Arnie Weissmann
Arnie Weissmann

One of the most difficult things to sort out during the pandemic is which of the dramatic shifts in society that we're observing represent secular change -- secular in the financial, not spiritual sense -- and which are only temporary.

We assume that, at some point, the plexiglass partitions will come down, the social distancing markers will be scraped off floors, demand for masks will dwindle and Clorox wipes will again be available at the supermarket.

As regards travel specifically, we assume that the relaxation of rules regarding bookings, cancellations and refunds will expire when travelers feel reassured that it's safe to travel again.

But "man proceeds in the fog," wrote the Czech writer Milan Kundera. The path forward is obscured, yet the future is determined by decisions people make as they stumble along with poor visibility.

Sometimes, a decision is so momentous that whether it is, with hindsight, correct or misguided is beside the point -- it will set the course forward, for better or worse.

Such a decision, I believe, occurred in travel this week when the country's major airlines said they would eliminate change fees. Not the temporary policies airlines instituted to reassure travelers they could book without risk during the pandemic but, as United Airlines assured me in an email, a change that was "for good," "permanent" and "forever."

There are some carve-outs and variances in how these policies will roll out among the other major carriers who, in short order, followed United's lead. Most importantly, American said it would give credit for any disparity in fares between the original booking and the rebooking, whereas United will just pocket the difference. That should be a huge competitive advantage for American, and perhaps United will feel the pressure and modify their policy in that direction. But I do think the move, while not exactly lifting the fog, clarifies where we may be heading in other sectors of the travel industry, as well.

Hotel companies may have taught the rest of the travel industry how to improve guest services, but the airlines schooled everyone on pricing. Yield management, a demand-driven approach to maximize the profitability of available capacity by increasing prices as supply dwindles, was refined by commercial aviation before being adopted by hoteliers, car rental agencies and cruise lines.

Charging fees for ticket changes was the precursor to another pricing revolution: "unbundling," the model that breaks down services into individual components and then charges an ancillary fee for anything beyond the most basic function (transporting passengers from point A to point B).

Although unbundling isn't a concoction exclusive to commercial aviation, the enthusiasm with which airlines embraced it and the creativity and sheer nerve they brought to it, coupled with the grudging consumer acceptance, spurred other travel companies to push the limits of what their customers would pay extra for. It clearly inspired the insidious practice of hotel resort fees, which all too often amounts to money for nothing.

In any case, the broader industry watches airline pricing for financial guidance. The elimination of change fees suggests that, although cruise, tour and hotel executives will now look you straight in the eye and solemnly swear they will not reduce rates to stimulate demand as the industry recovers from the pandemic ... they will.

I do not begrudge airlines, or any supplier, a reasonable profit, and during the carriers' 10-year run of profitability in the second decade of this century, a number of factors besides unbundling helped them: Cheap fuel, consolidation and a strong economy were all important.

In a video statement, United's CEO, Scott Kirby, presents a somewhat revisionist history of change fees, noting correctly that they were born during a period of crisis and unprofitability but glossing over United's increasingly warm embrace of other ancillary fees long after the crisis passed.

Still, it was refreshing to hear him say that the airline was "looking for ways to serve you better instead of defaulting to cuts."

The quick response of United's two major competitors, Delta and American, who came out with similar but not identical plans, reinforces the sense that, although airlines are not a utility or monopoly, the speed with which they mimic each other suggests that competitive advantages don't last long.

The permanent dropping of change fees is a biggie and a sign of things to come. The speed of the match indicates the other airlines must have run financial models on this option and concluded it was doable, though United should be credited for being the one to break the ice.

All of this suggests that other segments of the industry are likely to imitate the permanent dropping of their least popular pricing strategies in order to stimulate bookings. In doing so, they will be acknowledging that the recovery will, by necessity, be slow and painful for suppliers while consumers are likely to see deals like never before. 

Our path onward through the fog became a little clearer this week.

One last point: Before writing the first sentence of this column, I double-checked the definition of "secular change." I'm wondering, perhaps a bit cynically, whether I should also look for possible alternative meanings of "forever," "permanently" and "for good." 


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