The Department of Transportation’s Likely Next Step Regarding Mistake Fares

Let’s set aside for a moment whether people who falsely claimed to reside in Denmark so as to take advantage of unbelievably good first- and business-class fares are morally corrupt. (Not sure what I’m talking about? Google “united denmark fares” and read any of the host of articles for a debrief).

Let’s set aside whether United, which has decided to cancel all of these tickets, is performing PR hari-kari by going after its customers rather than the third-party vendor that has been identified as responsible for the mistake.

And let’s set aside for the time being guesses as to whether the Department of Transportation (DOT) will impose fines on United if United doesn’t honor the fares, per the current DOT regulations.

What I would like to focus on in this post is what the DOT will do going forward.

By now, thousands have filed complaints to the DOT claiming that, per the current regulations, United is bound to honor the mistake fares. At the same time numerous travelers posting in the forums, as well as several bloggers, have advised against these filings. The argument being that this particular case is a bad one to make a stand on, seeing as how the fare was pretty obviously a mistake and required Americans to claim Danish residency to take advantage of the fares.

In short, even if the complainants win this battle, which is deemed highly unlikely anyway, they could end up losing the war – i.e., the DOT will change the rules going forward and all travelers will enjoy fewer federal protections when airlines inevitably screw up again.

Why do some travelers and bloggers fear that the DOT will use this case as a reason to make rule changes that favor the airlines? Namely because of this statement from the DOT:

The Enforcement Office has become concerned that increasingly mistaken fares are getting posted on frequent-flyer community blogs and traveldeal sites, and individuals are purchasing these tickets in bad faith and not on the mistaken belief that a good deal is now available. We solicit comment on how best to address the problem of individual bad actors while still ensuring that airlines and other sellers of air transportation are required to honor mistaken fares that were reasonably relied upon by consumers.

As fellow BoardingArea blogger Gary Leff wrote when he reported on this back in June:

I have no idea how the Department of Transportation is going to write a rule that would parse whether a fare was obviously a mistake to a consumer or whether a consumer was duped by a good deal that the travel provider tried to raise the price on later.

My guess is, shortly after the fallout from this most recent mistake fare is sorted, the DOT will not attempt to parse at all and will instead employ a more broad brush approach. Namely, I think they will try to “balance” the rules surrounding mistake fares by allowing airlines an out that is currently only available to the airlines’ customers.

As best I can tell, this “out” was first expressed by FlyerTalker travelinmanS (though in all the excitement it’s possible someone else raised this idea first and I simply missed it – if that’s the case please accept my apology):

If I make a mistake booking a ticket I have 24 hours to cancel it free and clear without penalty and a full refund. This is mandated by the DOT, I believe, so I can see how it should also work the other way in this case.

Don’t be surprised if, within a year or so, the DOT announces that both airlines and airline customers are granted a 24-hour cancelation option. Within 24 hours of a ticket purchase, either the purchaser or the airline can cancel the reservation without penalty. The key here being that, the airline is only allowed to cancel within the same parameters that the customer is allowed to cancel.

No parsing. No determining if a fare was a mistake or not. No muss.

Is this a perfectly fair solution? Nope. But then again, according to Hopper.com the current cancelation policy is unfair in the customers favor.

Frankly, there likely isn’t a perfectly fair solution to be found. But with this solution the DOT would be able to appease the airlines, and claim they have attempted to deal with a difficult issue in a way that is fair to all parties involved.

And the airlines should be fine with this solution. It gives them the leeway to determine how badly they are getting hurt on a mistake and gives them adequate time to decide if they want/need to cancel all of the tickets purchased. The policy would, in effect, provide a way to manage the “bad actors” who read the “frequent-flyer community blogs” and who participate on the “traveldeal sites”.

Basically, if a mistake isn’t widely publicized and taken advantage of, the airlines could accept the minimal loss and honor the fares. If, on the other hand, the mistake is posted on the blogs or on a travel community and as a result thousands upon thousands of customers book tickets, the airline would quickly see that there is a problem and could cancel everyone’s tickets – as long as the tickets are canceled within 24 hours.

And, though this solution certainly couldn’t be considered ideal for customers, it sure would ratchet up the drama the next time there is a mistake fare – as the 24-hour clock would begin ticking as soon as the tickets are purchased.

How do you think the DOT will react to this interesting case? Or is it possible they won’t react at all?

Continue to follow the thread on FlyerTalk that started this all: [PREM FARE GONE] UA: NCL-EWR 600 DKK (mistaken fare)

Department of Transportation Seal” by DonkeyHotey. CC BY 2.0.

Comments

  1. The issue with allowing airlines to cancel within 24 hours is that if someone got a totally legitimate fare, say $100 SFO-DEN, and then the price increases to $250, the airline could theoretically cancel so the customer has to rebook at increased price. But like you said, there is no perfect solution. That said, I am in favor of airlines being able to cancel clear mistake fares.

  2. Just one clarification…Danish residency at no time had to be claimed. In fact, all you had to do was select the “Denmark” button from the United.com homepage. You could then pay by Paypal, Western Union, United gift certificate or United travel certificate without a Denmark credit card billing address. A credit card was just one of many options to pay.

    In any event, to your point about a mutual 24 hour policy (presumably if the reservation is made a week out), generally mutual rights granted by statute/decree would be more appropriate in situations where the parties are in a position of even bargaining power. In this case, the consumer clearly is not in an equal position as say, United or Delta. Additionally, consumers could not make non-refundable commitments (e.g., other flights, hotel, rental cars, etc.) within that 24 hour period as their flight could be cancelled. In fact, taken to the extreme, it could be cancelled repeatedly by the airline if done within 24 hours each time (at least until 7 days out). I’m not saying they would do that, or that it would be good business practice, just that would be the potential risk exposure.

  3. @Kris

    I hear that a lot, that the airline should be able to cancel a “clear mistake fare”. But who would make that determination? How would it be evaluated whether a fare was a mistake or not? How long would the airline have to claim a mistake was made? Hot long would the DOT (if they were the one making the ultimate decision) have to make a ruling? Would there by any recourse for the passenger left stranded by the mistake fare? It sounds good in practice, but it creates a lot of challenges.

  4. @Matt – you make good points, appreciate your insights. Still, I think the mutual 24-hour cancelation policy could be fleshed out so that it would work “well enough”. To some extent, I think it’s ok to rely on good business practices. An airline that put in place a practice to cancel tickets to take advantage of marginal increases in prices within 24 hours would surely be committing financial suicide. Word would get out fast and I can’t imagine too many travelers sticking with that airline. Further, the DOT could still establish this as a nuclear option, only to be used in extreme cases, by requiring airlines to submit explanatory paperwork whenever the option is employed. Maybe they could still even have a threat of fines if the airline is found to be using the tactic solely to gain profit, rather than prevent major losses.

    Ultimately, I think the DOT is looking to do something to appease the airlines and this would be the simplest solution in that it “looks” fair and doesn’t require them to establish rules determining what is and isn’t a mistake fare. Again, it isn’t a perfect solution, but I imagine they would be happy with a “good enough for now” solution.

  5. Thanks Mikel. Agree with you that airlines have a general incentive to engage in good business practice. Of course, if there is little or no competition on a given route or out of a given airport (seems increasingly the case with consolidation in the US) because nearly all capacity is controlled by a single airline, then airlines in such cases will have less of an incentive as consumers may not have much in the way of viable alternatives. In any event, it will be interesting to see how this all unfolds!

  6. From a selfish point of view, if the DoT and airlines are just waiting for a ridiculous case to use as a reason why the current 399.88 must change, then I say, let’s make it to be this one as I cannot imagine a “better”/bigger mistake.

    The problem I personally see with cancellations goes along the reservations may take longer than 24 hours to ticket (especially when code shares and other airlines are involved) and a fairly simple/cheap IT solution could be made to decide whether to ticket the reservation or simply cancel it because the airlines aren’t able to secure the seats, the seats had already been sold out etc. When you include the 72 hour ticketing period for reservations made by agents (which don’t even need to be paid for 71h59m in theory) you end up with one big mess of things.

  7. I’m in favor of the reciprocal 24hrs. cancellation if we also get the same deal in return. Just to name a few: if I make a mistake and set my alarm clock at the wrong time, I can get the tickets changed without fee. If I fly without any bags, then I get $60 back. If my car breaks down on the way to the airport, then I should be able to fly on a later flight without paying any penalties. I guess you get my idea….airlines have so many rules that benefit them that I don’t think they need any more. Just my $0.02.

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