What is an airline credit really worth?

Yu Lan/Shutterstock
Yu Lan/Shutterstock
It happened to Louise Andrew twice last month. She made reservations on the United Airlines Web site, tried to cancel them within 24 hours for a full refund, and was told that the airline would be happy to issue a ticket credit instead.

“Both times, I was initially told that my purchase value would be applied to a future ticket,” says Andrew, an attorney from Redmond, Wash.

That didn’t make sense to her. United promises a no-questions-asked refund on most tickets as long as the request is made within a day of the reservation. And since 2011, the Department of Transportation has required airline reservations to be cancellable without penalty for at least 24 hours after the booking is made, unless the ticket is purchased one week or less before a flight’s departure date.

Andrew’s case illuminates the growing problem of ticket credit deflation. Historically, airlines have preferred to issue credit instead of a cash refund. They’re also fairly generous when it comes to parceling out vouchers for future flights. The reason? Redemption rates on vouchers hover somewhere between 5 and 8 percent, so there’s little cost to the company.

But lately, many airlines have made their credit even more difficult to turn into a usable ticket through a combination of aggressive new policies, fees and restrictions. The net effect could be that your next ticket credit might not be as valuable as you think.

In fact, it may be worth nothing.

Andrew experienced one of the most effective ways airlines can lay claim to all your money. They push you into taking a credit instead of a refund but then make it difficult to redeem the credit. Had Andrew agreed to the credit, United might have imposed additional terms on the funny money that could have rendered it useless.

This spring, United was the first carrier to raise its domestic ticket change fee from $150 to $200 — a move that all the other major airlines, except Southwest, soon followed. High change fees make ticket credits worthless on some discounted fares, since the fees often exceed the value of the ticket.

Other restrictions apply. In late 2011, Delta Air Lines tightened its voucher rules, making vouchers non-transferable and disallowing their redemption in conjunction with other credit. On Spirit Airlines, travel credit requests must be booked within two months of issuance, instead of the industry average of one year, according to the airline’s contract of carriage. When air travelers miss that deadline, their credits are quietly zeroed out, and appeals to reinstate them are met with rejection form letters.

Andrew didn’t accept United’s initial offer, because she knew about the Transportation Department’s 24-hour rule. “I had to repeatedly badger them to get my refunds,” she says. Even so, it took the airline six weeks to refund the cost of her first ticket, she says. An airline representative told her that the second refund could take up to two months.

Charles Hobart, a representative for United, said that shouldn’t have happened. “We offer a full refund back to the original form of payment in the first 24 hours of booking a new ticket through United.com or through a contact center representative,” he says.

Andrew is hardly the only United passenger who feels frustrated by the foot-dragging. A recent on-site inspection by DOT investigators at the airline’s headquarters found that between March and May 2012, the airline had failed to process more than 9,000 refund requests in a timely manner. In August, the government fined United $350,000 for its sluggish refunds.

The government can’t always help. Although a DOT spokesman says that federal law requires airlines to be “truthful and transparent” with their ticket credits, the agency doesn’t directly regulate the terms or conditions of flight vouchers.

“The law prohibiting unfair or deceptive practices in air transportation requires airlines to ensure that the information they provide about vouchers is accurate, and that they disclose restrictions placed on vouchers when they are offered as an alternative to a payment the consumer is entitled to, such as a settlement of a baggage claim or a ticket refund,” says agency spokesman Bill Mosley.

Yet consumers are sometimes confused. Susan Vick, a college professor from Baltimore, received an $800 voucher from US Airways after a flight delay from Rome to Philadelphia. “What should I watch out for when I want to redeem it?” she asked.

A look at the restrictions on her voucher suggests the answer: What should you not look for? Her airline scrip can’t be used on the Internet, doesn’t allow any stopovers, can’t be combined with any other voucher, and can’t be used to pay for a reservation that she has already made. If she finds a ticket for more than $800, she’ll have to pay the difference in cash, but if the flight costs less than $800, the airline keeps the balance, according to the terms.

It’s hard to blame the airline industry for adopting these policies. Consumers crave cheap fares and have the tools to find them, thanks to the Internet. Since passengers seem remarkably tolerant of junk fees and absurd restrictions — and since they’re perfectly legal — why shouldn’t the industry look there to boost its bottom line?

You don’t have to get stuck with useless credit. Next time an airline agent offers you a voucher, ask for cash instead. If you can’t get it, break out your reading glasses and review the fine print before saying “yes” to anything else.

What is an airline credit really worth?

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Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at . Got a question or comment? You can post it on the new forum.

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  • http://www.microsoft.com/bizspark Douglas Crets

    The way it worked was: I was sent an email saying I had thousands of miles I had never used before, all gained on United flights and with their credit card. It prompted me to book any type of flights I wanted (I think it also said that I would lose those miles at end of year if I didn’t). I thought it was a good chance with the upcoming trip to Africa.
    I actually booked four separate tickets — two first class tickets with fiancee JNB to Namibia and Cape Town to JNB later in the month.

    I simply booked the first class tickets only with miles and paid a fee of $35 per each flight to get the seats. There was no economy purchase first or prompt for that. It was a straight first class booking.

    Incidentally, the flights I booked — also in first class with miles — from Cape Town to Johannesburg were not downgraded, though I used the same procedure.
    I was given no refund from United or SAA. I was not even given a chance to purchase an upgrade for the seats I got downgraded into. I was told that I would have to pay for two first class tickets day of sale, and I believe they would have been nearly $2,000 each. I thought it was completely unfair to have lost those. And it was my birthday that day, so I was a little upset.

  • Alan Gore

    Apparently, it’d okay for UA to use the “codeshare” scam to avoid responsibility for the missed upgrade. The pax in question arranged the deal with United, but when its “partner” downgraded him, he’s supposed to fight it out in the South African legal system?

  • Justin

    Carver,
    Dance or no dance, the proof is in the pudding. Look at the story below from one of Mr. Elliot’s posters. He received an 500 dollar voucher only to find the restrictions negated the value to $25 if redeemed at a Hub Airport.

    500 dollars cash is 500 dollars cash. The money has value and spend potential anywhere. Vouchers on the other hand are loaded with restrictions. So unless you’re a lawyer and choose to navigate the legal speech, or have no other choice, cash is king.

    If no other choice exists (Eu261 doesn’t apply, 24 hour cancellation isn’t applicable, a refundable ticket wasn’t purchased, and no travel insurance exists), then take the voucher.

  • TonyA_says

    Sorry I misread your original post. So this was an award ticket not an upgrade. Looks like you are owed the difference in miles between FC cabin and Economy cabin. And if they are nice, they might think of giving you more points or miles for the hassle.

  • Justin

    Chris,

    Correct me if I’m wrong cyb, but I believe he’s asking are airline vouchers subject to the 150-200 dollar change fee.

    I.E. if you are given an 800 dollar voucher, does one have to pony up 150-200 dollars for rebooking or change fee costs?

  • TonyA_says

    That and as if federal preemption is not enough. The airlines have become an overly protected industry that cannot do wrong when in fact the opposite is happening. Time to lift that bogus protection and allow the flying public to sue them in court.

  • TonyA_says

    US stopover is longer than 4 hours.
    INTL stopover is more than 24 hours.
    Coming back to the USA from overseas, you may layover in US gateway city longer than domestic stayover rule if there are no connecting flights to your destination, but you must take the first available one after that.

    This policy affects both fare rule and taxes.

    For EC261 all flights that are covered to, from, and within EU for all carriers. And, all covered flights for EU carriers regardless of Origin or Destination.

  • TonyA_says

    You probably meant to say you basically will be paying for two fares not two tickets necessarily.

  • TonyA_says

    This part of the article caused my reaction:

    Since passengers seem remarkably tolerant of junk fees and absurd restrictions — and since they’re perfectly legal — why shouldn’t the industry look there to boost its bottom line?

    If airlines can do their tricks to boost their bottom line because they are perfectly legal, then why can’t passenger do their own tricks to reduce their costs and boost their savings if the tricks are also legal?

    What’s good for the goose…

  • bodega3

    It could be either, depending on the connecting flight.

  • TonyA_says

    I was concerned about the risks involved with separate tickets.

  • bodega3

    Fortunately I don’t deal with this any more, but you are correct about the concern. When I handled corporate, we dealt with layovers all the time for meetings. Not much with leisure, so not something I have had to deal with in years!

  • TonyA_says

    You should see the kind of butchered itineraries that are sold today. Kayak even introduced hacker fares. These are two separate tickets sold together to make an “unconnected” connection the same day. Since the connection is not interlined, minimum connection time rules do not apply. Worse, in the event of a delay or cancellation, then the pax will most probably be a noshow for the next flight. They do not get the privilege of reaccommodation since the tickets are separate.

    I am seeing more of this recklessness in online crowdsource sites especially when they try to integrate low cost carriers in an itinerary. Imagine asking a traveler to connect from Heathrow to Stansted or Gatwick using only LHR’s internal minimum connecting times.

  • TonyA_says

    Also those fines do not go to the victims. So it’s kind of a slap in the face. Thanks for your suffering, now we get to fine the airline and use the money for our pet project :-)

  • Carver Clark Farrow

    That’s silly. Are you saying that you’d never take a voucher regardless of the differential? Would you take $10 in cash over a 10.000 voucher?

    Now, to be clear. In a choice between a voucher and cash of similar amounts, it’s a no brainier.

  • Carver Clark Farrow

    I’m totally for paying as little as possible. But I’m not booking a fat fingered fare for example. To me, that’s unethical. By contrast I have no problems with hidden city and throwaway tickets. But I’m not asking a travel agent to book either. That would be wrong.

    I hope that clarifies my point a bit.

  • cowboyinbrla

    Actually, as the article stated, a 24-hour cancellation period with no penalty is a requirement. It’s just that sometimes, some airlines try to cheat (as was noted in the OP’s situation).

    Southwest does do substantially better than most carriers in allowing you to cancel a non-refundable flight and apply 100% of the fare paid towards a future flight, no change fee assessed (as long as you cancel before the flight).

  • TonyA_says

    That’s an interesting comment because the new law prohibits post sales price increases. Therefore, airlines tend to lose the mistake fare fight whenever any flight touches US soil.

    On the other hand airlines can enforce their hidden city and throwaway ticket rules even if there is no law broken by the passenger.

    In essence, the law protects the buyers of mistake fares more :-)

  • Carver Clark Farrow

    The 24 hour cancellation window is only mandated if the flight is more than a week away.

    Virgin goes above and beyond by not imposing the one week requirement.

  • Barry Moss

    A stop over is not the same as a connection. A stop over implies an overnight stop in a connecting city.

  • Cybrsk8r

    I love Southwest. I’ll even fly Southwest to a nearby city, if the drive is reasonable, to avoid the legacy airlines.

  • MarkieA

    But – and here’s the problem – fine them big enough and they’ll just turn around and raise the price of….whatever, to make up for it.

  • MarkKelling

    Yep, EFD was their little secrect. ;-)

    It was great. CO operated there out of a mobile home trailer. They were the only commercial airline at EFD. Everything else was military or NASA. TSA showed up when it was time to board so you walked through security and directly on the plane. Kinda cool waiting in your plane while a dozen F-15s were doing touch and go flights. Best part was no charge for parking and the extra 500 miles CO gave you and there was no extra charge for the segment. I worked downtown Houston at the time, so it was easier to get to EFD and fly out of there than IAH.

  • MarkKelling

    You still get a credit voucher for any flight if you cancel after the 24 hour window as long as it is before originally scheduled departure, just no refund. You just have to pay the change fee if there is one on your ticket.

  • Kevin Mathews

    Carver,

    “Would you take $10 in cash over a 10.000 voucher?” – This is probably a case by case situation. If the airline was so awful I felt that I would never set foot on them again, then I get more out of the $10…

  • Justin

    Do airlines still use EFD? Wikipedia leads one to believe it’s vacant of commercial airlines now.

    Sounds like a great airport. Few travelers, breeze through TSA, and stress free. A free military show included with the price of airfare, too.
    When I was in Europe, Ryanair does the same. Go through Security, walk onto the tarmac, and board the plane.

    Send me some of the Houston weather if still living there. I moved back up north in 2010 and we’re expecting SNOW! I’m not ready for snow.

  • Justin

    Carver,
    A 10,000 dollar voucher might be completely unusable if the restrictions are prohibitive. All depends upon the terms put forth by the airline.

    Look at the example I gave. A 500 dollar voucher rendered near worthless by the terms. At least, according to the poster here.

    Option 1. Always Cash. Option 2. Voucher but I’ll read the fine print.

  • bodega3

    We can void any ticket we issue within 24 hours of issue.

  • bodega3

    The answer is no. The voucher isn’t tied to an unused airline ticket. You only pay a change and cancel fee when you reuse an unused ticket.

  • MarkKelling

    I’m actually north of Denver now, so can’t help you with the weather. Still not used to snow after living in Houston most of my life.

    EFD is only used by military (Air National Guard, Coast Guard, spy planes), NASA, and some UPS cargo planes now. There were no traveler services like rental cars or even taxi service at EFD. With HOU just a couple miles away, other airlines went there because it was well established with full services. City of Houston still has plans to expand EFD in the future or alternately one of the private fields west of town as air travel continues to grow, so we might see flights from there in the next few years depending on how the expansion underway at HOU goes.

  • Carver Clark Farrow

    That’s all I’m trying to get across. The answer is, as you stated, it

    All depends upon the terms put forth by the airline.

    A sentiment I wholeheartedly agree with. We can easily construct a case where you would take the voucher. Obviously, we can construct many more cases where you (and I) wouldn’t.

    It’s like booking a prepaid hotel room because it’s cheaper than the flexible rate. Generally, something to be done with great trepidation and foreboding :-D

    The greater the difference between a cancellable rate and a prepaid rate, the more likely I’m willing to chance it. It’s a soft analysis between the cost difference and the likelihood of my travel plans changing.

    I generally book a prepaid rate the day of travel after arriving at the airport. Sometimes, I wait until arriving at my destination. I figure at that point, the risk of changing my plans are minimum, thus potentially justifying the risk.

    I’ve even booked a prepaid rate from the lobby of the hotel that I’m staying in.

  • Carver Clark Farrow

    I agree 100%. That’s my only point. Is that everything is a “case by case situation”
    If you despise the airline.
    If you hate flying.
    If you can’t fly within the voucher period.
    etc.
    Then the value (to you) of any voucher is exactly $0.00. But in a different set of circumstances, you might decide that based on the terms and conditions, and your flying patterns, you’d get better use out of the voucher.

  • IGoEverywhere

    There is a difference between the words credit and refund. A refund will be made in full within 24 hours. Only a fool would accept a credit with the 24 hour rule. Your ticket is accually voided under this circumstance. A credit comes under dozens of reasons. 1) Cancellation of ticket by passenger – pentalties nomally apply 2) Failure by the airline to deliver transportation. You are entitled to a full refund or play”let’s make a deal” with the carrier. 3) The airline really screwed up and offers a $??? credit – then there is no penalty involved, it is a gift card and normally the best offer to walk away with for an error that is their compensation to the traveler. There are rules, but they are easy to use if you are near that airline as they are done at the counter or ticketing counter. I use them to pay towards my more expensive holiday flights as they are credits, not free tickets with blackout dates.
    Anyway that you look at it, the airlines usually win.

  • Lindabator

    Travel agency is not the airline, whose responsibility it falls under – although I do inform my clients, and take care of any snafus as they occur, so they don’t run into so many potential problems.

  • Lindabator

    Sorry – but SA downgraded you, NOT UA!

  • Lindabator

    But if he had booked with SA, he still would have the same downgraded situation as SA downgraded him – UA cannot control how their partners control mileage/upgrade tickets. It may be a case of a change of gauge, in which the aircraft loses some seats in those classes. In these cases, it clearly states in your mileage brochure that your flights are the first to be downgraded.

  • Lindabator

    NO – those are connecting flights – a stopover is when you stay a longer period of time (one to several days). And although some tickets will allow, when using vouchers, they will not in most cases.

  • Lindabator

    Yep – allows for a one to several day stay in a cool connecting town (like Amsterdam, Paris, Frankfurt…) Or can let you book a flight INTO LA today, then not fly out to the next stop till TOMORROW! (Great for Pacific destinations.)

  • Lindabator

    Or those lovely options into LGA and out of JFK (with a 45 minute layover! HAH!)

  • wiseword

    The proof isn’t in the pudding. It’s in the eating. Think!

  • davidglass

    The scary part is if you are seated on the aircraft and the gate agent comes aboard and asks for volunteers. Do you accept, get off the aircraft, then try to negotiate the terms in the terminal or do you negotiate while still on the aircraft? Clearly the airline has the upper hand once you exit the aircraft because you have give up your seat and your negotiating position is significantly weakened. Cash vs. voucher with restrictive terms vs. voucher with no restrictions. Thoughts?

  • http://www.facebook.com/SSRedG Red Guevarra

    Alaska also doesn’t impose the 1 week requirement:

    “Reservations made via alaskaair.com or through one of our reservation call centers or airport locations require immediate purchase. Customers holding immediate-purchase travel will have the flexibility to make one change to wholly unused tickets within 24 hours of purchase without incurring applicable change fees. Any applicable increase in fare still applies. Or if you prefer, you may elect to cancel your immediate-purchase travel itinerary within 24 hours of purchase, we will refund your wholly unused ticket back to the original form of payment.”

    That’s why I love them.

  • http://www.facebook.com/SSRedG Red Guevarra

    BTW, there’s a recent law in California where a credit balance of under $10 may be cashed out. This applies to gift cards, but I wonder if it extends to airline vouchers? ‘Cause I got a few under $10.

  • http://www.facebook.com/SSRedG Red Guevarra

    When it says “can’t be used on the Internet,” do you mean not even on THE airline’s website? Or just booking engines in general? Because that would make more sense. Obviously, I don’t expect to be able to use a US Airways voucher on Expedia, even if booking US Airways flights. But one should be able to use that voucher on their own website.

    And actually, $800 can buy you a coach r/t between PHL and FCO again. So why not? I’d take it and rake in more Dividend Miles in the process.

  • http://www.facebook.com/SSRedG Red Guevarra

    So true. Especially with airlines, they won’t proactively tell you what is and what isn’t. Gotta ask for it!