Seven Reasons Why the Death of Mistake Fares Might Not Happen
Numerous weblogs have been pronouncing the possible death of mistake fares ever since this comment was posted by FlyerTalk member PITgetawayflyer pertaining to an official statement issued by the Department of Transportation of the United States with regard to a change in policy involving mistake fares:
A notice was posted sometime yesterday on the DOT website under What’s new regarding the enforcement of mistake fares. It is silent on the 24 hour hold issue, but after a quick read, it seems to be a temporary “get out of jail free card” for the airlines going forward from Friday.
Perhaps I am wrong; but I simply do not see this as the death knell for mistake fares — and here are the seven reasons why the death of mistake fares might not happen, in my opinion:
1. Mistake Fares Have Been Honored for Years
The rules set forth by the Department of Transportation of the United States pertaining to a prohibition on post-purchase price increase was set forth on Monday, April 25, 2011 and became effective as of Tuesday, August 23, 2011…
(a) It is an unfair and deceptive practice within the meaning of 49 U.S.C. 41712 for any seller of scheduled air transportation within, to or from the United States, or of a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, to increase the price of that air transportation, tour or tour component to a consumer, including but not limited to an increase in the price of the seat, an increase in the price for the carriage of passenger baggage, or an increase in an applicable fuel surcharge, after the air transportation has been purchased by the consumer, except in the case of an increase in a government-imposed tax or fee. A purchase is deemed to have occurred when the full amount agreed upon has been paid by the consumer.
(b) A seller of scheduled air transportation within, to or from the United States or a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, must notify a consumer of the potential for a post-purchase price increase due to an increase in a government-imposed tax or fee and must obtain the consumer’s written consent to the potential for such an increase prior to purchase of the scheduled air transportation, tour or tour component that includes scheduled air transportation. Imposition of any such increase without providing the consumer the appropriate notice and without obtaining his or her written consent of the potential increase constitutes an unfair and deceptive practice within the meaning of 49 U.S.C. 41712.
[Doc. No. DOT-OST-2010-0140, 76 FR 23167, Apr. 25, 2011]
…but mistake fares had been honored by various airlines long before this portion of the Code of Federal Regulations became effective. Alitalia did not have to honor this now-infamous business class airfare for round-trip flights between Toronto and Larnaca back in 2006 at a cost of fewer than $200.00; nor was Air Pacific required to honor the mistake fare of $51.00 for a round-trip flight between Los Angeles and Fiji back in 2005 — but they did; and those are only two of many examples of mistake fares which were voluntarily honored. Some of classic “hall of fame” examples are listed here.
I do not see why at least some airlines would choose not to continue honoring them should they occur.
2. The New Policy is Somewhat Nebulous
While the official statement will no longer require airlines to honor mistake fares…
As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.
…there is no timeline nor a clear direction as to how the Department of Transportation will decide what exactly will be the final ruling pertaining to mistake fares — which leads to the next reason…
3. What Exactly IS a Mistake Fare?
According to the aforementioned segment extracted from the latest statement from the Department of Transportation, the airline is required to first demonstrate that the fare was indeed a mistake fare — although the parameters of that burden of proof are not completely clear, adding to the nebulousness of the new policy — but what exactly is a mistake fare?
United Airlines and Delta Air Lines had apparently had an airfare war with each other this past January by pricing incredible deals from the hub airports of each other where you would have been able to fly from the United States to Europe through May — with the exception of a couple of weeks in late March and early April — for as low as $314.00 round-trip between Chicago and Moscow, including all taxes and fees. Can that be considered a mistake fare?
What if the exact same scenario occurred once again where the airfare was $414.00 round-trip between Chicago and Moscow; but it was really supposed to be $914.00. Can the airlines claim that that was a mistake?
Look at low-cost carriers such as Spirit Airlines, Ryanair and Allegiant Air. They charge ridiculously low airfares which could easily be confused for mistake fares; and yet they are wildly profitable because of the revenue from ancillary fees.
Is an airfare of $99.00 each way between Boston and Keflavik International Airport in Iceland a mistake? What about an airfare of $61.00 round-trip between New York and Keflavik International Airport?
Even worse: can the airlines simply pick and choose what were mistake fares? Will they have license to engage in “bait and switch” tactics on their customers — and would they be perfectly legal?
I have to disagree with Richard, who is a reader of The Gate and posted this comment on May 3, 2015: “Also, we all know what constitutes a mistake fare, ie. LHR to LAX in F for $399!” That is not necessarily true, as it depends on myriad factors: the airline and the time of year as two examples.
4. Mistake Fares Versus Airfares Procured by Questionable Means
I personally believe that this latest shift in policy by the Department of Transportation comes from this footnote included in the aforementioned official statement:
In February 2015, United Airlines experienced a mistaken fare situation where, in order to purchase a ticket, individuals had to go to United’s Denmark website which had fares listed in Danish Krone throughout the purchasing process. Only people who identified “Denmark” as their location/country when entering billing information at the completion of the purchase process were able to complete their purchase at the mistaken fare levels. The Enforcement Office decided not to take action against United for not honoring the fare offers because the fare offer was not marketed to consumers in the United States. The Enforcement Office also noted its concern that to obtain the fare, some purchasers had to manipulate the search process on the website in order to force the conversion error to Danish Krone by misrepresenting their billing address country as Denmark when, in fact, Denmark was not their billing address country.
That was not taking advantage of a mistake fare; rather, that was a way for customers to blatantly and purposely circumvent paying the appropriate airfare by questionable means — and I would not be the least bit surprised if that was the pivotal situation as at least minimally part of the reason why the Department of Transportation was prompted to change its policy and issue its latest official statement.
5. Dynamic Pricing: Can it Bite the Airlines as Much as Benefit Them?
Airlines long been engaged in dynamic pricing to the point where jokes regarding their absurdity have become classics — such as the one which is approximately 20 years old and pertains to what if airlines sold paint, as one of many examples…
…and not only have airlines not abated on keeping the consumer puzzled as to what airfare is valid and when; but instead, the contrary seems to be happening: there are signs that that pricing model has actually been extended to pervade award travel as well. For example, Delta Air Lines no longer has these award charts available to members of its SkyMiles frequent flier loyalty program. As with airfares, customers are left to “roll the dice” and take a chance as to how many SkyMiles need to be redeemed for a certain award — again with myriad factors to determine the final price.
With dynamic pricing comes uncertainty by the consumer; and with that uncertainty comes the questioning of the validity of an airfare. Is it really fair for a consumer to be burdened with proving that an airfare is indeed a sale upon which they unknowingly stumbled; or that the airfare is an actual mistake? I do not think so — because…
6. Mistake Fares are the Responsibility of the Airline — Period
…if an airline cannot ensure that the quality of information it distributes is as accurate as possible, why should the consumer bear the inconvenience or responsibility of the mistake?
In every industry, there is a subset of customers who take advantage of the mistakes of companies — or solely purchase “loss leader” items or services without purchasing other items or services which the company intended for you to purchase in order to profit. Supermarkets are a good example: items will be advertised and displayed at them for a good deal — let us say half the regular price, for example. Management of the supermarket might be willing to lose money on a container of ice cream or boxes of pasta if it means getting you into the store to purchase other items which may not be on sale: “I am here already and I need tuna — I guess I will buy several cans.”
That would be ideal; but there are customers who purchase only the “loss leader” products and will also take full advantage of mistake pricing. I know of supermarket chains whose policy allows the customer to keep the item free of charge if the price of the item is incorrect. Should the Federal Trade Commission of the United States get involved to protect supermarkets from those nefarious customers who will take unfair advantage of them with any opportunity to do so? Is it up to the consumer to prove to management of the supermarket that the price of an item is part of a legitimate sale versus a mistake?
Rather than place the burden of proof on a consumer to know the difference between a mistake fare and a legitimate sale fare — and no, there is no clear bright line to determine that distinction — perhaps the burden should be on the airlines to ensure that the pricing information which they distribute is consistently accurate in order to prevent mistake fares from happening in the first place?
7. Public Image, Relations — and Trust
This may not be as much of a factor as during the years when there were more airlines competing for the same customers; but an airline can receive great press — in other words, valuable free advertising — such as the Christmas Day airfare mistake which Etihad Airways honored. I do not have the numbers — but it seemed like a win-win situation where customers took advantage of amazing airfares; and the news about the good will of members of the management team at Etihad Airways was all over the media.
Conversely, an airline can receive negative publicity when it does not honor an airfare — although I am not sure if an airline would be as adversely affected these days due to the decreased competition, strengthening economy, and other factors which are outlined in this article.
If a customer purchases an airfare — only to be rescinded by the airline which issued it — how can that customer trust that he or she is getting a good deal in the future?
I really do not believe that the latest statement from the Department of Transportation of the United States will sound the death knell for mistake fares — although it would certainly not surprise me if the amount of mistake fares not being honored does increase somewhat.
In order for that to happen, the airlines must still prove to the Department of Transportation that airfares are indeed mistakes — not an easy task when unpredictable dynamic pricing is considered.
Still, it will be interesting going forward as to how airlines, customers, and the Department of Transportation handle situations concerning possible mistake fares — but in my opinion, the only true death of mistake fares will be when the systems of issuing airfares by airlines has been improved to the point of perfection and an accuracy rate of 100 percent.