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Saturday, January 3, 2015
Why Airlines Hate Hidden City Ticketing (and maybe you should too) George Hobica, December 31, 2014
Why Airlines Hate Hidden City Ticketing (and maybe you should too)
It's a dirty little secret of the airline business: sometimes it's cheaper to fly from LA to Dallas by buying a ticket to Austin via Dallas and hopping off the plane in Dallas. It's called hidden city ticketing or "point beyond ticketing" and most airlines have language in their contracts of carriage, which you nominally agree to when you buy a ticket, forbidding this ploy.
For example, a nonstop fare from Los Angeles to Dallas might be over $300 one-way, but a fare on the same airline from LA to Austin with a stop in Dallas might be $150. So you buy the flight to Austin and ditch the plane in Dallas.
Savvy travelers have known how to play this game for decades now, but a new website called Skiplagged, dreamed up by a young whiz kid in his spare time, is aiming to make the process easier to figure out and book, and become much more widely known.
First, let us explain why airlines do this. Let's say that Virgin America charges $150 to fly LA to Austin nonstop. If American doesn't fly that route nonstop, but only with a connection in Dallas, in order to compete with Virgin America, American charges the same $150 to Austin via its Dallas hub, even though it continues to charge $300 for LA to Dallas nonstop. American isn't trying to screw LA-Dallas passengers as much as it's trying to compete with Virgin on the LA-Austin route.
Why beyond point ticketing might hurt consumers
Airlines don't like "hidden city ticketing" for obvious and not so obvious reasons.
Not only does it reduce their revenue, but it plays havoc with computer programs designed to estimate how many people won't show up for flights. Airlines routinely overbook flights based on historical levels of no-shows. If many more people don't show up for the Dallas to Austin segment in our example, it either means that seats will go unsold and empty or that airlines will have to overbook more passengers and may miscalculate how many passengers they'll need to bump and compensate.
Another consideration: what would happen to airfares on that Dallas to Austin segment? If a large number of people book LA-Dallas-Austin and get off in Dallas, anyone trying to book Dallas-Austin will see that there are very few if any seats for sale, even though the plane continues to Austin with few people on board. American's fare analysts will see that Dallas-Austin is nearly sold out and their computer system will adjust fares skyward, penalizing anyone trying to buy a seat on that flight.
Or maybe people needing to fly that route wouldn't find any seats at all on American even though the flight was nearly empty, and they'd buy a seat on a competing airline instead, causing American to lose revenue and customers.
That's an admittedly extreme example. But if hidden city ticketing becomes widespread, instead of an insider secret, which, after all, is Skiplagged's aim, won't airlines simply raise fares for everyone in order to cover lost revenue? That would be bad for consumers who don't play the hidden city game.
And hidden city ticketing can backfire. Consider the scenario where your LA to New York flight via Chicago suddenly gets rerouted via Denver. You'll be stuck with a useless airfare with no recourse.
Not all airlines prohibit hidden city ticketing, but those that do have been known to kick passengers out of their frequent flyer programs for using the tactic too often, and they've also charged agents for the higher fare when tickets have been arranged through travel agencies. That's one reason why Orbitz, an online travel agency, joined the suit with United. Skiplagged was using Orbitz to monetize its fares, so that Orbitz ended up selling hundreds of hidden city tickets, without knowing it was doing so.
The Ethics Third Rail
Someone asked me recently if hidden city ticketing was "ethical." That's a hard one to answer (American, for one, says it is unethical and also points out that it's a breach of the passenger's contract with the airline). You could argue that all's fair in love and airfares. Or you could argue that causing everyone to pay higher airfares so you can save money, or depriving other people of seats that you've booked but had no intention of using, isn't cricket.
Also, it's not clear how Skiplagged is getting its fare data. If it's "pinging" airline fare systems or Orbitz using clever programs ("scraping" in computer parlance), thus using third-party computer resources in order to lower their revenue, one could see why that might raise hackles.
United and Orbitz are suing Skiplagged, and the tiny start up has launched a funding campaign to pay its potential legal costs.
One thing is clear: Whatever Skiplagged's future intentions are, if any, it better not be building a revenue model based on selling ads to airlines and online travel agencies like Orbitz. That simply won't fly.
The Ethics Third Rail
Someone asked me recently if hidden city ticketing was "ethical." That's a hard one to answer (American, for one, says it is unethical and also points out that it's a breach of the passenger's contract with the airline). You could argue that all's fair in love and airfares. Or you could argue that causing everyone to pay higher airfares so you can save money, or depriving other people of seats that you've booked but had no intention of using, isn't cricket.
Also, it's not clear how Skiplagged is getting its fare data. If it's "pinging" airline fare systems or Orbitz using clever programs ("scraping" in computer parlance), thus using third-party computer resources in order to lower their revenue, one could see why that might raise hackles.
United and Orbitz are suing Skiplagged, and the tiny start up has launched a funding campaign to pay its potential legal costs.
One thing is clear: Whatever Skiplagged's future intentions are, if any, it better not be building a revenue model based on selling ads to airlines and online travel agencies like Orbitz. That simply won't fly.
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