Got a non-refundable ticket? Now passengers can bid for a refund

Airlines can tackle the issue of no-show passengers with proprietary modeling schemes to maximise revenue, but this only solves half the problem.

Enter start-up company, Change Your Flight, whose software allows airlines to improve relations with passengers who do not hold a flexible ticket or who are unwilling to pay change fees, while driving fresh revenue for the operators.

The name of the company may be a misnomer: passengers are not changing flights but bidding for a travel voucher in exchange for surrendering a ticket they can no longer use, cannot obtain a refund for, or could change the date but do not know when they next want to travel. Change Your Flight lists the probability of receiving various voucher amounts, and from there the passenger selects an amount and the company checks with the airline if the amount is appropriate based on current reservation trends. Consider it a Priceline for refunds.

The concept is not ‘pie-in-the-sky’: Barcelona-based Change Your Flight launched its first partnership, with Italy’s Air One, in late December.

The potential market size is huge. There may be upwards of 250 million global no-show passengers annually based on estimated no-show rates of between five and 11 per cent for all passengers carried. In comparison, premium passengers account for approximately 7% of all seats.

Change Your Flight co-founders Iñaki Uriz and Jose Vilar join a small group of passenger experience companies visible to airlines and the public. “We are partners with the airline, but we’re partners with the passengers,” says Uriz. The latter benefit by receiving a voucher instead of nothing for a forfeited ticket. That can lead to a better passenger-airline rapport, but also makes it likely passengers will return to the airline since they have a voucher, alluring especially to airlines without a loyalty programme. Airlines also benefit from reduced estimation in no-show models (if airlines overbook – JetBlue Airways and Ryanair do not). That could reduce the number of unpopular and costly denied boardings.

“We ask the airlines, ‘Would you like to do over-booking in real time? Not expecting or forecasting no-shows, but confirmation of no-shows,’” says Vilar.

Change Your Flight is free to passengers, but for airlines the company has a revenue sharing model based on how much new revenue is generated from offering forfeited seats for re-sale as well as how much revenue the vouchers bring in, if ever redeemed. “We need the whole picture to assess how much value is created in every transaction,” Uriz explains.

Behind-the-scenes the process between receiving a refund request and issuing one is largely automated. Airlines can tweak the refund parameters to their liking. Passengers can change their refund request if they do not hear back; a request for a small voucher could be accepted within a few hours whereas bigger refund requests may take longer – or perhaps never – for the booking variables to align in the passenger’s favour. The company helps the process by estimating how long each refund amount may take to be approved.

Change Your Flight interfaces with an airline’s reservation system but does not supply it with data. If a request does not meet the refund parameters, airlines will not know and cannot better forecast no-shows, thus not gaining additional insight without giving back. “We are passengers as well,” says Uriz.

It was frustration as passengers that led Uriz and Vilar, both in their 30s, to create Change Your Flight. For Vilar’s birthday in 2009 the two organised a meet-up in Paris with friends from elsewhere in Europe. Friends cancelled at the last minute due to work commitments, forfeiting tickets but creating a business idea Uriz and Vilar spent 2.5 years developing. They do not come from airline backgrounds, but have advisors with airline experience and networks that led to the Air One partnership and conversations with other airlines.

Targeted, for now, are European carriers given geographic proximity and their more conservative stance towards over-booking. Also on the radar are low-cost carriers for a host of reason. “They have the attitude. They are more into innovation and trying new things. Operationally it’s easier: all the seats are the same and most of the passengers are online,” says Uriz.

Change Your Flight is building real-world figures while it hopes to fight industry inertia and partner with more airlines. “This is a slow sector. Airlines do not innovate a lot but when some idea is proven to be real business, they commit very fast,” says Uriz, recounting what one airline manager told him: “We are brave but not leaders.”