Executive Summary
OFOP profitability depends on moral hazard. OFOP purchasers cancel at 3x the rate of non-OFOP purchasers (30% vs 10%). If this is pure selection (uncertain travelers buy OFOP), margin is ~78%. If OFOP causes incremental cancellations, margin could be as low as ~18%. Truth is likely somewhere in between.
OFOP Revenue & Trends
OFOP (Original Form of Payment) allows customers to receive cash refunds instead of flight credits. Launched February 3, 2025.
Key Metrics
| Metric | Value |
|---|---|
| Total OFOP Revenue | $1,353,247 |
| Total OFOP Purchases | 10,518 |
| Average OFOP Price | $127.58 |
| Average Booking Value (OFOP transactions) | $495.66 |
| Current Attach Rate | 0.60% |
Monthly Trend
OFOP adoption has grown steadily, with attach rate increasing from 0.17% at launch to 0.60% by January 2026:
| Month | OFOP Purchases | Revenue | Attach Rate | Avg Price |
|---|---|---|---|---|
| Feb 2025 | 307 | $33,130 | 0.17% | $107 |
| Mar 2025 | 372 | $54,855 | 0.19% | $146 |
| Apr 2025 | 150 | $15,637 | 0.08% | $104 |
| May 2025 | 839 | $102,000 | 0.41% | $121 |
| Jun 2025 | 907 | $112,544 | 0.45% | $124 |
| Jul 2025 | 1,132 | $136,093 | 0.49% | $119 |
| Aug 2025 | 1,077 | $130,689 | 0.50% | $121 |
| Sep 2025 | 1,186 | $149,996 | 0.54% | $126 |
| Oct 2025 | 1,013 | $129,216 | 0.45% | $127 |
| Nov 2025 | 1,180 | $162,696 | 0.57% | $138 |
| Dec 2025 | 1,256 | $176,820 | 0.59% | $140 |
| Jan 2026 | 1,139 | $149,571 | 0.60% | $130 |
Attach rate has grown 3.5x since launch (0.17% to 0.60%). Average OFOP price has also increased from $107 to $130, suggesting customers are willing to pay more for refund protection.
Redemption Behavior
When OFOP is redeemed, customers receive their booking value back as cash instead of flight credits. Note: Analysis filtered to true cancellations only (excludes adjust-journey/modify flows).
Cancellation Rate Comparison
This is the key finding for margin analysis:
| Booking Type | Bookings | Cancelled | Cancel Rate |
|---|---|---|---|
| Non-OFOP Bookings | 2,701,862 | 271,235 | 10.0% |
| OFOP Bookings | 10,526 | 3,201 | 30.4% |
| Differential | - | - | +20.4pp |
The 20.4pp gap could be selection (uncertain travelers buy OFOP) or moral hazard (OFOP makes cancellation easier). Likely a mix of both.
Redemption Summary
| Status | PNRs | Percent |
|---|---|---|
| Not Redeemed (flew or future trip) | 7,325 | 69.6% |
| Redeemed (cancelled to cash) | 3,201 | 30.4% |
| Total OFOP Purchases | 10,526 | 100% |
Lead Time Analysis
OFOP purchasers book with similar lead times to non-OFOP customers - slightly more last-minute, not less:
| Lead Time | OFOP % | Non-OFOP % |
|---|---|---|
| 0-7 days | 24% | 21% |
| 8-14 days | 14% | 14% |
| 15-30 days | 21% | 21% |
| 31-60 days | 20% | 21% |
| 61-90 days | 9% | 10% |
| 91-180 days | 11% | 10% |
| 180+ days | 2% | 1% |
Margin Analysis
The true margin on OFOP depends critically on whether OFOP causes cancellations (moral hazard) or simply attracts customers who would have cancelled anyway (selection).
Economics Framework
Key insight: When a customer with OFOP cancels, they get cash back instead of flight credits. Without OFOP, those flight credits would eventually become revenue for Breeze:
- Breakage (20%): Credits that expire unused - we recognize this as revenue
- Recapture (80%): Credits used for future bookings - keeps customer in ecosystem
So each OFOP redemption costs us the breakage revenue we would have recognized (20% × $435 booking = $87).
The Moral Hazard Question
The cancellation rate data raises a critical question:
| If we assume... | Then the cost of redemption is... |
|---|---|
| Pure selection All 30% would have cancelled anyway |
Lost breakage only = $87 (They'd have gotten flight credits) |
| Full moral hazard Only 10% would have cancelled; OFOP caused the other 20% |
Mix of lost breakage + full booking value = much higher (We lose flights that would have flown) |
Margin Sensitivity Analysis
All scenarios use: OFOP price $119, booking value $435, breakage 20%, OFOP cancel rate 30.4%, baseline cancel rate 10%
| Scenario | Assumption | Effective Margin |
|---|---|---|
| Pure Selection | All cancellers would have cancelled anyway Cost = lost breakage only ($87) |
78% |
| 50% Moral Hazard | Half the gap is OFOP-caused 10.2% incremental cancellations |
48% |
| Full Moral Hazard | All excess cancellations are OFOP-caused 20.4% incremental cancellations |
18% |
The truth is probably between pure selection and 50% moral hazard. People who buy OFOP are likely more uncertain travelers (selection), but having OFOP probably also makes the decision to cancel easier (some moral hazard). Best estimate: 48-78% margin.
Calculation Detail
For 100 OFOP purchases under the 50% moral hazard scenario:
| 69.6 don't redeem | $119 × 69.6 = $8,282 |
| 20.2 would have cancelled anyway | ($119 - $87) × 20.2 = $646 |
| 10.2 OFOP-caused cancellations | ($119 - $435) × 10.2 = -$3,223 |
| Total value | $5,705 |
| Margin | $5,705 / $11,900 = 48% |
Customer Retention Impact
Do customers who get cash refunds via OFOP come back to book again?
90-Day Repurchase Rates
| Refund Type | Users | Repurchased | Repurchase Rate | Avg Days |
|---|---|---|---|---|
| Flight Credit Refund | 155,183 | 55,099 | 35.5% | 26 days |
| OFOP Refund (Cash) | 1,952 | 550 | 28.2% | 27 days |
| Difference | - | - | -7.3pp | +1 day |
Customers who receive cash back via OFOP are 7.3 percentage points less likely to book again within 90 days compared to those who receive flight credits. This makes intuitive sense: flight credit holders have "Breeze money" that incentivizes rebooking, while cash refunders have no lock-in.
Implications
- Flight credits create a "stickiness" effect that OFOP eliminates
- The 7.3pp gap represents real LTV loss beyond the immediate refund
- However, some OFOP buyers may have never purchased OFOP if it wasn't available (selection effect)
Insights & Recommendations
OFOP is likely profitable, but margin depends heavily on moral hazard assumptions. Best estimate: 48-78% margin. The 3x higher cancellation rate among OFOP purchasers (30% vs 10%) is the critical uncertainty.
Recommended Actions
Caveats
- Moral hazard vs selection: The 3x cancellation rate could be selection (uncertain travelers buy OFOP), moral hazard (OFOP makes cancellation easier), or both. This is the largest source of uncertainty.
- Breakage estimate: 20% flight credit breakage is an assumption - actual rate may differ significantly.
- Selection effect (positive): OFOP may attract customers who wouldn't have booked without it - this positive value is not captured.
- Repurchase differential: OFOP refunders are 7.3pp less likely to repurchase (28% vs 35%). This LTV impact is noted but not included in margin calculation.
Technical Appendix
Methodology
Analysis used GA4 event data from BigQuery. OFOP purchases identified via item_id = 'OFOP' in purchase events. Redemptions filtered to true cancellations only (path contains /cancel/), excluding adjust-journey and modify flows which represent flight changes, not true cancellations.
Data Sources
breeze-airways.ga4_outputs.ga4_events- Purchase and refund events- Date range: Feb 1, 2025 - Jan 21, 2026
- Refund path filter:
path LIKE '%/cancel/%' - Excluded:
/adjust-journey/,/modify/,/reimburse/(IROPs)
Key Definitions
- OFOP Redemption: PNR with OFOP purchase that later appears in a refund event on the cancel path
- Cancellation Rate: % of bookings that result in a refund on the cancel path
- Breakage: Flight credits that expire unused - recognized as revenue (assumed 20%)
- Moral Hazard: When OFOP causes cancellations that wouldn't have happened otherwise
- Selection: When uncertain travelers are more likely to buy OFOP (correlation, not causation)
Margin Calculation Assumptions
- OFOP price: $119 (average)
- Booking value: $435 (average)
- OFOP cancellation rate: 30.4%
- Non-OFOP cancellation rate: 10.0%
- Flight credit breakage: 20% (assumption - needs validation)
- Cost of redemption if would-have-cancelled: lost breakage = 20% × $435 = $87
- Cost of redemption if OFOP-caused: full booking = $435
Limitations
- GA4 data only - no direct reservation system integration
- Cannot directly measure moral hazard - the 3x cancellation rate could be selection, moral hazard, or both
- Breakage rate (20%) is an assumption that significantly affects results
- Repurchase analysis (7.3pp gap) not included in margin calculation but noted as additional LTV impact