Airplane tickets are generally nonrefundable, because the majority of tickets sold are discount tickets. In exchange for discounts of 60 to 80% off the cost of a full-fare ticket, airlines make tickets nonrefundable and nontransferable. They do this to have greater predictability of customer loads and stability of income. Airlines also use it as a way to generate additional ticket fee income.
Reasoning Behind Change Fees
Airlines work on thin profit margins. The process of filling a flight requires a complex computer algorithm that makes adjustments to ticket prices and flight logistics as each reservation is booked. Any change to a reservation adds costs the airlines have not built into the discount ticket price so they charge a change fee. The typical ticket change fee ranges from $100 to $150.
The airline’s actual cost of making changes to a reservation is less than $100 to $150. These ticket fees, along with baggage fees, are a major profit center for airlines. According to the Department of Transportation, airlines charged a total of $2.98 billion in reservation cancellation/change fees in 2014. The three largest airlines, Delta, United and American, each billed over $800 million in change fees.
Airlines also make money from new tickets. If the new flight has a higher fare than the old flight, the customer has to pay the difference in addition to the change fee. If the new flight has a lower fare than the previous flight, the airline keeps the difference. There is no reason for airlines to offer easily refundable tickets because they are making solid profits from the current system.