Travelers often wonder what the exact terms and stipulations are when it comes to "nonrefundable" airline tickets. First, let’s quickly define the word nonrefundable. The Macmillan dictionary states: if the money that you pay for something is nonrefundable, it will not be given back to you, such as a nonrefundable deposit or ticket. In general terms, that definitely rings true for the airline industry. A nonrefundable airline ticket means that if you must cancel or change your flight, you will not get your money back.
So why would travelers opt for nonrefundable tickets? It all comes down to price. Airlines claim that nonrefundable tickets keep the cost of airfare affordable. And they’re right. Flexible fares (also called full coach or 'y' fare tickets) are fares that allow travelers to change their ticket once the booking is made. But with the accommodation, such as modifying flight dates, flexible tickets come at a premium. Flexible fares can cost double, triple and sometimes even quadruple that of a nonrefundable fare.
Who would purchase flexible fares at that price? Most often, airlines sell refundable tickets to business travelers who are not especially concerned with ticket price because they are 1) expensing the ticket and 2) aren’t looking for extra savings if the flex fare fits within their spending threshold. But employee’s freely purchasing overpriced flexible tickets can have a negative impact on your company’s bottom line.
A Travel Management Company (TMC) will put policies and procedures in place with rules and regulations regarding the purchase of nonrefundable tickets. This way rogue travelers cannot purchase expensive nonrefundable tickets without justification and proper approvals.
But are these tickets truly nonrefundable? In literal terms, yes. You will not get cash back if you cancel or change your flight. However, most airlines allow travelers to apply the face value of the canceled ticket toward the purchase of a new ticket (called ticket credit) with a penalty charge and some restrictions.
Penalty charges vary according to individual carrier policy, so you must check with the airline where you purchased the ticket. Restrictions also fluctuate from airline to airline. Here are some typical charges and constraints issued by carriers for nonrefundable ticket:
- Changing or cancelling nonrefundable airfare can cost as much as $200 per ticket on US legacy airlines such as American, Delta, and United for penalty charges. Other carriers may charge a little less, while changing or canceling an international flight can cost much more.
- The U.S. Department of Transportation regulations require that, as long as you’ve booked a nonrefundable ticket seven days ahead of your flight, you’re entitled to change or cancel your reservation within 24 hours of booking, without paying a cancellation or change fee. Keep in mind, if you do change your ticket and the price of the ticket has increased, a fare difference may apply. But there is no change penalty. This regulation applies not just to airlines based in the US, but to any airline selling tickets in the States.
- Some airlines require a new ticket to have the same routing as the original itinerary.
- Nonrefundable tickets are also non-transferable. New tickets must be issued in the same name as the originally ticketed passenger.
- Ticket credits typically expire in a year. TMCs know how to manage unused ticket credits and refunds so that they are never forgotten or wasted. In addition, a TMC knows how to extend an expiration date. By making another reservation and then changing the ticket again, the life of the ticket lives on. Of course, you may be charged with an additional penalty but, depending on the price of the ticket, it may or may not be worth the effort.
- Rule 260 states that if the airline refuses to carry you for any reason or if your flight is delayed for a lengthy amount of time (the length of time varies among airlines) or the flight has been canceled, you can apply for a full refund, even on a nonrefundable ticket. The “involuntary refund” rule can be found in the airlines' contracts of carriage. Rule 260 also applies if the new flight includes a much longer layover, an unexpected overnight stay or moves from nonstop to a connecting flight. If your original flight is canceled and you can’t make it to the airport at the new time or if the new time changes your plans so the trip is now pointless, ask for a refund.
- Consumers should be forewarned that some online booking sites (such as Priceline, Cheap Tickets and Hotwire), buy up consolidated tickets from airlines. These tickets, which for one reason or another have not sold, are purchased in large quantities from the major airlines at bulk prices and are then offered at attractive discounts. Consolidated tickets have a multitude of restrictions and usually offer no refunds or changes whatsoever.
You may be wondering, “Why all the mystery around nonrefundable tickets?” As we mentioned earlier, it all comes down to prices. Penalty fees for ticket changes, along with baggage fees, are a major source of profit for airlines.
According to the Department of Transportation, airlines charged a total of $2.98 billion in reservation cancellation/change fees in 2014. The three largest airlines, Delta, United and American, each billed over $800 million in change fees. In addition, carriers often make money on replacement tickets. For instance, if the new flight is more expensive than the old flight, the traveler is responsible for the price difference plus the change fee.
There is little motivation for carriers to change the current system. Clear, upfront policies informing travelers how to avoid penalties when changing nonrefundable tickets takes away solid profits. TMCs are familiar with the different fees airlines charge for changes and cancellations, as well as specific exception rules. In order to take advantage of the 24-hour cancellation or change rule and to manage your unused tickets, it’s best to book directly with TMCs rather than through third-party websites.
For more information on what a TMC can do for your company, check out our whitepaper, Travel Management Companies: What They Mean for YOUR Company.