Airlines Getting Nasty w/Cancellation Fees and Expiring Credits

When the pandemic first began, I felt airlines and hotels were reasonably generous in waiving cancellation fees. More recently my experience has been different with airlines in particular digging in their heels on refunds and extending flight credit expiration.

Let’s get right into it…

Situation

Most US carriers have eliminated change fees to encourage new ticket purchases. But it’s important to note that flexible change policies are different than free refunds. Once a ticket is purchased, a clock starts ticking towards its value expiring if you don’t take the trip for whatever reason.

For example, with American Airlines if you cancel a ticket you get a Flight Credit. With a Flight Credit:

  • Travel must begin within a year of purchase
  • Tickets are name locked
  • You can only use one Flight Credit per booking
  • You’re responsible for any fare differences

Thankfully most other airlines (though not all) have more flexible cancellation terms and have been more generous about extending the expiration of flight credits.

Between my personal experience and in talking to friends and family, it feels to me like airline patience is wearing thin and they’re starting to put the screws to customers.

An Example

I bought tickets for travel on AA eleven months out right when the schedule opened in 2021, for travel in early 2022. About a month before the trip we decided collectively that we didn’t want to take the trip.

I booked through Amex Travel (for a 35% Membership Reward rebate and Insider Fares) and I didn’t want to wait on hold to talk with them so I clicked “Cancel” thinking I’d have plenty of time to use the funds towards a future trip. I didn’t realize until later that I’d need to use the funds for travel on AA by February 2022.

Once I realized I had only a couple months to take a trip on AA, I looked into whether AA was extending expiration of flight credits. They aren’t but this article gave me some hope, suggesting a Flight Credit could be converted into a more flexible Trip Credit with an additional year of expiration. I pinged AA on Twitter asking about this. They told me they aren’t empowed to do that, and that if the ticket was eligible for conversion to Trip Credit I’d be informed via email.

Further complicating matters is that I booked through Amex Travel. Any change or refund would have to come through them. It looked like I was going to be taking a loss on these tickets…

Refunds When the Airline Cancels Your Flight

Around the time I was considering my options I read this post from Matt at Miles Earn and Burn. He points out that if you’re booked on a flight that the airline cancels you’re entitled to a refund:

Cancelled Flight – A passenger is entitled to a refund if the airline cancelled a flight, regardless of the reason, and the passenger chooses not to travel.

Schedule Change/Significant Delay – A passenger is entitled to a refund if the airline made a significant schedule change and/or significantly delays a flight and the passenger chooses not to travel.

Source: DOT

My flight time actually was changed along the way. But since it was a two hour change that wasn’t enough for AA to consider it worthy of a refund.

I could have waited to see if by chance the flight I was booked on was cancelled. But I didn’t like the feeling of this hanging over my head. I wanted to get a refund buttoned up, and I felt like I’d exhausted my better options so I set to change to a flight with a high chance of cancellation due to weather.

In practice this is easier said than done, and I experienced a lot of customer service reps who quickly defaulted to telling me why I wasn’t getting what I wanted rather than seeking to help me get what I wanted.

I talk more about this in Episode 151 of our podcast.

Sludge

At the suggestion of member of the Milenomics Slack community I’ve been reading a book called Nudge. A counterpoint they mention is Sludge. An example of sludge is how it’s easy to subscribe to a channel on a smart TV, but far more difficult to cancel that subscription. I experienced Sludge at every step of the way while seeking a refund for these airline tickets.

First, AA’s flight credit scheme is incredibly complicated. There are Flight Credits, Trip Credits, and Travel Vouchers, each with their own restrictions. And this is just one airline we’re dealing with. Each airline is different so understanding the restrictions before booking can be very time consuming.

Second, by booking through Amex Travel I put myself in a weak position. As my “travel agent” any changes I wanted to pursue had to be taken up with Amex Travel who in turn has to negotiate with AA. So if I wanted to get anywhere I had to convince the Amex Travel rep of my position, and that person had to convince an AA rep on my behalf. That’s a difficult game of telephone to play effectively.

Third, the complexity of the rules and regulations conceived by the airlines in conjunction with booking through a third party is such that it exceeds the limits of what a customer can do themselves online. I could book the ticket on Amex Travel online, and I could cancel it online. But from that moment on, since it was an AA Flight Credit booked through Amex Travel, everything had to be done by calling.

Fourth, the hold times when calling are very long. And if a third party travel agent in turn needs to call the airline the call time gets even longer. If you factor in calling during during a weather event hold times get even worse.

Ultimately I think:

  1. Flight credits shouldn’t expire. Retail gift cards don’t expire. It would be nice if flight credits didn’t expire either. The funds are in the airline’s hands. I’ll use them eventually. It just doesn’t seem right to me that the value disappears a year after a ticket is purchased.
  2. If they’re going to expire, they should expire 13 months after purchase. This would give customers the ability to book into the same week the next year if they need to cancel.

Going Forward

I’m going to take into consideration the ease of booking and refund more than ever. This has implications on both the booking channel I use as well as the currencies I’ll favor using.

I appreciate getting value out of flexible bank points, but the savings over cash needs to be significant in order for me to enlist bank travel agencies as a middle man between me and the airline.

I’ll heavily favor using airline miles over bank points or cash, even if the value per point out of the airline mile isn’t as good as cash. Being able to cancel and get miles back is far more convenient than dealing with flight credits.

But beware: Even if you book with airline miles you’re not in the clear on cancellations. For example, I’ve got award travel booked for Japan in February with AsiaMiles. Even though Japan isn’t open for tourism AsiaMiles is insisting on a $120 per ticket award cancellation and redeposit fee. This is in stark constrast with typical airline policies when Covid started, and even more stringent than when there was political unrest in Hong Kong a couple years ago. Like I said upstream: Airlines are running out of patience and they want money.

Bottom Line

Like many of you, I’ve been booking and cancelling a lot of flights lately. Recent experiences have taught me to be more careful before booking and to explore more options when looking to cancel.

I’d encourage you to become familiar at a high level with the cancellation policies of your hometown airline(s) and above all know your rights when it comes to when you’re due a refund. Because flexible change policies don’t equal free refunds.

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About the author

– Written by Robert Dwyer, contributor at Milenomics. Connect with me on Twitter @RobertDwyer

Comments

  1. I had an old AA paper voucher which was going to expire in 9/21, so I purchased a refundable ticket for a flight in February, 2022 I had no intention of taking. The flight I bought cost slightly less than the voucher, so I received a credit for the residual value. When I canceled the purchased ticket and tried to use its value to purchase a new ticket, I learned that the value from the canceled flight (trip credit) and the residual value of the voucher (trip credit) could not be combined even though both originated from the original paper voucher! Why not? Because American says so. What a scam. Whenever possible, these days I try to used miles instead of cash since the miles can be redeposited for free as long as you avoid Basic Economy.

    1. Jeff: thanks for sharing and what a terrible story. At this point I’m with you on booking with miles…I think that’s great advice. I don’t like fighting fire with fire but if they’re going to force my hand with one sided rules (like AA did Robert’s) I will.

  2. Robert – you are describing my exact experience with both Amex Travel and AA. I thought it would have been fairer if AA started counting the flight credit from date of departure, not date of purchase. Fortunately, we did use the “flight credits” before expiration. The original airfare was much higher, so we had credits left over. The clock on those credits then started with the reservation date of the new flight (a year from that new date), AND, the new credits became “trip credits”. Subsequently, booked a flight for my husband and those trip credits could now be used for him, both his credit and my credits could be applied to his ticket.
    By the way, as for Amex Travel, we did have to cancel the original trip through them, but when we made the subsequent trip, I called AA directly. We had to pay $50 for each ticket, but this way, the flight was through AA and when we later used the “trip credit” it was much easier. Yes, there was a long wait time to reach AA, however, they give option for a call back, and that worked.

    1. Vicki – I agree it would be more fair to have flight credit expiration clock start on the flight date rather than the original ticket purchase date. It’s like they’re penalizing people who book early which doesn’t make sense.

      Good tips on being able to interact directly with AA once you’ve got flight credits rather than dealing with Amex Travel. Bummer they charged you $50 for something you couldn’t do online though – what a money grab. I guess I was under the impression I had to deal with Amex Travel because my ultimate aim became getting a refund which I believe does have to be done through Amex Travel.

      Here’s hoping for fewer cancellations and changes going forward.

  3. I agree – we hadn’t flown AA metal in 20 years – but we booked Costa Rica for January 2021 on AA with AA miles.

    We’ll in January Biden instituted a PCR test to re-enter America went in to effect the day we were to depart – the rule went in to.effect less than 2 weeks after announcement. Didn’t want to stress and possibly spend half of a week long trip trying to make sure we could get tested properly to re-enter.

    It wouldn’t have been an issue a month in, but last minute was an insane gamble. Bit we ate taxes, miles and seat upgrades. We booked in May 2020 and the changed the flight/route 5 times – but because the changed equipment from 757 to different plan changed so did our paid seats – so we could have cancelled but we “recommitted” we looked to rebook then Delta, then Omicron then the clock ran out and I think the rules for award flights changed 3-4x.

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