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This is a simple problem, but I wanted to hear an answer from someone else.

I had a round-trip flight that cost 135 dollars for a recent trip. At the last minute, plans changed and I decided not to go. I called the airlines asking to have 135 dollars of credit added for future use. The rep told me that there was a 200 dollar fee to do so, so I would be better off just pulling a "no show" and losing the 135. Which is the better option, no-show or credit, assuming I'm 100% sure that I will book a future flight?

airliner121212121
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5 Answers5

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If you want to decide between two choices, it is often simplest to compare the possible situations after you have seen the effects of your choices, and not start calculating "losses" and "wins" because that would just complicate things too much and make it difficult to communicate you thoughts.

Let us say you have $B$ dollars in your bank account after paying 135 \$ for the first flight. Let's see what you have after two flights if the ticket for the second flight costs $x\geq135$ dollars.

Option 1: No-show. After the first flight, you have $B$ dollars, after the next flight, you have $B-x$ dollars.

Option 2: Credit. You pay the fee. After that, you have $B-200$ dollars and 135 \$ worth of credit. After the next flight, you have $B-200-(x-135)=B-x-65$ dollars. So you have lost 65 \$ compared to Option 1.

What if $x<135$?

Option 1: No-show. After the first flight, you have $B$ dollars, after the next flight, you have $B-x$ dollars.

Option 2: Credit. You pay the fee. After that, you have $B-200$ dollars and 135 \$ worth of credit. After the next flight, you have $B-200$ dollars and $135-x$ worth of credit. If you are not going to fly for a third time, you have lost $200-x > 65$ dollars compared to Option 1. But if you are going to fly many times, you'll eventually be able to use all your credit, so again you have lost 65 \$ compared to Option 1.

JiK
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  • This was a great explanation, and thank you all for the answers. Thank god for the rep (it's just sometimes hard to think they're advising you to act in your best interest!). – airliner121212121 Feb 06 '14 at 21:57
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It should be quite obvious that the rep is right. Unless in an era of extreme deflation, paying 200\$ now to have 135\$ available at some later point in time is a very bad business model. (Also, I assume the airline would not pay you any interest on the 135\$ deposit)

Hagen von Eitzen
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  • I'm afraid I did not get your point on deflation. It seems that it would pinch relatively less indeed but I guess that whether there's an inflation or delation the loss is a loss nonetheless – Abhimanyu Arora Feb 07 '14 at 13:26
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If you pull a no-show, then you have a net loss of $135$ wasted dollars.

If you add the credit for a future flight, then you do not waste the $135$. However, you waste $200$ instead.

So the no-show is better.

Caleb Stanford
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  • For credit option he loses $65 and not $200 – Abhimanyu Arora Feb 06 '14 at 21:35
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    @AbhimanyuArora No. He payed $135$ already for this flight and wasted it, and gained $135$ for a future flight, and paid $200$ for the credit application. Net loss was $135 - 135 - 200 = -200$ dollars. – Caleb Stanford Feb 06 '14 at 21:37
  • @AbhimanyuArora depends on where you set the base. If the 135$ in case of no-show are considered a loss, the base point is before originally booking the flight and then you do indeed loose 200$ fee in the second option. - As it turns out the best option would be neither no show (135 loss) nor refund (200 loss) but to actually fly (enjoy the flight in exchange for 135$) – Hagen von Eitzen Feb 06 '14 at 21:37
  • @Goos: If he does a no-show again, then yes. If not, by paying $200, he put $135 safely in his account (at a cost of $65) – Abhimanyu Arora Feb 06 '14 at 21:45
  • @AbhimanyuArora See Hgen von Eitzen's comment. It just depends on your frame of reference. I am counting his initial wasted $135 as a loss, and you are not. If you don't count it as a loss, then a no-show loses you $0 while credit loses you $65. – Caleb Stanford Feb 06 '14 at 21:46
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If you do a no show you lose what you paid, 135 dollars If you want to have 135 dollars in the form of a gift card, you would have to pay 200 dollars to use the 135 dollars. So now you flying for 200 dollars instead. It's like exchanging a 135 dollar ticket for a 200 dollar ticket.

imranfat
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  • Note that if prices rise, he would have to fly for more than $200 as I am sure the airlines will ask for the additional difference – Abhimanyu Arora Feb 06 '14 at 21:42
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Here's a way of thinking about the problem that might help.

You put some money in an envelope and give it to me for safekeeping. You change your mind and ask for it back. I refuse to do so unless you give me $200. Should you open your wallet and hand over the ransom in order to get your envelope back?

Barry Cipra
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