Why do LCCs not permit cancellations ?

[davidjohnson6]

As everyone knows, if you buy a ticket from a LCC (Easyjet, Ryanair, etc), once you buy the ticket, it's non refundable. Yes, you might be able to pay an additional fee to move the credit across to a new flight, but the money has basically left your pocket forever. Furthermore, those fees and taxes can be legally refunded but the admin fees usually wipe out any gain in doing so.

In the event that a passenger knows he/she either can't make the flight (or doesn't want to) and doesn't wish to pay the extra fee to move the booking to a different flight on a different date, there is almost no incentive to tell the airline that you will not travel.

Sure, if the flight is less than full, this suits the airline very well. If however the flight *is* full more than 24 hours in advance, it suggests there are probably other people who really want to fly (and will pay a high price) but can't get seats at short notice. While a network carrier will typically overbook to cover this scenario, LCCs generally do not overbook. In this scenario, presumably an airline really would like non-travelling passengers to declare their intentions so their seats can be sold to someone who does want to travel. Of course, one has to then incentivise non-travelling passengers to reveal their plans in advance - i.e. give them some sort of rebate, with the rebate possibly being conditional on the seats in question actually being resold.

An equivalent scenario is unwanted theatre tickets. Return them to the box office, and if they can sell your tickets you get some of your money back.

Has anyone ever considered this "if the flight's full and you tell us if you don't want to fly more than 24 hours in advance we'll give you some of your fare back" approach ? I'm trying to think of why it might break yield management models, but nothing comes to mind - if I've missed something obvious, please do say so....

[ExXB]

Are you certain that LCC's can't return a seat to inventory if it is cancelled?

The change scenario suggests that they can, but you are correct they don't seek cancellations. Could this be to avoid the accusation that they are selling the seat twice?

Complexity could also be a reason as it isn't really like returning theatre tickets to the box office. There is no equivalent box office, only virtually and putting in limitations (like 24 hours in advance) could serve to confuse things even more.

If it really was an opportunity I'm sure someone would have done it by now, perhaps by allowing go-shows or something similar

[Tableview]

I used to work in reveneue management (not for an LCC) and I find it hard to understand why the LCCs don't accept cancellations.

It will be interesting to see if someone here can come up with an explanation that is plausible. It would make commercial sense to me, if only for the courteous gesture of allowing someone else to occupy a seat which might otherwise not have been available.

I can't imagine Ryanair missing an opportunity like this and I don't think that they could give a stuff about the accusation that they are selling the seat twice?

[DaveReidUK]

Has anyone ever considered this "if the flight's full and you tell us if you don't want to fly more than 24 hours in advance we'll give you some of your fare back" approach ?

I can't imagine any LCC having failed to evaluate this option. If they don't do it, then they must have concluded that there's no commercial advantage in doing so.

[ezycrew]

LCC do over book, Easyjet do it all the time. Even when overbooked we leave with empty seats.

[Anansis]

Are you certain that LCC's can't return a seat to inventory if it is cancelled?

I think the point davidjohnson6 is making is that there is no incentive for a passenger to cancel a booking that they know for certain that they won't be using, potentially costing the airline money if the flight is busy.

I'm from Liverpool. In May 2007 I booked a return to Belfast with four friends. We booked LPL-BFS-LPL with EasyJet, costing under £40. Our return flight was due to depart on the afternoon of the Champions League final.

A few weeks before departure, Liverpool FC made it through to the final and one way fares on this flight instantly shot up to in excess of £250 and quickly sold out! Wanting to stay in Liverpool for the football, I tried to cancel the booking. In the circumstances, I thought easyJet might even offer us money for cancelling the flights given that they'd make over a grand reselling our seats. They refused, telling me that we'd get no refund if we cancelled. I'm sure they could have returned the seat to inventory if we cancelled but there was no incentive whatsoever for us to do so, even though it would have been in their interests!

We eventually decided to fly and had a great time bantering with loads of drunk Irish football fans on the way home! :)

[DaveReidUK]

potentially costing the airline money if the flight is busy

It costs the airline nothing if you don't show up to occupy your seat, in fact there would be a marginal fuel saving resulting from not having to carry you and your bags.

Yes, they are arguably foregoing potential additional revenue, but that's something completely different.

I had a similar experience coming back from Cologne on Germanwings a couple of years ago - my business finished early, so I asked to fly on an earlier flight (on which there was loads of space), which would have enabled them to re-sell my seat on the (full) later flight at a much higher cost than I had paid. The ticket agent agreed that it made sense, but said his hands were tied.

[Anansis]

It costs the airline nothing if you don't show up to occupy your seat, in fact there would be a marginal fuel saving resulting from not having to carry you and your bags.

It depends. They have missed out on the Opportunity cost (http://www.investopedia.com/terms/o/opportunitycost.asp#axzz1x9NzWcKK). In the majority of cases where loads are below 100% what you write is true and the airline saves money. However, on a fully booked flight where airlines could sell seats for a premium they are missing an opportunity. Take the situation I describe above. Had I not shown up for the flight, easyJet would have saved a few quid on fuel. If we'd cancelled (like we wanted to), they could have resold our seats and potentially made £1250, clearly a much better financial proposition for the airline. Without an incentive to cancel, most pax in this situation would prefer to keep the booking and no-show, meaning everyone loses.

Some locos have experimented with versions of a permitted cancellation policy. Wizzair offer a 'Flex Fee', which allows passengers to change flights free of charge (although you have to pay the fare difference). Easyjet used to allow passengers returning to the airport they departed from to catch an earlier flight if they showed up at the check-in early (not sure if this is still the case). However, I can't think of a good reason why more locos don't offer some sort of incentive to cancel flights (when it is in their interest) apart from it perhaps being too complicated.

[Gibon2]

apart from it perhaps being too complicated

I suspect this has quite a lot to do with it. Another factor my be reluctance to "dilute" the LCC concept of selling you a cheap seat, no frills, no changes or flexibility, use-it-or-lose-it.

But if I were running easyJet, once I had finished with the purges and executions of everyone involved in the speedy boarding debacle, I would introduce a system of ticket buy-backs. Every ticket would have a buy-back value, i.e. the price which easyJet would pay to buy your ticket back from you. This would change over time, and customers could track it online. Most of the time, the buy-back value would be zero, or some nominal sum to make it worth the customer's while to click the mouse a couple of times so the seat could be returned to inventory and re-sold. But in cases where a flight was subject to unexpectedly high demand (as in Anansis' example), the buy-back value could be raised accordingly - up to, or even beyond, the original price paid. In this way, easyJet could in some cases roll over an entire passenger load, buying back all the original tickets at, say, the original purchase price +10%, and re-selling them at a 100% mark-up or more.

This idea is essentially a way of allowing the yield management system to respond to actual as well as anticipated demand, even at very short notice.

[PAXboy]

One of the difficulties of this is indeed complexity.

If you permit buy-back - then you have to either send the client a payment OR you have to hold a credit for them. Just making sure those credits get where they are supposed to go can cause problems. Yes, I realise that they have received money electronically but they may not still have the credit card, the car may have expired and so on.

But there is no doubt that it IS an opportuntiy.