American Airlines Inc. and Delta Airlines Inc. said they were removing change fees on most domestic flights, as the levies emerged as a new competitive battleground among airlines. The moves on Monday by the two largest U.S. carriers comes a day after UAL Holdings Inc. said that they were permanently ending flight change fees for most domestic flights, in the latest effort to boost demand in an air-travel industry hit hard by the coronavirus pandemic.
The sluggish rebound in passenger demand since April and concerns that Covid-19 cases could rise during the fall and winter have pushed airlines to identify new competitive strategies. The carriers are seeking to provide passengers with more reassurance about returning to the skies. Southwest Airlines Co. has never charged baggage or change fees, a policy it has used as a marketing tool.
“This is a huge move,” industry consultant Michael Boyd said after United’s decision. “The other major airlines will have to follow suit.” Industrywide, change fees netted airlines $2.8 billion in 2019. Dropping the lucrative fees underscores that the balance of power between airlines and passengers’ rests firmly with customers today. That doesn’t happen too often, noted Philip Baggaley, the chief credit analyst for airlines at Standard & Poor’s.
The airlines are responding to the fact that a modest recovery in air travel at the start of summer started stalling out in July, Baggaley said. With the end of the summer travel season a week away, they had no choice but to throw in the towel on anything that might be keeping people from booking.
“The airlines are in a position where they are not generating a lot of revenue,” said Helane Becker, airline analyst at Cowen. “If this gets people to book, that’s a huge positive for them.” Becker said that most of the fees were paid by business travelers in the past, but most business travel remains grounded — only about 5% of pre-Covid levels by her estimate.
“Even if you want to travel on business, I’m not sure that corporate clients want you in their office,” she said.