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United Declares War on Fees, Forces Response From Rivals

By Lou Whiteman – Aug 31, 2020 at 4:23PM

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The airline is eliminating the fee it charges when customers change their flight.

A move by United Airlines Holdings (UAL -0.63%) to permanently eliminate change fees on tickets is reverberating through the airline industry on Monday and is likely not making United many friends among its airline rivals.

United said Sunday effective immediately it would eliminate the up-to-$200 fee it charged to change tickets, getting rid of a charge that helped it generate more than $600 million in fee income last year. A number of major airlines temporarily waived the fee earlier this year in response to the COVID-19 pandemic, but until now Southwest Airlines (LUV 0.43%) was the only major airline that did not charge change fees.

A United plane lands at an airport.

Image source: United Airlines.

The move comes at a time when airlines are desperate for revenue but also trying to win over reluctant customers. Industry revenue was down by about 80% year over year in the second quarter, and it is expected to take years for demand to return to pre-pandemic levels.

"Following previous tough times, airlines made difficult decisions to survive, sometimes at the expense of customer service," United CEO Scott Kirby said in a video message to customers announcing the move. "United Airlines won't be following that same playbook as we come out of this crisis. Instead, we're taking a completely different approach -- and looking at new ways to serve our customers better."

Analyst Robert Stallard at Vertical Research Partners in a note out Monday likened the move to Caesar's crossing of the Rubicon, which set off the Roman civil war, writing that "while passengers can rejoice, we're not sure if United's rivals will be quite so enamored by this move."

United's rivals might not be enamored, but in a competitive market they have no choice but to go along. Both Delta Air Lines (DAL 0.03%) and American Airlines Group (AAL -3.12%) on Monday afternoon said they would eliminate change fees as well.

Combined, United, American, Delta, and Southwest control more than 80% of the U.S. domestic market.

Lou Whiteman owns shares of Delta Air Lines. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.

Stocks Mentioned

United Airlines Holdings Stock Quote
United Airlines Holdings
$43.89 (-0.63%) $0.28
Southwest Airlines Stock Quote
Southwest Airlines
$40.08 (0.43%) $0.17
Delta Air Lines Stock Quote
Delta Air Lines
$35.38 (0.03%) $0.01
American Airlines Group Stock Quote
American Airlines Group
$13.98 (-3.12%) $0.45

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