United Airlines CEO says he wants to eliminate change fees from 1998.

Gary Leff at 21. March 2021.

Scott Kirby, CEO of United Airlines, said he was vice president of America West in 1998 and that one conversation changed his mind about change fees, and that he has wanted to eliminate them ever since. It wasn’t until August 2020 that this happened, and then American, Delta, Alaska and JetBlue followed suit. His remarks were made at the recent J.P. Morgan Industrials conference.

The interesting part of the story is not the golf game that gave him an epiphany, but why it took 22 years for that change to happen.

At the J.P. Morgan Industrials conference, Kirby told us he was golfing with a friend in Phoenix and the friend flew southwest. Kirby asked him why he left America West with a better loyalty program and other benefits, and a friend said it was Southwest’s flexibility.

He was a car salesman. He flies to the auctions every week. He can buy 6 or 10 cars, or none. If he went shopping, the paperwork took hours, if he wasn’t buying cars, he was done and wanted to go home. And by paying right of way, he sent his weekly business to Southwest 52 weeks a year.

Of course, the content of the article changes the same day. When Kirby was president of American Airlines in 2015, American Airlines instituted stricter rules for same-day itinerary changes and required passengers to stay on the same route, eliminating the merger benefit for customers from more hubs.

Kirby said the elimination of transfer fees (on the non-base economy ticket) was a billion dollar solution, so it would take almost a CEO to implement it. Not only did the rebooking fee bring in a lot of money, but that money was exempt from the 7.5% excise tax on domestic airline tickets, so decoupling the rebooking fee from the ticket price was also a tax arbitrage.

I predicted in 2018 that Kirby would become CEO in 2020. Months later, United announced the change.

Why now, if not to become CEO? Surely he could convince Oscar Munoz or Doug Parker to waive the draft board if he could show that it would be more beneficial to the operation than offsetting potential losses?

The airlines didn’t want to collect a buyback fee for a while anyway. They are no longer needed to separate customers. And the abolition of the amendment fee outside of Basic Economy fares has led to greater differentiation between Standard Economy and Basic Economy fares. In other words: This was the cheapest time to make changes that serve the dealer without offering anything to the passenger, because after the pandemic, the lines with the lowest fares don’t change at all for a fee.

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