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