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What are the reasons airlines have for non-refundable tickets? A non-refundable ticket usually has a lower price, but what harm does it do if a customer asks for a refund? Not refunding a ticket 1 or 2 weeks before the flight I understand, but before then the airline can always resell the open seat, maybe even at a higher price. So why place such restritions?

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closed as primarily opinion-based by Gagravarr, Dirty-flow, Vince, uncovery, Karlson Jun 28 '13 at 12:42

Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise.If this question can be reworded to fit the rules in the help center, please edit the question.

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Welcome to travel.SE. Simplest and shortest answer to this is: Why not? You're guaranteeing them at least some money whether seat is filled or not. –  Karlson Jun 27 '13 at 21:07
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That's a strategy. On the contrary, some train companies even offer to reserve a seat for a full week before paying for it, for free. And yeah they get to sell it for more expensive if not booked. There are a lot of strategies, with different reasons. Look at it: en.wikipedia.org/wiki/Pricing –  Vince Jun 27 '13 at 21:53
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I don't understand how this is opinion-based. I'm not asking what other users think of non-refundable tickets. I'm wanting to know the reasoning behind non-refundable tickets. –  RHPT Jun 29 '13 at 5:48
    
The point is extracting more money from people who want the refundable ticket while still selling tickets to people who are price-sensitive. Ideally, the airline would want to get as much money as each individual passenger is willing to part with but they can't do that so they have to use tricks like fare categories. If your cheap ticket was refundable, nobody would pay for the more expensive one. It does not even matter if the airline can resell the tickets, need to plan in advance, etc. –  Relaxed May 10 at 21:09

1 Answer 1

up vote 4 down vote accepted

Airlines sell lots and lots of "fare classes" and they set the price for each of them accordingly. It's partly based on "What the market will bear" and partly what it actually costs the airline to offer them.

As a thought experiment, imagine an airline chooses to have just 3 types of fares:

  • you have to buy 2 weeks in advance and you cannot change it for any price. If you change your plans you lose your ticket.
  • you can change as much as you like for no charge
  • you can buy at the last minute and we guarantee you a seat

Imagine a flight with 100 seats. On the day of the flight, 10 people change their plans and don't fly. If they were all "change with no charge" the flight goes out with 10 empty seats and no money to show for it. If they were all "no changes" the flight goes out with 10 empty seats, but they were paid for, so perhaps they don't mind.

Now imagine a flight with 100 seats and on the day of the flight 10 people decide to change to flying that day. Now there aren't enough seats and some people will need to be "bumped" and compensated.

Revenue management or yield management is the job of tweaking these relative prices. If you save "enough" by locking in and being unable to change, the airline will have money it can count on getting. If the "free changes" ticket costs "enough" extra, they won't mind that allowing changes results in wasted seats or costly bumping. But if they make the no-changes seats too cheap, the whole plane will buy them. For example if a no-changes ticket costs $100 and a free-changes ticket costs $500, I can just buy a no-changes ticket, and if I need to change it once I can throw it away and buy another and I'm still ahead; I only spent $200 instead of $500.

You assume the airline can always resell the seat. If that were true, they would not all be in such dire financial straits. And besides, it makes their lives simpler if people stick to their plans. Associating a cost with changing plans tends to make people stick to them.

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