Revealed: American’s Internal Memo On China Fares

Filed Under: American

At this point you’re surely all familiar with American’s ~$450 roundtrip business class fare between Washington and Beijing, which they published for a few hours last night.

American has been quiet, and up until now all we’ve been able to do is speculate about the fate of our tickets.

While not necessarily current info as of this evening, JonNYC at Traveling Better has the internal memo from this morning, which American sent out to agents.

Here’s the first update, which went out at 7:20AM this morning:

Zero dollar fares were filed for a short period of time on 17MAR15 for the market WAS-BJS. Additionally, 22.00 fares were filed WAS-SHA. The fares have been cancelled and are no longer available for sale.

  • For the zero dollar fares WAS-BJS, rule 5 states we do not intend to publish zero dollar fares. Unless Revenue Management advises otherwise, the zero dollar base fares will not be honored. If you receive a call on a PNR where the space was cancelled, it will show that HDQ UC’d the space. This is a clear indication the fares were not meant to be sold. Refunds can be made.
  • For the 22.00 fares WAS-SHA, at this time those fares will be honored since those do not fall within rule 5 restrictions.

Then at 10:05AM the following update went was sent to agents:

RM is aware of the situation with the PNRs booked for itineraries pricing at very low base fares to China. They are in the process of trying to identify and UC all unticketed reservations. The intent is to not allow purchase/ticketing of any reservations that have not yet been ticketed. Therefore, do not reinstate itineraries in order to authorize the low fare.

This is information from way earlier today, and it could be that their minds have been changed since then. But it’s clear that this morning their plan was to:

  • Honor the tickets with non-zero dollar base fares
  • Cancel the tickets with zero dollar base fares
  • Not honor the tickets which were only on hold

We’ll see how this plays out, but it’s interesting to know what American was thinking as of this morning. I think American is a bit off in their logic on the base fare somehow mattering, because that doesn’t factor in carrier imposes surcharges. From a consumer’s perspective it’s irrelevant whether something is a base fare or a carrier imposed surcharge — they’re the same thing, and I know the DOT agrees with that.

  1. I believe it is a rational, logical and fully dependable position on the part of American Airlines.

    There is no enforceable contract when the item’s sale price is zero; regardless of ‘added fees’

    That’s my professional opinion…and I am anticipating the DOT to back American. Any price above zero represents a willful, knowledgeable attempt by a seller to offer an item to a prospective buyers. Any price of zero (or less) is a clear indication of an error.

    Anyone can review some of the contract law cases that upholds this basic tenet.

  2. Hmm… Despite what they said, I don’t think they cancelled any DCA-PEK $0 base fare flights that had been ticketed.

  3. @ Ivan Y — Right, the memo is just saying that’s what they intend to do, and not that they’re in the process of doing it yet.

  4. “I think American is a bit off in their logic on the base fare somehow mattering…”

    I think their logic is that they give a pretty clear warning about zero fares, so it can’t be construed as false or misleading advertising.

    The applicable paragraph from the tariff:

    AA, as a policy, does not file nor intend to offer/file fares priced at zero (exclusive of any surcharge). Essentially, such fares do not make any economic sense. AA has introduced warning mechanisms to try to prevent such occurrences; however, occasionally fares such as these mistakenly get loaded into computer reservation systems that are not controlled by AA. Agents/customers should be aware that in these circumstances they are not allowed to ticket at these fares and AA will not honor fares of zero (exclusive of any surcharge). In the event that a zero fare (exclusive of any surcharge) is ticketed inadvertently, AA will void such ticket and may choose to waive, in its sole discretion, certain rules or restrictions of existing published fares as a gesture of good will.


  5. Lucky, you’re right on top of this! I’ve linked you to the FT thread a couple of times now.

    All this drama is keeping me riveted. Will they or won’t they? We bought our tickets last night and are content to sit back and enjoy the entertainment for now.

  6. John DELTA,

    I’m going to have to disagree. If it was $0.00 and $90 in taxes, I’d agree. When it’s $0′ $90 and $350 in “carrier imposed surcharges?” The $350 is the fare. You live by the nickel and diming you die by the nickel and diming.

  7. Ben what I don’t get is how these are zero dollar fares. Is base fare not an arbitrary number? Is fuel surcharges not also equally so?

    Couldn’t an airline have the base fare zero and fuel surcharges to Asia always be $1k?

    Does the doj really say $0 base fare or $0 collected.

    This whole industry is a complete game… Guess I shouldn’t complain about that tho

  8. @ Drew — I totally agree with you. To be clear, with their memo this morning I think they only considered their own rules and not the DOT’s rules on post-purchase price increases. I think this is just an interesting thing to get perspective on, but I wouldn’t read too much into the memo.

  9. @ Cliburn — Who told you it’s not being honored? Had you ticketed the reservation, or it was on hold?

  10. @Ben,
    Can I file a DOT complaint if AA doesn’t honour my ticket? Isn’t it within the DOT rules that irrespective of how much we pay they will have to honour our tickets?

  11. @ David C — Right, they give those warnings, which is fine, but DOT regulations supersede those, no?

  12. @ John DELTA — The price isn’t zero, though. There are carrier imposes charges as well. In other words, if a $10,000 ticket had a $0 base fare and $10,000 in “carrier imposed charges,” would that mean they can get out of it as well?

  13. It appears AA took clear action and communicated to their staff how to address it. if they honor any of the issued tickets I say good on them.

    I love a bargain as much as the next guy..but lets be honest here. Anyone seeing a $500 business fare that is UNADVERTISED (that is, AA isn’t running full-page ads saying “come and get it!”)…KNOWS its a mistake. By booking it you are taking advantage of a situation and frankly you will be lucky if they honor it.

    Accusing AA (or United, etc) of fraud or bad faith, etc is really self-serving. Next time you make an error in writing a check or overpaying and the vendor keeps your extra money then is that ok? If you operate a restaurant and your cashier charges $4 for a steak dinner instead of $40 are you ok with that? If you see someone drop $20 by mistake will you pick it up and not tell them?

    I’m sick of people feeling they are entitled to take advantage of other peoples errors. The person who mistakenly entered that $500 fare…should they lose their job over this?

  14. Thanks again for the updates. My booking had the zero base fare but I included the travel insurance since I assumed it was an airline mistake and they might cancel it. Does booking the insurance help anything?

  15. @ Peter Baker — That’s not really relevant in this case, I would think. But I’d recommend just holding off and seeing how it plays out.

  16. @ Chandan Bhat — You can certainly file a DOT complaint, though whether they take action is a different story.

  17. Eric,

    I think you have to also look at the flip side of the situation. Did AA ever allow you to cancel a ticket if you’ve booked for the wrong date? Maybe it’s Kait bad carma on them once in a while

  18. I love this website but I do find it disappointing you try to defend getting something for nothing. Looking for and publicizing bargain fares is great and appreciated, but when something is obviously an error to demand it be honored is borderline unethical. If a cashier gives you a $10 and it should have been a $5, do you pocket it inform the cashier of the error? Personally, I inform them because that’s being honest. If you see a fare like this, by all means book it. It may be legit or the airline may choose to honor it. But if they don’t honor a mistake, accept it and try again in the future. Don’t demand the FAA enforce an obvious error.

  19. @ Jonathan

    Yes, they have, and I believe (?) most US Airlines allow you 24 hours to cancel non-refundable tickets – so if you make an error you have time. Don’t get me wrong, I understand and I fly A LOT and have dealt with every situation imaginable and have had my fair share of arguments with airlines over their rules.

    But, two wrongs don’t make a right…

    (apologies for hijacking this thread)

  20. @ FinanceBuzz — Sorry if I wasn’t clear, but:
    a) I think the DOT regulations are too generous; I agree they should be changed so that “obvious errors” don’t have to be honored (the challenge is figuring out how that should be defined)
    b) If American doesn’t honor I wouldn’t file a DOT complaint

    When I book mistake fares I do it because I find the process fun and exciting. If it works out, awesome. If it doesn’t, no big deal.

    Sorry if that’s not the impression you got.

  21. I don’t feel sorry for American Airlines. I feel sorry for the AA mechanics who were given pink slips last weekend, at the same time US Airways is hiring replacements at the same airport. I feel sorry for the hundreds of delayed passengers who had their flights postponed 12 hours because of “mechanical problems.” If American Airlines sold $40 tickets to earn back the patronage of abused passengers, I compliment them on their public relations strategy.

  22. I got in on the WAS-PVG fare (like Shanghai more anyway) and so far so good as tickets were issued last night. Per Lucky’s suggestion, I called and have fares waitlisted for first with SWUs. I spend LOTS of money with American and am happy they are honoring the purchased tickets.

  23. Did AA ever allow you to cancel a ticket if you’ve booked for the wrong date

    Good point. I’ve take the 9:15pm flight home every week for 2 years. I once accidently booked the 9:15am. “You can see that it’s obviously a mistake!” said I to the res agent. Nothing I can do sir, you made a mistake so it’s going to cost you $650 to change your $150 ticket.

    They hit the wrong button on their system they get to walk away, I hit the wrong button and I’m out $650.

  24. Since David quotes Verse J of the AA manual, we might as well quote the Verse I that precedes it:

    (I) Overriding Law (Applicable only for transportation to, from, or via a point(s) outside the U.S.A.)
    Insofar as any provision contained or referred to in the ticket or in this tariff may be contrary to mandatory law, government regulations, orders, or requirements, such provision shall remain applicable to the extent that it is not over-ridden thereby. The invalidity of any provision shall not affect any other part.

  25. This is well deserved on airlines for using old antiquated systems and not investing in better software technologies to avoid this problems. They nickel and dime you to the end with all the carrier imposed fees. They messed up and it is their time to pay. I laugh at people comparing this to your local store giving you the wrong change. You don’t buy gum at.99 cents and get to the register to know that the gum is actually $2.99 because of the packaging that was not included in the price. Most business are honest about their prices unlike airlines. You gotta click your life away if you ever want to find out what all the taxes and fees are. I mean you don’t even get a detailed explanation and trying to get an agent to go one by one of those is… You get the point. Fuel surcharges is a hidden profit right now for airlines specially with fuel prices at an all time low. Is American really losing money on that fare they sold? Probably minimal if any at all. They just killed their profit. But at the end like any responsible adult when you play this game you know you will get burn sometimes. And they did. Move on. It is actually quite funny because I bet someone at Delta is looking like a genius right now. This is only gonna make American do what it is the obvious which is to go to a revenue based system. As much as I personally hate it (and I do) the system is perfect company wise to avoid this same problems. Unless you are dying to go to the place the mistake fare happens not a lot of people will book that ticket to go half way across the world to get 3,000 miles. And even then no one will do multiple routes to take advantage of the system. Had this happened in delta, they would have maybe sold 100 of those tickets. Company loses nothing. Hate on Delta as much as everyone does but clearly they know what they are doing. This fiasco for American proves it even further.

  26. I’m really sick of the ‘it’s a mistake so…’ apologists.

    When people used the wrong address for the United fare, that was one thing… But nobody did anything underhanded here, except buy a fare that AA offered. (I didn’t get in on either, btw)

    If you press the wrong button and buy a ticket (on AA there’s no going back, since they have a hold), will AA say it was a mistake, so you owe them nothing?

    If you sleep in and miss your flight, will AA say it was a mistake, so you owe them nothing?

    If your taxi gets into a car accident on the way to the airport, and you miss the flight, does AA say it’s a mistake, so you owe them nothing?

    By the way, there are plenty of times when airlines have 0 or very small fares and huge surcharges–and it’s done on purpose. Many tickets on BA, for example.

  27. Eric, you said it better than I could. I’m with ya’ 100%.

    Now, as to the cockamamie idea that AA should have to eat this simply ’cause _we_ cannot cancel mistakes, au contraire. The law is now that we get 24 hours to cancel, no questions asked. I just cancelled a ticket after almost 24 hours a couple of weeks ago. If you don’t find your mistake in 24 hours, then eat it. _IF_ AA had not caught this in more than 24 hours, the whiners might have a point, but AA cleaned this up as fast as they could.

    I knew about this fare, and didn’t book it. I knew about the UA Denmark fare, and didn’t book it. Both times I knew it was going to cause a major headache to defend that purchase. People who now want to run to the DoT need to first look in the mirror, because the dude in the mirror, not AA, is the one causing the grief. (I know that line sounds so “Zen” that y’all want to punch me, but it’s true.)

  28. @Joseph N.,

    Actually, AA hasn’t cancelled the fare and it has been more than 24 hours. So according to your logic, they can no longer do anything.

  29. Sorry, it doesn’t really matter if a reasonably informed person would know such a low fare had to be a mistake, the law treats consumers like they are idiots – “Warning: Contents are Hot” disclosures exist on coffee cups because you can be an idiot and have the law on your side.

    I agree with Lucky that it will be hard for AAT to cancel so called “zero fare” tickets because the booking engine gives an all-in price (inclusive of carrier surcharges, etc) – AA consumer was shown a monetary price and paid on that basis (even though it’s given an internal breakdown by AA that the notional base charge is nil). Zero fare can only really be ironclad when no money changed hands for the ticket itself. AA may well end up finding itself stuck between a rock and a hard place on this one. This might be unfair to AAT but since when did the law give anything but a token nod to fairness? Nope, this will be done on the wording, and existing precedent, and not much else.

    For those that did have a base fare component, looks like you can get on with your planning. But remember, you still have to fly on these old aircraft seats, probably with crappy service, to somewhere you probably otherwise had no intention to go. So it’s not like AA are the only ones who will have to grit their teeth – but at least you get a prize for your hardship lol.

  30. @Joseph N.,

    Actually, on AA, you don’t get 24 hours to cancel. You only get the guaranteed no-charge hold as an option — and this is allowed per DOT rules. Hence why many of us are mildly annoyed when AA isn’t ticketing our flights.

  31. I’d also add to those comparing this fare with people giving you the wrong change, or that DOT rules are too generous, that they miss the point.

    If someone gives you more change than you were entitled to receive, you are receiving something for which you have given no consideration. However, if you got to the cash register, paid for an item at the ticketed price and were walking out the store when chased down by a clerk who states the item was incorrectly priced and that you must now either cough up a much higher price or return the item forthwith – well that’s a whole other kettle of fish, you were offered a price for which you gave consideration in return – end of story. If that price had been corrected before you completed sale, fair enough, but you have to wear it post sale.

    As mentioned by others, you can’t expect better terms than you extend to your purchaser in the event of error. AA doesn’t excuse consumer error after sale is complete, so why should it expect a free pass if it has negligently made that error itself. It’s fair enough for AA not to honour holds because the transaction had not been completed, but for those it did sell well the error was entirely of it’s own making and nobody forced AA to sell those fares (now, if these had been the result of a malicious hack or some sort of externally generated exploit, then AA would have firmer ground to cancel all these fares, but that’s not the case here either).

    And I say all this as a bystander, as I was aware of the fare and even looked at some booking dates, but ultimately passed because it didn’t suit. AA might learn to take a little more quality control in future, given this could only come about due to lack of internal controls (nobody counter-checked this fare before it was loaded).

  32. People are defending a massive corporation who would bend everyone of us over and take our money if they legally were able to. All we are doing is playing their game. They made the game, and we are playing it. In my opinion, car rentals and airlines are from the two biggest scam businesses around.

  33. For the people says:
    “….a massive corporation who would bend everyone of us over and take our money if they legally were able to.”
    They do. and when they get caught, they hire their massively-priced lawyers at costs which are inevitably passed on to the consumer. How can they lose?

  34. …and further, I wonder why this isn’t splashed over the MSM. (Question mark)
    Oh, wait, they are massive corporations too.

  35. I personally would like to know DOT’s logic for 0 base fare. Just for that, I think people should file complaints to DOT. This carrier imposed fees/charges are just ridiculous because the fuel fee is a part of them. I think DOT require airlines to include the fuel charges into the base fare, otherwise AA’s logic about base fare is baseless.

  36. In my opinion they shouldn’t have to honor $22 fares either, since those are obviously mistake fares. It is not as bad a mistake as the UA denmark fiasco, since that involved lying about your credit card billing country. But even in this case, it’s hard to claim that you booked the ticket in good faith, believing $22 or $0 was actually what they cost. Once again, the mob rushes to book as many tickets as they can, and regular travelers have to make up for AAs losses.
    And the old argument of “let’s stick it to the big evil corporation” is not a good one. Just because a bank is evil doesn’t justify robbing it. If you feel this way about airlines, you should push for more government regulation and consumer protections, and agitate against airline mergers.

  37. This post should be repeated, so here it is again:

    “People are defending a massive corporation who would bend everyone of us over and take our money if they legally were able to. All we are doing is playing their game. They made the game, and we are playing it.”

    That is precisely why I have no ethical problem whatsoever with taking advantage of this sort of mistake.

  38. So what happens when they enter a mistake fare that is higher than intended, but you have to buy a ticket for that flight in that date? I’ve never heard of an airline reaching out and saying, “sorry, due to our error, we overcharged you, here’s a partial refund”. Because of the way dynamic fare pricing works, they need to honor any fare that is bootable via normal means (e.g. you don’t have to give false information during ththe booking to get that rate). Otherwise, how is a consumer ever to know if their good deal will just be revoked later?

  39. @trvlr really? I’ve been able to call AA within 24 hours of a booking to cancel it without issue as recently as November…

  40. Does anyone else find it interesting that these fares were offered only from Washington DC?

    Who would want to be flying Business Class from DC to China? Maybe, Chinese government officials?

    Officials from the notoriously-corrupt Chinese government on whom American airlines (including American Airlines) rely for favorable regulatory actions?

    No, they wouldn’t do a brief fare reduction and tip off their Chinese buddies and tell them to book in a hurry before the fare disappears, would they?

    More likely, they did it to test competitor fare-pricing methods to find out how quickly fares would be matched, and how long they would stay around after American fares were withdrawn.

    Too many comments here trying to excuse AA for being dumb. Not enough compliments for them being smart.

  41. So, it’s now been more than 24 hours since the bookings and then the fare being pulled and still nothing from American…any thoughts on what happens now? I booked a flight from WAS-ORD-PEK and back, wondering if it’s a safe time to go ahead and start making additional bookings on the trip for hotels and what not?

  42. Ben, if we soon find out that the ticketed fares will 100% be honored, you could make a post on the best use of miles/points for positioning to Washington, D.C. But I’m thinking Avios will be the least costly option for most regions of North America. It certainly helps me since the merger with US.

  43. @ Adam — If you’re really in a rush then go for it, but maybe give it another 24 hours? Limited downside, in my opinion.

  44. Speaking of credit, what’s the difference between this and the 50,000 miles the bank gave me for signing up for a credit card? Apparently that kind of generosity is acceptable.

  45. Thanks Ben/Lucky…do you know if there is any historical protocol for a situation like this and how long an airline will wait to make a statement (if any) on how to respond to this? I would think that they would act immediately, or at least within the first 24-48 hours…I am anxiously excited about this flight but I don’t want to get too excited until I know my ticket is valid! Thanks!

  46. @ Adam — It has been all over the place historically, but lately seems to mostly be within 24 hours or so.

  47. @Dylan The FT thread on this China fare had several instances where there was resistance to refund a ticketed booking without a $400 fee. As guidance evolved over the day, it seemed that people were able to get one time exceptions.

    I think there are nuances to this — e.g. ticket more than 7 days away / ticket less than 7 days away, etc. which may allow free cancellation within 24 hours. But the general consensus is booking more than 7 days away and not clicking hold waives your right to a free 24 hour cancellation.

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