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Booking Strategy

American Nixes No-Fee 24-Hour Reservations Hold

American has begun phasing out its notably customer-friendly practice of allowing travelers to hold a reservation for 24 hours before paying for it.

Thanks to the DOT, U.S. airlines are required to allow customers who book non-refundable tickets more than seven days in advance to either 1) hold the reservation for 24 hours before being charged for it, or 2) pay for the reservation but cancel within 24 hours and receive a refund.

The industry-standard policy is the latter. And it’s easy to see why: Forcing customers to pay up front, even with the option of requesting a refund later, gives the airlines control of passengers’ payments, some of which are surely never refunded, through inertia or inattention.

There was one high-profile exception to the general rule, American, which until last week allowed travelers to wait 24 hours before either paying for their reservations or allowing them to lapse. Given the alternative, it was a notably customer-friendly policy. And one which certainly resulted in lost revenue for American.

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As it turns out, it was unsustainably customer-friendly, as is often the case with policies that both fail to maximize revenue and diverge from the mainstream. Why be nice when there’s no competitive pressure to do so, and it’s costly?

So on Friday, April 1, American initiated a stepwise adoption of the more conventional, more lucrative booking rule. To begin with, up-front payment will be required for bookings not made on American’s website. And eventually, probably sooner rather than later, the policy will be extended to AA.com bookings as well.

There’s no word on whether or when the new policy might cover AAdvantage award bookings. For now, such bookings can still be made with a generous five-day hold before miles are committed.

An American spokesperson, quoted in USA Today, explained the move as follows: “We’re making the switch to minimize the customer confusion that arose sometimes because our policy was different from those of other airlines.”

Minimizing confusion or maximizing revenue? Whatever the motivation, the change is gonna come.

Reader Reality Check

Did you find American’s 24-hour-hold policy confusing?

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After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.

By Tim Winship

After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.