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When it comes to booking airline tickets, one common dilemma many travelers face is whether to opt for refundable fares.
At AllFly, we often receive questions about the pros and cons of these ticket options. In this post, we'll break down the cost implications to help you make an informed decision.
Understanding Refundable Fares
Refundable fares are marketed as offering flexibility, allowing travelers to cancel their bookings and receive a refund directly to the original form of payment.
However, the reality is slightly different. Non-refundable fares, when canceled, typically result in the value of the ticket being returned as an e-credit to the traveler's individual profile, rather than being refunded to the original payment method.
Refundable tickets, on the other hand, do provide the advantage of refunding the money back to the card it was purchased on.
This convenience, however, comes with a higher price tag, as refundable tickets are generally more expensive than non-refundable ones.
The Cost-Benefit Analysis
Let's consider an example to illustrate the cost implications of choosing between refundable and non-refundable fares.
See below a $600 ticket from Orlando to Cancun, with a refundable ticket for the same flight costing an $85 markup. If your corporate program has an average cancellation rate of 4%, or 2 out of 50 passengers canceling their tickets, the math becomes clearer.
If you opt for all non-refundable tickets with an average upcharge of $85 per ticket, you would spend $4,250 more on airfare.
However, if two people cancel and you lose the value of their $600 tickets, the company is only out $1,200.
The travelers will receive the value of the ticket as an e-credit on their profile, which is not transferable to the company.
The Verdict
In most situations, it is often more cost-effective for companies to "roll the dice" and accept the risk of canceled tickets rather than spending more on refundable fares to protect themselves.
If you have any questions or need further assistance, our dedicated sales team is here to help. Feel free to book a demo with us!
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