Airlines Shouldn’t Have to Honor Mistake Fares – But Cancelling Tickets After More Than a Week is Bull

Of course we all love it when mistake fares happen and they’re honored and we get to travel the world at insanely cheap prices, especially in business or first class.

For some readers booking a $28 ticket to Paris presents a moral challenge: should you take advantage of something you know is a mistake? My own view is that I’m happy to book it, airlines will choose to honor it or they won’t, but if they’re going to fly people to Paris for $28 I’d like to be one of those people.

I’ve never been a fan of suing to try to enforce these fares. Nor have I been a fan of the Department of Transportation requiring that they’re honored.

The Department of Transportation Regulated — and Then Abdicated On — 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.

In the fall of 2011 Korean published a sub-$500 fare New York JFK – Palau. The fare was available for several days. About 300 people bought tickets. $500 for coach isn’t obviously a mistake. Korean spent 2 months discussing internally what to do and consulting with regulators, so that they notified customers who by that time assumed they could travel that their tickets were being cancelled. Most people took refunds. Some people paid an extra couple hundred dollars to fly. Korean lost some small claims cases.

Requiring all fares no matter how egregious the mistake be honored though didn’t seem right, an overreaction to airline bad behavior, and in mid-2015 the DOT announced it would stop enforcing this rule even though it hadn’t repealed or replaced the rule.

An airline not honoring a mistake fare would have to cover nonrefundable costs a passenger incurred in reliance on the fare, however, a throwback to the approach they took to the October 2009 British Airways $40++ tickets from the US to India. With fuel surcharges and taxes they were over $500. That’s not an obvious error like $0 or $50. The airline canceled the tickets, and the Department of Transportation ordered that they cover expenses consumers incurred in detrimental reliance on the purchases. In that case over 1000 tickets were sold.

Virgin Australia and Delta are Flouting the DOT

Against the backdrop of non-enforcement of 14 CFR 399.88’s prohibition on post-purchase price increases, Delta and Virgin Australia have chosen to notify customers after more than a week that they won’t be honoring recent ticket purchases.

Virgin Australia had two recent incredible fares, $172 round-trip economy from Dallas to Melbourne and $900 round-trip business class from Auckland to Oakland. Six days after the business class tickets were sold they cancelled those. Nine days after the economy tickets were sold they cancelled those.

Some of the business class tickets with transpacific travel on Virgin Australia were sold by Delta, and Delta cancelled those after more than a week.

I don’t think that the airlines should have been required to honor these tickets, but airlines write the rules and take your money — there’s a tremendous disparity in power between an airline and an individual passenger — and customers only have 24 hours (under some circumstances) to cancel a ticket for a refund, an airline taking a week to do so is absurd. Airlines shouldn’t have even the same protections as consumers, but in no case should their protections be even greater.

I’ve realized I’ve booked the wrong dates of travel, or the wrong flight, after several days and I’m forced to pay a penalty (if my fare is changeable at all). Why shouldn’t airlines have to live under their own rules?

The reason is simple: the Department of Transportation won’t require them to.

Mistake Fares are Actually Hard Public Policy

What to do about ‘mistake fares’ is a real challenge and it’s difficult to balance competing priorities, which is why DOT hasn’t promulgated a replacement rule, they’re just choosing to ignore the last one they issued.

  • We really don’t always know what fares are mistakes versus what’s an intentional sale. When we started seeing $300 transatlantic fares last year I thought they were mistakes, same with $400 transpacific fares, but it turns out there have just been really great short-term (intentional) sales.
    Some mistake fares are obvious to most consumers, but there have even been ‘obvious errors’ that were intentional marketing stunts. Drawing bright lines is hard.

    Back in 2005 Washington Dulles-based Independence Air loaded mistake fares intentionally into their system around midnight. They waited until a few tickets were purchased and then called the Washington Post in the morning, with the message that you never know what kind of great deals you might get at flyi.com! It was a guerrilla marketing campaign.


    Credit: Frank Unterspann via Wikimedia Commons

  • After a certain amount of time we really do assume mistake fares are going to be honored. If airlines can renege on a fare, there needs to be a limit on how long airlines have to renege.

  • A rule where customers buy tickets but they aren’t really ‘confirmed’ would be bad public policy. If folks don’t know for sure they have a seat, that’s a problem. Airlines do overbook and try to shift customers to other flights. Qatar, prior to joining oneworld, was known for downgrading passengers traveling on United award tickets when they had sold out their business class cabin. There wasn’t a ‘mistake’ but customers had little recourse. That’s not fair, and it’s not good for airlines or the economy when customers can’t rely on their travel plans.

What Should Be the Rule?

I suppose I’d be ok saying airfare is just like everything else and ought to be subject to the same common law rules and Federal Trade Commission regulations as hotel prices or vacuum cleaners.

However the DOT has the power to regulate here and says they want to promulgate a new rule. Their decision not to enforce existing rules creates too much uncertainty, and Delta and Virgin Australia waiting over a week to cancel tickets is unacceptable — when the same mistake on the part of consumers would be subject to fees and a refusal to refund. Given that I do think we can come up with a reasonable and clear approach.

In order not to honor a mistake fare, a think a policy could make sense like:

  • An airline should have to certify that they’ve made a mistake. A submission to the DOT certifying under penalty of perjury that the fare in question was indeed an error.

  • The error must be obvious and egregious. If an airfare is an 80% or 90% discount from the lowest paid fare (inclusive of all fees and surcharges) sold on the route in the previous 30 days, and it wasn’t offered intentionally, it seems reasonable to accept that it was an error.

  • The submission has to be made in a timely manner. Customers generally have the right under current DOT rules to put airfare on hold for 24 hours, or to cancel within 24 hours of ticketing. It seems like airlines should be able to cancel a mistake within 24 hours.

  • They should communicate clearly with customers. Individually contact customers within 24 hours of purchase indicating that they’ve submitted to the DOT that the tickets in question were a mistake and won’t be honored.

Put another way, airlines should have to live under rules similar to consumers. They shouldn’t be able to decide not to honor a ticket just because they think they can sell a seat for more money the way Hilton allows some hotels to do. They should stand behind their sales except in the event of a genuine mistake, and then they should identify and notify customers promptly. Not after a week.

Shame on Virgin Australia, shame on Delta, and shame on the DOT.

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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Comments

  1. I think that airlines should be fully forced to honor these fares. This is something that a very simple software check can take care of, it’s simply laziness on the airlines part not to automate some of these QA functions.

  2. This is a good piece. Better than your usual fare of sex and fights on planes.

    For someone who tries to appear erudite, you have really very little influence on civil aviation policy. I still cannot get obey the fact that the economist cares about your views.

  3. Here, here!

    I really think DOT is going to have to do something at least in this individual case, and hopefully more broadly in making rules like the ones Gary suggests.

  4. @credit
    Do you realize ( obviously not) how stupid you look when you comment on a blog that you have to be subscribed to in order to receiive it , and have to click on the link to read it, that you think the blog is irelevant?
    Morons like you and IAHPHX witj such a chip on their shoulders is the only negative thing about Gary’s blog, even if I dont agree or like everything he writes

  5. Nice post Gary. Agreed that DOT should do something here – maybe simplify the “reasonable expenses” part of the fare cancellations so that the customer doesn’t have to go to small claims court to get their money back. Shouldn’t be rocket science.

  6. As someone that bought these tickets, I would hope they will honor them as well. I actually upgraded my seats to Economy Premium. I waited a week before booking associated tickets, Hotels, etc. I mean, after a week we’re good, right? Apparently not. They said it was a “human error” on their end. Sadly, their human error is now my problem.
    Thanks for the article.

  7. Here’s a simple solution. For reservations that are more than a week in advance, issue the ticket 24 hours after the reservation is made. In the 24 hour period, either the airline or the passenger may cancel. After 24 hrs, you’re both on the hook for what you agreed to. Airlines can fix mistakes. Passengers can change their mind. Then you (both) own it.

  8. I said the same thing on Lucky’s blog, at what point are airfare sales and error fares going to be blurred to where the airlines can cancel tickets because they don’t like the price they sold tickets for? I believe we are at that point or very close to it.

  9. @credit
    Not trying to win any argument, was just stating a fact that appears to elude you
    Now go upgrade yourself to F class, or simply go F yourself

  10. After 24 hours, it’s a done deal. Too much technology exists to quickly and simply validate that purchases are properly made and paid for.
    The airline industry gives consumers 24 hours to correct a mistake or make a travel or ticket change. It is simple enough for the airline to add up total revenue sold and calculate potential remaining revenue for each flight or after each ticket is sold. The ability to flag a flight or flights based on unusual web traffic, sales patterns, or per seat revenue falling below a minimum is so straight forward, we are describing it in comments on a blog.
    But here’s the issue: the customer makes other plans related to travel and that time cannot be recovered and those deals may not be unwound. New fares vary everyday.
    Finally, this is not a DOT issue. This is FTC as it involves consumer contracts and website purchases. It involves the business agreement between the parties, not the suitability of aircraft for flight. If DOT is monitoring website purchases, who makes sure the airlines are following airplane safety regulations? Would that be the FTC’s job. Of course not. The airlines are too cozy with DOT and should not use them for protection from the typical consumer transaction. Finally, if the airline can’t calculate seat prices, should we expect similar errors with flight time, max passengers per plane, crew schedules, fuel calcs, etc. They would be better off honoring the mistake as an intentional promotion and fixing their back office ops so we know that they do mind the details.

  11. Airlines should get 24 hours, same as the passengers. After that, they should need to pay a cancellation fee that the passenger sets.

  12. My experience with Ethiopian Airlines is this: I paid for a flight to Bangkok at a very cheap advertised rate last Spring. I heard nothing more after my reservation was confirmed. Months later I re-checked my reservation to learn that it had been cancelled. I called the 800 number and was told that it had been cancelled because it was an erroneous fare. Why had I not been notified of the error? Why had they kept my money for months. Why did it take another 3 calls to get my money back? That’s what I”m talkin’ about.

  13. Of course they should honour any fare they advertise. Just like when the supermarket has an out of date sale sign and they honour that.

  14. I’m glad to see you are advocating what I’ve also been advocating for a few years, which is to give airlines the same 24 hours to correct a human error than passengers get. I think it’s a fair answer.

    Another option that airlines would absolutely hate would be a requirement that they file minimum fares. So you know that you will always pay at least X or else it is a mistake. This of course limits their pricing power, would give competitive information, give people a frame of reference that’s more transparent, and be very cumbersome to implement, but if they don’t want to follow a 24 hour limit to correct mistakes, it’s another option to consider.

  15. The rule should be that once you’ve paid for your flight (ie, your payment has gone from pending to posted – usually 2 business days), then you have a confirmed purchase. If made in cash, then it’s final. 2 business days is plenty of time to determine if it’s a mistake fare or not.

  16. I agree with the four points Gary puts forth completely. Airlines have far more power than the consumer in these transactions. The least the consumer should expect is to have the airline held to the same timeline (currently 24 hours) that the consumer is held to with regards to cancellations. Considering the airlines’ power in the market, the other requirements seem perfectly reasonable as well.

  17. The particularly egregious part of this is that many people who may have booked one of those economy fares may have done so in good faith (by looking at Kayak or Google Flights). If I see a fare that is $300 less than the competitor, and I book it, do I now have to worry that the contract may be declared unilaterally invalid by the company that signed it? Whenever they feel like it?

    Why should someone be penalized if they were simply airfare shopping at the wrong moment? Only to discover 9 days later that their ticket is being canceled, and then find that the fare on said competitors went up by $500?

    This is inexcusable, and I hope the more restrictive rules come back. The airlines have clearly shown that they are incapable of playing fair.

  18. Sadly we are evolving to a country “of the corporation, by the corporation and for the corporation”. We all laughed at Mitt Romney when he aid corporations are people too, and now the last laugh is on us.

    This isn’t the forum in which to get into a political rant, so all I’m gonna say is remember this when you vote next November.

  19. Call them out on this shameful behavior. We need better consumer protection laws in the U.S.
    Where is our EU Regulation 261/2004 equivalent?

  20. I see no reason not to hold airlines to the same standard they hold their customers to. If they don’t cancel purchased and paid for mistake fares within 24 hours they should be required to honor them.

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