DOT Will No Longer Make Airlines Honor Mistake Fares

Against a backdrop of airlines handling mistake fares badly — cancelling tickets after months rather than hours — the DOT issued rules in 2012 that explicitly required airlines to honor mistake fares.

That’s because DOT prohibited ‘post purchase price increases’ of any kind — cancelling a ticket and requiring that a consumer buy a new ticket at then-prevalent rates would constitute raising the price of travel for that consumer after they had made a purchase.

Somehow the DOT was shocked that requiring airlines to honor mistake fares would mean that consumers would ‘take advantage’ of mistake fares.

DOT published a notice of proposed rulemaking asking for comment on how it ough to revise its rules. Without publication of a new rule, they basically decided to ignore their rules in the case of United tickets issued in Danish Kroner a couple of months ago.

Now DOT has announced that they’ve simply decided to ignore their published rules (.pdf) on mistake fares, provided airlines make customers whole for non-refundable purchases made in conjunction with their tickets.

The Assistant General Counsel has decided not to enforce section 399.88 with respect to mistaken fares while the Department completes the aforementioned rulemaking process. 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. These expenses include, but are not limited to, non-refundable hotel reservations, destination tour packages or activities, cancellation fees for non-refundable connecting air travel and visa or other international travel fees. The airline may ask the consumer requesting out-of-pocket expenses to provide evidence (i.e. receipts or proof of cancellations) of actual costs incurred by the consumer. In essence, the airline or seller of air transportation is required to make the consumer “whole” by restoring the consumer to the position he or she was in prior to the purchase of the mistaken fare.

The DOT has basically gone back to their fall 2009 rule announced in conjunction with the British Airways mistake fare to India.

This rule will remain in place until the DOT makes a determination as to what the rule will be going forward as a result of the rulemaking process for which comments closed in the fall.

There are several problems with this new DOT approach:

  • It’s not clear what constitutes a mistake fare under this guidance. The DOT simply says,

    The burden rests with the airline or seller of air transportation to prove to the Enforcement Office that an advertised fare and the resulting ticket sales constitutes a mistaken fare situation.

  • There’s no clear timeframe in which an airline must exercise its rights under this guidance. At what point can purchased travel truly be relied upon?

  • This would appear to allow consumers to buy non-refundable travel in conjunction with such a fare, and have the airline pay for accommodations (that a consumer then ultimately uses, booking alternate flights).

    That may discourage airlines from cancelling tickets in practice.

    There may also be procedures, to be worked out in the future but as now unclear, which would require consumers not to use their non-refundable bookings.

    In the meantime consumers might benefit from booking other travel right away, turning the conventional wisdom on its head to wait until one learns if a mistake will be honored. But doing so entails risks, because what expenses an airline will actually reimburse are as yet unclear despite the guidance.

Here’s how the DOT should handle mistake fares to be fair to both airlines and protect consumers.

For now though the DOT is on record saying that airlines don’t have to honor mistake fares, but they do have to make consumers whole who rely on those fares in incurring other costs.

(HT: One Mile at a Time)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. @Gary sez: “It’s not clear what constitutes a mistake fare under this guidance.”

    A mistake fare is like pornography. You know what it is when you see it.

    Just another way to say, “Come on, Gary, do you seriously believe that anyone would have a hard time knowing when a fare is mistakenly offered?” For one thing, just check the travel blogs! 😉

  2. So I guess if you book a mistake fare and then a much more expensive, non-refundable premium fare to get to the mistake fare…you’re good ;-).

  3. Good job by the airlines’ lobbyist in convincing the DOT that a few customers taking advantage of airlines’ mistakes is so shocking…

    I never bought a mistake fare ticket myself and probably never will because i don’t have the flexibility to react fast to these situations.

    However the principle of not forcing airlines to take responsibility of their mistake is actually very sad and shocking. Let’s not mix up the roles here, it’s not the mighty customers with forums and blogs conspiring to take advantage of poor and weak airlines. It’s the massive airlines playing the pricing game to take advantage of customers as much as they can everywhere and all the time. Seeing not limits to their creativity to achieve that: over booking, variable pricing, arbitrary fuel surcharges etc. In that game the airlines win 99 out of 100 games played, but they are outraged that 1 time out of 100, they loose and some consumers manage to turn the weapon against the airlines and take advantage of them.

    There is nothing wrong with consumers buying mistake fares. If I go to the wholefoods or walmart of this world and they have a mistake in their system and a champagne bottle scans at 20 USD instead of 120USD. They have to sell it for 20 USD. Their mistake their consequences.
    Why would it be different for airlines? If I send 20 friends to go the the mall and take advantage of the mistake or if I decide to go back and buy the 50 bottles myself, they have to sell at that price until they make the correct their pricing mess.

    They cannot manage the complexity of their own pricing system? Fine then simplify it and be able to manage it, or pay the price of your mistakes.

    Let’s also not forget that there is no compassion for any mistake that the consumer makes. If I buy a ticket for the wrong date or book an nonrefundable fare instead of a refundable by mistake. Or for the matter if I book 15 nights non refundable instead of 5, or 12 rooms instead of 2… There will be no mercy. I will have to pay the full non refundable price of the 15 nights or the 12 rooms or the fee for changing my wrongly dated airfare.
    Why would it not work the other way around?

    Some will say it’s a big mistake to make to book 12 rooms when you need 2 or to book 15 nights when you need 5. Well yes, and how big a mistake is it when you publish a 0 USD or a 50USD fare for a ticket that should be 5000 USD ??? And you have professionals paid to verify that (or should have).

    Give me a break, airlines have no excuses for the mistakes they make. They should put the proper controls in place to prevent the mistakes, or they should simplify their systems.

  4. This is simply terrible! First of all, Notices of Proposed Rulemaking cost the taxpayer’s time and money, including in government employees’ time. As someone who used to work at DoT, I can affirm that sadly this is just one of the ways that DoT employees waste time. When I was there, I worked with several porn addicts who spent much of the day surfing porn on the web and with several people who slept many work days away on couches in their offices. We even had a secretary in her late 70’s who literally did nothing- absolutely nothing!

    I believe DoT employees have so much time on their hands because DoT is carrying out too many functions that are not legitimate or positive roles for government. For instance, as with this example, does government really need to be involved in mistake fares, and regulating airfares in general? Is this really a legitimate role of government? Why not let the market decide? If an airline goes too far in treating passengers poorly, via not honoring a mistake fare or in some other way, passengers can vote with their feet and fly another airline. I believe we witnessed this with United. Yes, many customers are captive to an airline in big hub cities, but many are not. With “United Breaks Guitars” and other bad press, as well just treating passengers poorly in general, the airline had bad economic results. Some of its previous customers flew other airlines, hitting United’s financial results. And, United has been forced to make an effort to improve its service.

    More importantly, if government goes to the trouble of making formal rules with input from constituents, it needs to enforce them. This is what we do in a Republic. But not doing so is part and parcel of how the Obama Administration does things- just like what it has done concerning travel to Cuba (among other things like immigration policy). The Cuban economic blockade policy (which I consider to be bad policy) is established by a series of laws, including the Helms Burton Act. Obama personally decided to not enforced these laws to open up travel and trade with Cuba, although he is sworn to uphold the laws of the nation. To change this policy, he should have gone before the American people, made the case (which I believe to be a correct one) that the laws make no sense, and used his power of persuasion with the people to have Congress change the laws.

    How can we trust in government when laws and rules on the books mean nothing?

    When government decides not to enforce rules and laws, as it has done here with mistake fares, it’s dangerous. Next time it could be something that any one of us deeply cares about or which is key to our rights as Citizens. This is very bad and very dangerous for our rights as Citizens.

  5. @Choco says: “However the principle of not forcing airlines to take responsibility of their mistake is actually very sad and shocking.”

    If mistake fares were a regular occurrence that airlines refuse to own up to then you might have a point, otherwise your comment is way over the top.

    The adage is “to err is human; to really screw up takes a computer.” That being the case, I believe that “taking responsibility” is precisely what the airlines have done by getting the DOT to see the simple fact that mistakes will be made. No operation run but humans and/or computers will ever be error free. Therefore, the airlines’ position and DOT’s apparent agreement with it does not seem to me to be “sad and shocking” at all…especially, again, since mistake fares are not a routine or common occurrence.

    To see in mistake fares the consequences of some big cabal or conspiracy by airlines to take advantage of defenseless travelers instead of mistakes that they are, is just paranoia…

    Errare humanum est!

  6. Two notes:

    1) Am I the only one here that sees the irony in the OUTRAGE over this government abuse compared to, say, the outrage in Baltimore? Or the NSA? This is, uh, relevant how in the big picture?

    2) Get a grip people: this is and has always been about using the DOT to get something for nothing. If you’re outraged it’s because you can no longer steal and you have bad ethics and morals. Cue the violin.

    So please, save the outrage for the parts of our government who deserve it. The kids have an “I don’t want to live on this planet anymore” meme. It applies here.

  7. How Peter post 1, could make this about race and politics is disgusting. Too much fair and balanced TV watching I am guessing!

  8. @Chris Saab
    Your point is theoretically sound but in reality the market takes time to adjust and they could operate as a cartel. Take for example Comcast, worst customer service, but they don’t care. There is a middle ground, but somehow DOT likes to complicate itself.

  9. @Chris Saab says, among other things: “The Cuban economic blockade policy (which I consider to be bad policy) is established by a series of laws, including the Helms Burton Act. Obama personally decided to not enforced these laws to open up travel and trade with Cuba, although he is sworn to uphold the laws of the nation. To change this policy, he should have gone before the American people, made the case (which I believe to be a correct one) that the laws make no sense, and used his power of persuasion with the people to have Congress change the laws.”

    With that sort of statements, it is clear that you have no clue about how the American representative democracy works, but let me give you a hint: Obama would already have been impeached by this Congress if he’d done anything illegal, either in abolishing the ridiculous, over half a century old embargo of Cuba or using executive orders to bring some sanity to our immigration policy because of a dysfunctional congress wouldn’t act.

    Another fact is that many international agreements negotiated by the executive branch are not enshrined in laws passed by the Congress. That is, in fact, part of the fight about the ongoing negotiations with Iran, whereby the Congress is insisting on having a say on any deal reached and the administration is insisting on preserving its right to set foreign policy and negotiate international deals that are binding without congressional meddling…

  10. To be clear, I have never purchased a mistake fare and never will. However, I am outraged by this. Why have government rules (and the Notice for Proposed Rulemaking is a Democratic process, the way I see it, because it solicits feedback from all sides – the voters – before a decision is taken) and laws that we don’t enforce? It’s bad government. It’s not democratic. In this case, it was probably pushed by lobbyists and one of the top US airline lobbyists is sleeping with Bill Shuster, the Chairman of the Transportation Committee – a man who’s office is intimately involved decisions like this one at DoT. When you see these things, you can’t have faith in our government. We have an Democrat Obama Administration that feels it can pick and choose the laws and rules that it enforces. And we have a Republican Party that doesn’t reprimand one of its Committee Chairman for sleeping with (and probably cheating on his wife with previously, although they are now divorced) the main lobbyist with interest in his committee’s work!

    I don’t care about mistake fares. I care about the rule of law.

  11. @Chris Saab Correct me if I am wrong but this isn’t a “rule of law” but rather “executive branch administrative authority.” To me there’s a huge difference – there is no law passed by congress that addresses this topic (though of course there could be). I guess you could ask an article III court to invalidate this administrative rule (that you don’t even disagree with) because you believe a particular procedure was not followed to make a point that the procedure needs to be followed to keep people from stealing?

    Anyway, like I said above, concerns about the rule of law are important but in this case I think wildly mis-guided given the other far more substantive “rule of law” issues that dominate popular conversation. You are absolutely not going to see this an op-end in the NYT or even the WSJ.

  12. @bode – all I am saying is that if the government has rules and laws on the books that it chooses not enforce, how can we have confidence as Citizens in the government? What is the play book in which we are to run our lives, our businesses, etc? Selective enforcement of the law and government rules leads to chaos, corruption (which this example smacks of) and loss of confidence in government. It’s dangerous.

    And yes this is an executive branch authority issue. However, that authority is granted under laws, such as the Sunset Act in this case. And, in theory, the Rulemaking Process is supposed to be transparent and allow for public comment to a Proposed Rulemaking. The decision on the Rulmaking should then be made by DoT for the best supported argument from the public’s (i.e. voters’) comment. So, simply not enforcing a decided upon Rule is not open, honest and transparent government.

    I find this executive action by DoT to not enforce a Rule that came about in a transparent and open process, under authority granted by Congress, to be dangerous. In this example, we have Democrat Obama Administration officials who have a track record of selective enforcement based on political goals despite swearing to uphold the law. And we have a Republican Committee Chairman over DoT in Congress who is sleeping with the chief lobbyist of the airlines. None of this gives confidence in the process. But it’s typical of Washington. Will the Wall Street Journal cover this- no. But that doesn’t make it right.

  13. @DSC – you seem to be a liberal, but the liberal legal mind Alan Dershowitz agrees with me.

    Obama took an oath under the Constitution to uphold the law. His actions to open trade and travel with Cuba are not upholding, in fact they are undermining, the Helms Burton Act. I don’t like the Helms Burton Act personally, but having a President undermine a law is dangerous to the Republic. The next time it might be a President of another party undermining a law that you believe in. Take up your argument with Alan Dershowitz. Obama swore to uphold all laws, including the Helms Burton Act.

    And regarding the Iran deal, the Constitution is clear, the Treaty Clause states the President “shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur…” It’s there in Black & White. If you don’t like it, work to amend the Constitution.

  14. What really concerns me is the “slippery slope” argument as it applies to this. What is to stop an air carrier from saying that my $295 LAX-JFK fare was not a mistake because they forgot to add in some random $100 fuel surchage and $100 “tax” or something like that?

    Yes, we know a $295 First Class ticket from LAX to LHR is clearly mistake, but not forcing air carries to honor the mistake fare, gives them a loophole in much less egregious situations.

  15. @Chris Saab — You might start by understanding how the US constitutional democracy works before railing against some guv’mint failure of enforce laws on the books. Please do a search of “executive discretion” for more info but here’s a synopsis:

    Executive Discretion

    [I]t has always been within the president’s discretion to decide whether to have the Department of Justice enforce a particular law. As the Supreme Court declared in United States v. Nixon, “the Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a case.”

    A president may choose to not enforce particular laws when deciding how to allocate scarce resources or based on his view of the best public policy. Few object, for example, when the Department of Justice does not prosecute those who possess small amounts of marijuana, even though they violated the federal Controlled Substance Act. There are countless federal laws that go unenforced. In 1800, then congressman and later Chief Justice John Marshall stated, the president may “direct that the criminal be prosecuted no further” because it is “the exercise of an indubitable and constitutional power.”

    The president’s broad prosecutorial discretion has been repeatedly recognized by the courts. In 2013, Judge Brett Kavanaugh of the D.C. Circuit, appointed by George W. Bush, offered a strong defense: “The president may decline to prosecute certain violators of federal law just as the president may pardon certain violators of federal law,” Judge Kavanaugh wrote. “The president may decline to prosecute or may pardon because of the president’s own constitutional concerns about a law or because of policy objections to the law, among other reasons.”

  16. @DSC – I am well aware of executive discretion. First it has limits, as admitted by Obama, but what are those limits? If the President and Executive Branch can not enforce any law, why have a Congress? Why have laws? Why have Rulemakings? Why have courts? I vehemently disagree with ANY “Executive Discretion” because it is a slippery slope. Change the laws if they don’t work!

    And this brings us back to the point of this discussion. Why go the time and expense of having a Rulemaking on Mistake Fares and then decide not to enforce it? Change the rule. Don’t not enforce it! It’s out of control government. Perhaps DoT should not be involved in regulating airfares in the first place? Personally, I don’t think this is the proper role of government. And even if I did, the staff of DoT are not fares experts. Not a single DoT official at the level of taking these decisions whom I met had a strong background in this area. And I used to work there, so I speak with some authority. And I have been working in airline pricing, distribution and fares for 20+ years.

    I personally agree with DoT letting the airlines do what they want with Mistake Fares. Consumers can choose other airlines if they feel aggrieved. And the press, including this blog, will make the general public aware when airlines mistreat their customers. And then the public can rethink to whom they give their business in terms of an airline.

    My issue here is why have Rules and then not enforce them? I don’t even personally agree with this rule. But, without government following our rules and laws, we get chaos and corruption. And there very well could be corruption in this case with the airlines’ chief lobbyist sleeping with the Chairman of the Transportation Committee!

  17. @DCS

    If the airlines and hotel chains were applying the “Errare humanum est” to their customers you would have a point. Fact is they don’t. Book a non refundable night at any hotel and try to tell them that mistakes happen to try to get a refund.
    It’s all about consistency. If consumer have to face the consequence of their mistakes, so should airlines and hotel chains.

    I don’t think my comment suggested any cabal or conspiracy. I definitely don’t think there is.
    Airlines like other industries have lobbyist who try to influence government entities in taking decisions that favor their industries. In this case they seem to have succeeded.

    No paranoia either. No-one says that mistake fares are not genuine mistakes. My point is that the consequence of the mistake have to be assumed by the author of the mistake. That seems to be a generally accepted principle in our society.

    Finally, it seems quite easy for the airlines to mitigate the risk they are facing here. If the average Joe can find out about those mistakes and book them online, it should be easy for the travel industry players to quickly identify them too and remove them timely. Just takes monitoring those blogs and forums. In addition, it should not be that difficult to have routines in their own system that warns them whenever a booking is made below a certain price for any given origin/destination. That’s basic basic basic computing.

  18. @Chris Saab aka DSC continues undeterred: “My issue here is why have Rules and then not enforce them?”

    If you are aware of “executive discretion” and understanding what it means but are still hyperventilating then your issue is with the fact that Obama as POTUS has that discretion. You are not concerned with rules that are not enforced; you just have ODS — Obama Derangement Syndrome.

    G’day.

  19. @Choco — What is lacking in your argumentation is a sense of proportion. If, say, 100 consecutive people book a non-refundable night/fare and they all claim to have done so mistakenly then the hotel/airline might not have presented the information clearly enough and a refund should be considered. That is the flip of the scenario that one would be dealing with in the case of a mistake fare. I believe that the DOT ruling is meant to cover those cases when a large number of people have purchased a fare that the airline later says was a mistake and must PROVE it. It would tough for an airline to make the case for a mistake fare if there is no mass purchasing…

  20. @DSC – Did you not read my comments that I am also upset with the REPUBLICAN House Transportation Committee Chairman for sleeping with the Airlines4America (A4A) lobbyist, which very well may be influencing the issue we are discussing? The one who has issues with Obama is yourself. You seem to have some type of sycophancy or deranged worship of the man. I blasted both parties.

    This whole debate is ridiculous. The DoT has no business regulating Mistake Fares in the first place. But if it passes a Rule to do so, it should enforce the rule. To get rid of the rule, it should do another Notice of Proposed Rulemaking (NPRM) and allow the democratic process to occur by allowing the public (voters) to comment and be part of the process of change. Everyone commenting here would then be free to comment as part of the NPRM and have their voices heard and considered. Non-enforcement is not the transparent government promised by your “Dear Leader” Obama.

  21. @Chris Staab — I am very sorry I engaged you in the first place for you are absolutely clueless if you believe that a representative democracy is government by consensus. What a joke and a waste of time!

    G’day!

  22. OMG- can Chris/DSC/DCS take the debate about executive privilege someplace else? No one wants to read your comments!

    Back to the original topic, I agree that determining what is a mistake fare is just like pornography- school districts have banned “The Scarlet Letter” for being “pornographic and obscene”. Similarly, the DOT ruling offers airlines a potential loophole to retract bad business decisions. Discover you can’t make money flying a plane with first class seats to Des Moines? Whoops- call it a “mistake” fare, cancel out the tickets, and mitigate your losses.

    @Choco- clearly, there is a process in the DOT regulations for consumers to make mistakes on airfares (which is what the original posting is about)- it’s called the 24 hour cancellation/hold rule.

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