions of dollars here,” said Ralph Nader, the consumer activist who has been pressing airlines to at least account for what he describes as a windfall from tickets that expire unused after a year.

Actually, there are two windfalls. One of them we can keep tabs on. Customers paid airlines in the United States a total of $2.5 billion in cancellation fees in 2012, up from $915.2 million in 2007, according to the Transportation Department’s Bureau of Transportation Statistics.

And this pot of gold is getting bigger. The major airlines, Southwest excepted, raised cancellation fees for domestic tickets to $200 from $150 last April (international flight cancellation fees also rose, by various amounts). In the third quarter of 2013, which reflects that increase, airline cancellation-fee revenue was $734.8 million, up from $652 million in the third quarter of 2012.

But what about all those unused tickets that will never be rebooked for one reason or another? How much revenue does that represent? Keep in mind that most airplanes are flying nearly full and have been for years, so they simply resell that seat.

“The public dialogue that should be happening around this is, how much money are the airlines retaining from all those unused tickets people have in their drawers or whatnot, because they cannot convert them into a usable ticket?” said Theresa Amato, director of the Fair Contracts Project started by Nader’s Citizen Works organization.

The airline industry — which has become solidly profitable in recent years, partly through accumulating ever-higher revenue from change fees, charges for checked bags and other so-called ancillary revenue — says that income from unused nonrefundable tickets is proprietary data, and has declined the Nader group’s request for an accounting.

In a response to Nader in 2012, David A. Berg, the general counsel for the airline trade group Airlines for America, noted that in 1978, the airline industry was deregulated, resulting in intense competition that drove down the costs of air travel.

“Customers get significant value when they choose to purchase nonrefundable tickets instead of full-fare refundable tickets,” Berg wrote, adding, “Consumers understand that if nonrefundable tickets cannot be used, their value will be lost.”

That standoff continues. But new questions about airline financial accountability are now being raised over the way airlines present and advertise ticket prices. Airlines in the United States are trying to repeal a 2012 rule by the Transportation Department that requires them to prominently display the full base price of a ticket, including standard taxes and fees.

A bill introduced in Congress in March would amend that rule and instead allow airlines to “state the base airfare of the transportation” more prominently in advertisements. Critics say that would allow airlines to highlight the base fare, relegating fees and taxes to the fine print.

Critics say that would be deceptive advertising and would allow airlines to cast as onerous government burdens the costs of maintaining and operating the national air traffic network and airport systems, including security, without which they could not operate.

The proposed law “would give airlines free rein to quote artificially low ticket prices,” said Paul Hudson, president of the consumer group But Airlines for America, the industry trade group, says that the proposed law would ensure that customers “are aware of exactly how much of their ticket price goes to federal taxes.”

“Air travel remains one of the best bargains for consumers, but that affordability is imperiled by rising government taxes and fees,” said Nicholas E. Calio, president of the trade group.

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