Airlines Shouldn’t Have to Honor Mistake Fares – But Cancelling Tickets After More Than a Week is Bull

Of course we all love it when mistake fares happen and they’re honored and we get to travel the world at insanely cheap prices, especially in business or first class.

For some readers booking a $28 ticket to Paris presents a moral challenge: should you take advantage of something you know is a mistake? My own view is that I’m happy to book it, airlines will choose to honor it or they won’t, but if they’re going to fly people to Paris for $28 I’d like to be one of those people.

I’ve never been a fan of suing to try to enforce these fares. Nor have I been a fan of the Department of Transportation requiring that they’re honored.

The Department of Transportation Regulated — and Then Abdicated On — Mistake Fares

Against a backdrop of airlines handling mistake fares badly — cancelling tickets after months rather than hours — the DOT issued rules in 2012 that explicitly required airlines to honor mistake fares.

In the fall of 2011 Korean published a sub-$500 fare New York JFK – Palau. The fare was available for several days. About 300 people bought tickets. $500 for coach isn’t obviously a mistake. Korean spent 2 months discussing internally what to do and consulting with regulators, so that they notified customers who by that time assumed they could travel that their tickets were being cancelled. Most people took refunds. Some people paid an extra couple hundred dollars to fly. Korean lost some small claims cases.

Requiring all fares no matter how egregious the mistake be honored though didn’t seem right, an overreaction to airline bad behavior, and in mid-2015 the DOT announced it would stop enforcing this rule even though it hadn’t repealed or replaced the rule.

An airline not honoring a mistake fare would have to cover nonrefundable costs a passenger incurred in reliance on the fare, however, a throwback to the approach they took to the October 2009 British Airways $40++ tickets from the US to India. With fuel surcharges and taxes they were over $500. That’s not an obvious error like $0 or $50. The airline canceled the tickets, and the Department of Transportation ordered that they cover expenses consumers incurred in detrimental reliance on the purchases. In that case over 1000 tickets were sold.

Virgin Australia and Delta are Flouting the DOT

Against the backdrop of non-enforcement of 14 CFR 399.88’s prohibition on post-purchase price increases, Delta and Virgin Australia have chosen to notify customers after more than a week that they won’t be honoring recent ticket purchases.

Virgin Australia had two recent incredible fares, $172 round-trip economy from Dallas to Melbourne and $900 round-trip business class from Auckland to Oakland. Six days after the business class tickets were sold they cancelled those. Nine days after the economy tickets were sold they cancelled those.

Some of the business class tickets with transpacific travel on Virgin Australia were sold by Delta, and Delta cancelled those after more than a week.

I don’t think that the airlines should have been required to honor these tickets, but airlines write the rules and take your money — there’s a tremendous disparity in power between an airline and an individual passenger — and customers only have 24 hours (under some circumstances) to cancel a ticket for a refund, an airline taking a week to do so is absurd. Airlines shouldn’t have even the same protections as consumers, but in no case should their protections be even greater.

I’ve realized I’ve booked the wrong dates of travel, or the wrong flight, after several days and I’m forced to pay a penalty (if my fare is changeable at all). Why shouldn’t airlines have to live under their own rules?

The reason is simple: the Department of Transportation won’t require them to.

Mistake Fares are Actually Hard Public Policy

What to do about ‘mistake fares’ is a real challenge and it’s difficult to balance competing priorities, which is why DOT hasn’t promulgated a replacement rule, they’re just choosing to ignore the last one they issued.

  • We really don’t always know what fares are mistakes versus what’s an intentional sale. When we started seeing $300 transatlantic fares last year I thought they were mistakes, same with $400 transpacific fares, but it turns out there have just been really great short-term (intentional) sales.
    Some mistake fares are obvious to most consumers, but there have even been ‘obvious errors’ that were intentional marketing stunts. Drawing bright lines is hard.

    Back in 2005 Washington Dulles-based Independence Air loaded mistake fares intentionally into their system around midnight. They waited until a few tickets were purchased and then called the Washington Post in the morning, with the message that you never know what kind of great deals you might get at! It was a guerrilla marketing campaign.

    Credit: Frank Unterspann via Wikimedia Commons

  • After a certain amount of time we really do assume mistake fares are going to be honored. If airlines can renege on a fare, there needs to be a limit on how long airlines have to renege.

  • A rule where customers buy tickets but they aren’t really ‘confirmed’ would be bad public policy. If folks don’t know for sure they have a seat, that’s a problem. Airlines do overbook and try to shift customers to other flights. Qatar, prior to joining oneworld, was known for downgrading passengers traveling on United award tickets when they had sold out their business class cabin. There wasn’t a ‘mistake’ but customers had little recourse. That’s not fair, and it’s not good for airlines or the economy when customers can’t rely on their travel plans.

What Should Be the Rule?

I suppose I’d be ok saying airfare is just like everything else and ought to be subject to the same common law rules and Federal Trade Commission regulations as hotel prices or vacuum cleaners.

However the DOT has the power to regulate here and says they want to promulgate a new rule. Their decision not to enforce existing rules creates too much uncertainty, and Delta and Virgin Australia waiting over a week to cancel tickets is unacceptable — when the same mistake on the part of consumers would be subject to fees and a refusal to refund. Given that I do think we can come up with a reasonable and clear approach.

In order not to honor a mistake fare, a think a policy could make sense like:

  • An airline should have to certify that they’ve made a mistake. A submission to the DOT certifying under penalty of perjury that the fare in question was indeed an error.

  • The error must be obvious and egregious. If an airfare is an 80% or 90% discount from the lowest paid fare (inclusive of all fees and surcharges) sold on the route in the previous 30 days, and it wasn’t offered intentionally, it seems reasonable to accept that it was an error.

  • The submission has to be made in a timely manner. Customers generally have the right under current DOT rules to put airfare on hold for 24 hours, or to cancel within 24 hours of ticketing. It seems like airlines should be able to cancel a mistake within 24 hours.

  • They should communicate clearly with customers. Individually contact customers within 24 hours of purchase indicating that they’ve submitted to the DOT that the tickets in question were a mistake and won’t be honored.

Put another way, airlines should have to live under rules similar to consumers. They shouldn’t be able to decide not to honor a ticket just because they think they can sell a seat for more money the way Hilton allows some hotels to do. They should stand behind their sales except in the event of a genuine mistake, and then they should identify and notify customers promptly. Not after a week.

Shame on Virgin Australia, shame on Delta, and shame on the DOT.

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