The big airline industry news of the past week or so has been about the 22 year old founder of the website Skiplagged, who is being sued by United and Orbitz. Among other things, his website helped people take advantage of hidden city ticketing.
Airline pricing is complicated
There’s no denying that airlines have made revenue and inventory management such a complex art that it’s virtually incomprehensible to the average consumer. That’s because the airlines want to squeeze every possible cent out of consumers based on what they perceive their willingness to pay is. This is why we have things like minimum stay requirements, advance purchase requirements, day of the week requirements, different fares based on whether you’re traveling nonstop or connecting, etc.
Using a combination of all these things, the airlines feel like they can not only figure out who’s a business traveler and who’s a leisure traveler, but also how much each person within those groups is willing to pay.
What is hidden city ticketing?
Hidden city ticketing, specifically, is a trick whereby you book a ticket to a destination other than where you intend to travel to, in order to get a cheaper fare.
For example, say you want to fly from Las Vegas to Chicago on American. Chicago is a huge hub for American, so generally they won’t have the lowest pricing in that market since they know people are willing to pay a premium for a nonstop flight.
For example, a nonstop ticket this coming Monday costs ~$538:
Say, instead, that you book a ticket on American from Las Vegas to Detroit connecting in Chicago on that same exact flight. The price is less than half:
Why? Because Detroit is a Delta hub. So while Delta might charge a premium for you to fly nonstop from Las Vegas to Detroit, American might have cheaper fares in that market since they realize you’re being inconvenienced by connecting with them through Chicago.
They know what they can get away with and what people are willing to pay for, and in this case they know people are more likely to pay a high fare for a nonstop flight on a route which they have a good number of frequencies on, vs. a connecting flight where a competitor has a much more convenient schedule.
So hidden city ticketing would be just flying from Las Vegas to Chicago, even though you booked a ticket all the way to Detroit.
This violates the contract of carriage, though in practice there usually aren’t consequences if done in moderation. Do keep in mind you can’t check bags when using this method, since they’ll be checked through to your final destination.
My thoughts on hidden city ticketing
Yesterday I participated in a segment on HuffPost Live with host Josh Zepps discussing hidden city ticketing, general travel hacking, etc.
To sum up my thoughts, yes, hidden city ticketing violates fare rules. That being said, I find it rather bizarre that they’re going after the founder of the site as opposed to the individuals doing it. Hidden city ticketing is prohibited in the fare rules, so why not enforce the actual rules rather than just go after someone running a site which shows how it can be done?
The irony in all of this is that is that they’ve literally made millions more people aware of what hidden city ticketing is, which seems like it kind of backfires. So sure, go after the site that shows the few people that are “in the know” how to do it, but in the process they’ve exposed millions more people to it…
What do you think? Is suing a site that acts as a search engine for hidden city ticketing a reasonable tactic?
Hey Lucky,
A friend of mine just got a letter and bill for $3,000+ from United for over-using/abusing hidden city ticketing. United are suing him for the balance of all the flights for what he paid Vs. how much he should have paid. I have a copy of the letter if you're interested.
It's not difficult to find hidden city itineraries on the airlines' own web sites. And Skiplagged wasn't selling tickets, just making it easier to find the itineraries. So Napster is not a good analogy. What is?
The best I can come up with is Grams. "Looking online for some good weed, assault rifles, or stolen credit cards? One reddit user has just the thing. With its intuitive, Google-like interface, a new search engine, called Grams,...
It's not difficult to find hidden city itineraries on the airlines' own web sites. And Skiplagged wasn't selling tickets, just making it easier to find the itineraries. So Napster is not a good analogy. What is?
The best I can come up with is Grams. "Looking online for some good weed, assault rifles, or stolen credit cards? One reddit user has just the thing. With its intuitive, Google-like interface, a new search engine, called Grams, offers users a new tool to find sites, not indexed by standard search engines, that are selling illicit materials." But even this isn't a good analogy because the objects of the Grams searches are illegal. Hidden city itineraries with the intent to hop off at the hidden city aren't illegal.
I can't imagine that the case against Skiplagged won't be thrown out. I just hope they get that far and don't cave in advance. The lawsuit is a total abuse of power by United and Orbitz, IMO
How awesome would that be if his portal included a link to donate United miles? Lucky, you've got the clout in this industry and a slight relationship with the guy to maybe suggest that if you're so inclined.
Can someone define "in moderation"?
I do this fairly frequently (5-10 flights/year) and have saved quite a bit doing so. I add my FF # everytime and get points for the segments I take.
Any documented cases of the airlines busting individual travelers? What's the threshold before the airline takes action?
Seems to me as though there could be many legitimate reasons (medical problems, family/business emergency, etc) for a traveler to cut their trip short at the "layover". This may be why airlines typically don't generally try to enforce their contract for very occasional violations of this rule. However, it seems like a bad idea to me to put in your frequent-flyer number on a reservation where you're intending to do this.
Who says prohibiting hidden city ticketing is legal? If not, these specific fare rules are not enforceable anyways.
@Cee - the Terms of Use for the United and Orbitz websites and apps likely contain language to the effect that prohibit a user from using automated systems to obtain information from their websites/apps that aids in violating their contract of carriage, in the same way that airlines like Southwest and Ryanair have language in their their websites/apps' Terms of Use that prevent websites like Kayak from retrieving fare information from their websites and including...
@Cee - the Terms of Use for the United and Orbitz websites and apps likely contain language to the effect that prohibit a user from using automated systems to obtain information from their websites/apps that aids in violating their contract of carriage, in the same way that airlines like Southwest and Ryanair have language in their their websites/apps' Terms of Use that prevent websites like Kayak from retrieving fare information from their websites and including it in search results. So there's no freedom of speech issue. Simply writing a "how to" website on the basics of hidden-fare, or even showing examples using prices from a source that doesn't involve a restricted permission of use (say, a newspaper advertisement, which is publically published information with no terms of use associated) would be protected by freedom of speech.
@alex - I totally agree. Also, to Lanteen's point: why does the price offered need to reflect the cost + margin? To whom is that fair? The business traveler that needs to get to the meeting and is willing to pay $1000 but no tickets are available because they were all sold weeks ago at $200? Why is it fair to say the first person to buy the ticket gets the ticket rather than the...
@alex - I totally agree. Also, to Lanteen's point: why does the price offered need to reflect the cost + margin? To whom is that fair? The business traveler that needs to get to the meeting and is willing to pay $1000 but no tickets are available because they were all sold weeks ago at $200? Why is it fair to say the first person to buy the ticket gets the ticket rather than the person willing to pay more for it? We're not talking about gouging customers for water during a hurricane, or fire services during a wildfire. This is an entirely different system where the laws of supply and demand apply and the airlines are free to charge what they want. Pre-1978 de-regulation had much higher air fares than we do today, and as a result flying of any kind wasn't within reach of many people of normal incomes. The only reason the airlines are able to make positive margins (albeit very small ones) at all is due to revenue management.
@Lantean - the key difference here is that when you go to a grocery store you dont sign any contract with the store to buy your apple. When you buy your airplane ticket you sign a contract agreeing to certain terms.
It's understood that you may not like the terms of the contract, but unfortunately that's what comes with the ticket. Don't like the terms, don't buy the ticket.
Flight prices are dictated by 'supply...
@Lantean - the key difference here is that when you go to a grocery store you dont sign any contract with the store to buy your apple. When you buy your airplane ticket you sign a contract agreeing to certain terms.
It's understood that you may not like the terms of the contract, but unfortunately that's what comes with the ticket. Don't like the terms, don't buy the ticket.
Flight prices are dictated by 'supply and demand' and nothing more. After all....why can I buy a r/t flight NYC-LAX for $300 yet when I fly to Pittsburgh it's as high as $1000? Why is it often cheaper to fly out of Newark or JFK as opposed to LaGuardia? Or why is it absurdly expensive to fly out of HPN/Westchester?
Ben,
I don't think the planes the Qatar Royal Family uses are regualr Qatar Airlines planes.
Qatar Amiri Flight is a VIP airline owned and operated by the government of Qatar. It operates worldwide charters on demand and caters exclusively to the royal family of Qatar and other VIP government staff. The vast majority of its fleet is painted in the standard livery of the commercial flag carrier of Qatar, Qatar Airways.
http://en.m.wikipedia.org/wiki/Qatar_Amiri_Flight
Ben,
I don't think the planes the Qatar Royal Family uses are regualr Qatar Airlines planes.
Qatar Amiri Flight is a VIP airline owned and operated by the government of Qatar. It operates worldwide charters on demand and caters exclusively to the royal family of Qatar and other VIP government staff. The vast majority of its fleet is painted in the standard livery of the commercial flag carrier of Qatar, Qatar Airways.
http://en.m.wikipedia.org/wiki/Qatar_Amiri_Flight
Trying to enforce the contract of carriage puts the airlines in a difficult situation - other than acting against the frequent flier accounts of the travelers, the airlines don't have a lot of tools to use. I know a lot of people have talked about the airlines simply billing the travelers the fare difference, but this would open up a number of questions (for example, price on day of travel vs. rule-compliant purchase at time...
Trying to enforce the contract of carriage puts the airlines in a difficult situation - other than acting against the frequent flier accounts of the travelers, the airlines don't have a lot of tools to use. I know a lot of people have talked about the airlines simply billing the travelers the fare difference, but this would open up a number of questions (for example, price on day of travel vs. rule-compliant purchase at time original ticket was bought?) that would lead to so many travelers challenging the credit- or debit-card transactions that any recaptured revenue would be lost to additional costs processing the charges, defending the inevitable chargebacks from credit card processors, etc.
I guess - although I have my doubts - that United and Orbitz are calculating that the revenue gained from suppressing this tool and making hidden-city ticketing more difficult will offset revenue lost from more people becoming aware of the technique. I doubt that, since once you're aware of the basic idea it's really not that difficult as long as you know what cities are major hubs.
Great interview Lucky! Has this aspect of the contract of carriage been enforced by the courts? I just wonder how enforceable it actually is.
I certainly hope that they don't come after you, since it seems like its difficult to be 100% compliant with their contract of carriages.
if airline pricing were fair (cost of flight + margin) this would never happen. they created this issue and they should suffer the consequences.
i actually believe a consumer advocate group should sue the airlines for making this practice against fare rules.
it should absolutely be allowed... when i go to a store and buy an apple i have absolutely no obligation to eat the whole apple... i can eat as much as i...
if airline pricing were fair (cost of flight + margin) this would never happen. they created this issue and they should suffer the consequences.
i actually believe a consumer advocate group should sue the airlines for making this practice against fare rules.
it should absolutely be allowed... when i go to a store and buy an apple i have absolutely no obligation to eat the whole apple... i can eat as much as i want to throw out the rest. i don't see how it's any different from not taking all the flights.
Seems like Untied and Orbitz are trying to censor the press. Since when are they allowed to take away free speech from anyone.
Can you be awarded elite qualifying miles on the legs you do fly? (Asking for a friend... ;-))
@ Nick -- Yup.
Airlines can lose bags, strand people, change flights without properly notifying travelers and more without consequences, but they can't handle someone figuring out a way to get around their price gouging. Greedy misers.
"it's like saying why not file millions of lawsuits against individual music piraters instead of Napster"
Uh, Napster was a service that provided the ability to share music illegally. The blogger who posted about hidden city ticketing was simply talking.
The airlines do not need to sue anyone to stop people from taking advantage of hidden city ticketing. They just need to enforce their own rules. Suing a blogger just generates a lot of...
"it's like saying why not file millions of lawsuits against individual music piraters instead of Napster"
Uh, Napster was a service that provided the ability to share music illegally. The blogger who posted about hidden city ticketing was simply talking.
The airlines do not need to sue anyone to stop people from taking advantage of hidden city ticketing. They just need to enforce their own rules. Suing a blogger just generates a lot of publicity for this trick. Surely United knew this, but they did it anyway. Why? Because they don't care about the bad publicity. Airlines are really the Comcast of the travel industry. They don't care how miserable they make us because we're a captive audience. So their lawsuit is a calculated attempt at bullying that they figure will not backfire because, no matter how shabbily United treats its customers, people will keep buying United tickets.
Would you still get the miles for the segment flown?
@ scott -- In practice, yes.
"so why not enforce the actual rules rather than just go after someone running a site which shows how it can be done?"
let's like saying why not file millions of lawsuits against individual music piraters instead of Napster ?
and it's rather poor argument to say "go after the people who violate the contract" unless you want airlines to close accounts after any single no-show infraction.
On the one hand SL is a small business so exhausting the defendant's resources in court should be a piece of cake for someone like United or Orbitz. On the other hand because SL is little more than a tiny one off website they didn't have many options for breaking into the mainstream news. Until now.