ExpertFlyer Hot Topics — Where the Rubber Meets the Runway
You’ve heard the phrase, “Go Big or Go Home”? Well, Jonathan Breeze, CEO of Aardvark Compare, has his own motto, “Go Non-Refundable and Travel Insure!”. Don’t start yawning because you think this post is about insurance. Once you wrap your head around Jonathan’s awesome travel hack, you’re going to perk right up.
Did you know that a large majority of companies insist that their employees book Refundable Airline tickets? In doing so, they believe they are enjoying increased flexibility in the event of cancellation or rebooking. Sure, that’s all well and good, but they are paying through the teeth for that allowance — typically three times more than they should be.
According to Breeze, there is a little-known travel hack that will beat the airlines at their own game. “The airlines are robbing us blind with their 3x pricing on refundable tickets. That is the basic math. The seat price for a Refundable flight, particularly when booked far in advance, is typically 3 or 4 times as much as a Non-Refundable flight. You will hear of these Non-Refundable tickets being called ‘Throwaway Tickets’ because if you don’t fly, you may as well throw them away.
The best way to think about Non-Refundable tickets is ‘Inexpensive, yet Insurable’. Not as sexy, I grant you, but certainly, much, much cheaper, most of the time, ” says Breeze.
Simplistically, a Refundable Seat can cost 300% of the price of a Non-Refundable Seat bundled with inexpensive insurance.
So, if one buys a Refundable Round Trip Economy Ticket, say from DFW to LAX in August for a week (6 months from now), American wants $2,100 for a Main Cabin Fully Flexible Seat. It’s in the Main Cabin, but it’s more expensive than a First Class seat.
So, you bypass this option to seek a more traditional Main Cabin (Economy) seat. And now, this looks like a bargain, after you managed to avoid the $2,100 fully flex seat.
Breeze points out that American wants $1,150 for a Main Cabin Flexible Seat. So, it is flexible, just not ‘fully’ flexible. Travelers may change their flights, not lose all of their money, but they will need to pay for the effort to make the flight change — a $200 change fee.
According to the US Bureau of Transportation Statistics, the Top 25 US Airlines rake in $3Bn a year in Reservation Change Fees. And $4Bn a year in Baggage Fees.
“If businesses didn’t hate the airlines before, they probably hate them now,” says Breeze.
“But, let’s go beat them at their own game…
Just before I hit the ‘Buy’ button, I, unlike almost every traveler, decide to get creative. Why not buy a Non-Refundable seat, and wrap it up with some ‘Cancel For Any Reason’ Travel Insurance from a Marketplace, similar to what we do at AardvarkCompare.com.
American wants $400 for the Non-Refundable Main Cabin Seat. Add the Insurance, it will cost around $50 — And you’re bulletproof! You have secured coverage for Cancellation (Sickness, Death, Incapacitation etc) – 100% Refund; Cancellation for Work Reason – 100% Refund; and Cancellation for any other Reason – 75% Refund.”
So, for $450 a customer booking that DFW – LAX return has nearly the same level of coverage as the person paying $1,150 for the exact same seat — A $700 savings.
Breeze emphasizes that the person in the $1,150 seat still has to pay $200 every time they make a change. Whereas the person in the $450 seat just needs to throw the ticket away and use their insurance if a flight needs to be canceled.
“However, I haven’t explored why these price discrepancies exist. Normally there is no such thing as a free lunch.
It’s pretty simple – Travel Insurance is based on risk, and the probability of claim.
Whereas flight prices are based on pricing models that try to wring as much money out of a passenger as possible.
And if a company likes to fly some of the Execs in First Class, the numbers become even more staggering. Recently we ran a study that showed a $16,600 saving on a First Class ticket, using this exact same methodology.”