Qantas’ $5,000 AUD First Class Mistake Fare…

Airlines sometimes publish mistake fares, which can happen due to a variety of factors. Qantas published one of these in first class a few days ago, and I think the airline is getting a bit too much praise for how it’s handling this.

Qantas doesn’t really honor first class mistake fare

For a period of around eight hours on Thursday, August 22, 2024, Qantas published a very cheap first class fare between Sydney (SYD) and Los Angeles (LAX). Specifically, the airline had first class fares of around $5,000 AUD roundtrip, around 75% off the normal published fare of ~$20,000 AUD.

Roughly 300 of these tickets were reportedly booked during the window where this mistake was live. In the days following these fares, Qantas has blamed the issue on a coding error. Qantas has made it clear that it won’t honor these fares, but it will offer passengers either business class tickets at the prices paid, or a full refund.

In a statement, the airline clarified that “this is a case where the fare was actually too good to be true,” and Qantas states that the option to rebook in business class is a “a gesture of goodwill.”

Per the email to customers:

An updated ticket and itinerary has been sent to you which is for the same dates as booked for travel in our Business cabin. Any future date changes are subject to our standard fare rules, and any applicable fare difference. If you are proceeding with this offer there is no action required from you.

If you do not wish to proceed with this offer, you can request a full refund by replying to this email directly confirming that you wish to cancel and refund this booking. We will then process a refund to the original form of payment.

Here’s what Qantas’ conditions of carriage say regarding mistake fares:

Sometimes mistakes are made and incorrect fares can be displayed. If there is an error or mistake that is reasonably obvious in the fare price and you have a Ticket and/or a confirmed booking, we may:

(a) cancel the Ticket and/or booking;

(b) provide you with a refund in accordance with 14 (Refunds);

(c) offer you a new Ticket at the correct fare price as at the time of the booking; and

(d) in the event that you accept the offer and pay the correct fare issue you with a new Ticket.

My take on Qantas’ handling of the mistake fare

I don’t have terribly strong opinions as to whether or not Qantas should have honored this fare. I mean, of course I like when airlines honor mistake fares, but I don’t expect it, and I think what’s most important is that the airline communicates promptly.

I will say that this wasn’t a case where an airline published a fare of a few hundred bucks, and it was the deal of a lifetime. Obviously this fare was much lower than usual, but as far as mistake fares go, it was hardly the most exciting one ever.

The only strong opinion I have here is that I think some people are giving Qantas a bit too much credit for how it’s handling this. For example, Bloomberg writes that “Qantas is opting to soak up costs from the snafu.” 2PAXfly suggests that Qantas is being heroic, and this will cost the airline millions of dollars:

“Since a single leg in Business Class to the USA costs on sale around AU$6,000, I calculate that at a loss of close to AU$4,000 a sector times a return trip (x2) and then times the 300 passengers who took up the offer, that’s a loss of approximately AU$2.4 million for Qantas.”

“Again, well done Qantas. This is the right solution to a potential PR disaster. Qantas goes from bumbling mistake-prone tech head to hero in the space of one email.”

While I respect those takes, personally I have a very different conclusion. I think Qantas is doing what’s technically within its rights, but there’s nothing “heroic” here. I’d also approach the math very differently, and I’d go so far as to say that Qantas’ loss from honoring these tickets in business class is roughly zero.

When someone books a cheaper fare, you can’t just compare that to the standard price at which the airline is trying to sell a seat, and call the difference the loss. If Qantas were selling 100% of its business class tickets between Sydney and Los Angeles for $12,000 AUD roundtrip, it might be the world’s most profitable airline.

In reality, people secure business class seats in all kinds of ways, from award seats, to upgrades, to cheaper fares originating in other markets. Like, when someone books a business class award ticket, airlines don’t calculate that as a loss of many thousands of dollars. Instead, it’s part of the overall mix of ways that people book, to ensure that as few seats as possible are empty.

When doing this math, the question shouldn’t be how much Qantas is trying to charge for a ticket in a particular city pair, but rather, what kind of a passenger is being displaced. If not 100% of seats are occupied, then these “mistake fares” are profitable, as $5,000 AUD is way above the incremental cost of carrying an additional passenger.

Even if every seat is occupied, the question is whether there’s someone else in the cabin who paid less (by whatever metrics Qantas uses), whether it’s an award ticket, an upgrade, or whatever.

Bottom line

Qantas recently had a mistake fare of $5,000 AUD between Sydney and Los Angeles. The airline isn’t honoring the fare, but is instead offering passengers a business class seat or a refund. We’ve seen worse handling of mistake fares, though I’d hardly say that this is overly generous, or for that matter, costly for the airline.

What do you make of Qantas’ handling of this mistake fare?