Why the Airlines Are Going Bankrupt

As travelers know all too well, the airlines are a hassle to deal with these days. There are delays, flight cancellation/rescheduling, hidden fees, and bizarre policies. While all contribute to their decline, to be fair, they don't always have much control over delays and rescheduling. But they can alter fees and policies. A particularly strange fee-driven policy is forbidding customers from cancelling the first leg of a roundtrip flight without incurring a change fee.

I just got off the phone with one of the major airlines and experienced this first-hand. Here's the situation:

I've got a round trip flight (both direct routes) scheduled in July that cost around $250. The fee to change the ticket is $150. Excessive, but that's their prerogative. It turns out I want to change the first leg of the flight to a day earlier. That earlier flight is cheaper than the first leg of the original flight booked by around $11.

In order to do this, I would have to pay the $150 change fee. But then I realized: the earlier flight only costs $100. Why not just book that flight separately and just skip the initial flight on the roundtrip? That doesn't work, because if you don't show up, the entire itinerary is eliminated. You must change the itinerary, which means you can't escape the $150 change fee.

This makes no economic sense. Here's an analogy: You go to Macys.com and order two pairs of shoes for $250. Before they're shipped, you realize you only want one pair, so you offer to let the company keep the other pair -- and demand no refund for those shoes. They say, "No. We'll only accept that second pair back if you pay us an additional $150. And by the way, we'll cancel your entire order and keep your money unless you keep both pairs." What?

Additionally, this policy makes no sense considering that it only works in one direction. You can always take the first leg of the flight and just fail to show up for the return. It's not like they'll bill you if you skip it, demanding a $150 change fee since your seat was empty on the second flight.

If the airline just allowed passengers to cancel the first leg of a round trip, then it would have an additional free seat to sell -- even though it had already been paid for once. In my case, I would also buy another seat on an earlier flight, providing it with $100 of additional revenue for a seat that might otherwise not be purchased.

So let's compare:

Scenario #1 (that the airline demands): They get $250 for the original itinerary.

Scenario #2 (my alternative their policy forbids): They get $250 for the original itinerary, plus $100 for a new one-way departure, plus a free seat from the first leg of the original itinerary they could resell for $135 since it's a more desirable flight. Their revenue would then range from between $350 and $485.

Which would you pick? This airline picks Scenario #1. It looks like they need a class in economics or basic finance. And that means I'm stuck with my original itinerary, but at least I'll save $100.