The website FiveThirtyEight (of Nate Silver fame) recently published “When to Hold Out For a Lower Airfare.” In that post, author Kaiser Fung reviewed Kayak’s Price Trend feature which gives recommendations of whether to Wait or Buy Now when shopping for flights. Fung tested 32 routes to see whether following Kayak’s advice resulted in savings. The results were mixed, but Fung still recommended the service. He wrote:
In the end, even though my analysis shows that you might not save any money following Kayak’s algorithm as opposed to buying tickets two weeks ahead of your scheduled departure, it still might be worth your time and energy to use airfare prediction software. Why? Because following the algorithm isn’t going to cost you more money, and it might actually relieve some of the second-guessing that occurs when you’re left to your own devices. Etzioni said he found in user surveys that in addition to appealing to quantitative types, another group of regular users said Farecast gave them “peace of mind.”
The key takeaway, for me, is the observation that purchasing airfare can be stressful due to “second-guessing” your decision to buy now or later. The argument is that Kayak’s service can relieve some of that stress basically by deciding for you. That’s nice, but in my mind, the stress involved in buying nonrefundable airfare goes well beyond concerns about price fluctuations. My biggest concern tends to be worry that my plans will change and I’ll have to pay a hefty change fee. Or, something will come up and I’ll want to change my plans, but I won’t because I’ll feel locked in to the ticket I’ve already purchased. Of course, most airlines offer refundable fares for much steeper prices than non-refundable fares for the same flights. Paying extra for refundable fares would eliminate some sources of stress, but introduce larger concerns (such as quickly depleting bank accounts).
Southwest, Miles, and Status to the rescue
Southwest Airlines has no change fees. There’s very little risk in buying a ticket since you can make changes to it anytime before departure. The only small risk is with cancelling tickets. Southwest will refund your money in the form of airline credit that must be used within 12 months. The risk then is that you may not ending up using that credit unless you fly Southwest often. A better solution is to use points to book a Southwest flight. Flights paid for with points are fully refundable. And, if you use points for a “Wanna Get Away” fare, you’ll get decent value from your points (see “The new true value of Southwest points”).
Another option for almost fully refundable fares is to use British Airways Avios to book awards on BA partners that do not have fuel surcharges. For example, you can use British Airways Avios to book a non-stop one way flight on American Airlines / US Airways. If the flight is 650 miles or less, you’ll pay only 4500 points plus a $2.50 security fee. If you later cancel that flight, you’ll get all of your points back, but not the $2.50 fee. In my mind, $2.50 per segment is a small enough fee to feel comfortable booking flights like these even when plans remain up in the air.
Most other airlines do charge change and cancellation fees for both paid and award flights. With mid to high level elite status, though, these fees may be waived. Hack My Trip has a terrific document (found here) that shows the benefits of each tier of elite status with each of the major US airlines. None of the airlines listed offer free changes at their entry-level elite tier (typically requiring 25,000 flown miles per year), but at the next level (requiring 40K or 50K flown miles) Alaska Airlines gives their MVP Gold elites free changes and cancellations for both revenue and award tickets. The rest of the players (American, United, US Airways, and Delta) require near top-tier status (75K to 100K flown miles) to get free award changes and cancellations.
In my recent post, “The new true value of Southwest points,” reader PSL commented:
Booking a flight with points certainly gives you more flexibility if the price is reduced – you get points refunded on the difference instead of cash which must be spent within a year after the flight was initially booked. That’s the real beauty of Southwest points.
I couldn’t agree more. There’s a real added value to freely refundable / changeable flights. PSL pointed out the value given by the possibility of price drops. Even better, to me, is simply the reduced stress that goes with it. And, best of all, is the ability to book flights prospectively. For example, I currently have high level (Platinum) elite status with Delta. Since I can change or cancel award flights for free up to 72 hours before departure, I frequently book awards when I find them just in case I end up wanting them. Or, I’ll book a partial award (e.g. one leg of a longer itinerary) when it is available at the saver level in the hopes that the other legs of the trip will open up later at the saver level too. A similar trick is if you want to book an award for two but can only find award seats for one. If the award is fully refundable, then go ahead and book the award for one person, and keep checking back afterwards to see if a second award seat opens up on the same flights. For more on this latter technique, see “Booking Delta awards when you love your spouse”.
While I highly value the ability to have free changes and cancellations, I can’t think of any way to estimate this value in terms of dollars and cents. All else being equal, I’d far prefer an award with free changes over one that would charge for changes, but I can’t think of any way to put numbers to this. For me, given my current elite status, that means I prefer Delta and Southwest awards. And, this feels like a big deal. But, how big? Is it worth flying exclusively on Southwest for this? Or, is it worth seeking high level elite status with the traditional carriers for this benefit? I have no doubt that the answers to these questions will vary tremendously from one person to the next. Some will see little value in this, others will see a lot. Where do you fall on this spectrum?