Odds are you don’t know the answer to this question. I know that I have no certain answer to it. But I do know that the most recent revisions to it carry tremendous potential impact on passengers, travel agents and airlines. The most recent rules took effect only earlier this year, meaning there haven’t been many opportunities for test cases. It looks like a pretty significant test case has just shown up. The above referenced cite is the rule the DoT uses to handle unfair and deceptive advertising practices. While it is focused on truly misleading or bait-and-switch actions where one price is advertised and then the fare changes after a ticket is purchased, it also appears to have potential impact on mistake fares.
Here’s the text of 49 U.S.C. 41712 § 399.88(a) :
It is an unfair and deceptive practice within the meaning of 49 U.S.C. 41712 for any seller of scheduled air transportation within, to or from the United States, or of a tour (i.e., a combination of air transportation and ground or cruise accommodations), or tour component (e.g., a hotel stay) that includes scheduled air transportation within, to or from the United States, to increase the price of that air transportation, tour or tour component to a consumer, including but not limited to an increase in the price of the seat, an increase in the price for the carriage of passenger baggage, or an increase in an applicable fuel surcharge, after the air transportation has been purchased by the consumer, except in the case of an increase in a government-imposed tax or fee. A purchase is deemed to have occurred when the full amount agreed upon has been paid by the consumer.
Airlines have, with some frequency, cited clauses in their Contract of Carriage when they load mistake fares into the GDSes and sell them. Korean Air canceled a whole bunch of flights to Palau last year and British Airways did the same to customers who were ticketed to India (self included) prior to that. In each case the airline claimed that the fares were simple and obvious errors and therefore they could absolve themselves of their obligations simply by refunding the charge.
The DoT seems to feel otherwise these days. In fact, this specific type of case is directly addressed in their Second Final Rule on Enhancing Airline Passenger Protections FAQ:
Does the prohibition on post-purchase price increases in section 399.88(a) apply in the situation where a carrier mistakenly offers an airfare due to a computer problem or human error and a consumer purchases the ticket at that fare before the carrier is able to fix the mistake?
Section 399.88(a) states that it is an unfair and deceptive practice for any seller of scheduled air transportation within, to, or from the United States, or of a tour or tour component that includes scheduled air transportation within, to, or from the United States, to increase the price of that air transportation to a consumer after the air transportation has been purchased by the consumer, except in the case of a government-imposed tax or fee and only if the passenger is advised of a possible increase before purchasing a ticket. A purchase occurs when the full amount agreed upon has been paid by the consumer. Therefore, if a consumer purchases a fare and that consumer receives confirmation (such as a confirmation email and/or the purchase appears on their credit card statement or online account summary) of their purchase, then the seller of air transportation cannot increase the price of that air transportation to that consumer, even when the fare is a “mistake.”
A contract of carriage provision that reserves the right to cancel such ticketed purchases or reserves the right to raise the fare cannot legalize the practice described above. The Enforcement Office would consider any contract of carriage provision that attempts to relieve a carrier of the prohibition against post-purchase price increase to be an unfair and deceptive practice in violation of 49 U.S.C. § 41712.
Seems like good news for consumers, right? Well, that depends on whether the airlines are actually held to the rule. Both Korean Air and ANA, among others, are now facing just such a question after a “mistake” fare for travel from Burma/Myanmar to pretty much anywhere in the world was available last week. The “mistake” came about due to a currency devaluation, essentially causing a few zeroes to disappear from fares. When just a few were being purchased here and there it was no big deal. Once the deal was widely publicized, however, hundreds were purchased and the airlines realized they had a problem.
They managed to pull most of the fares pretty quickly though some were still available several days later. But what to do about the hundreds of tickets already issued? For obvious reasons the airlines want to cancel them; in many cases the costs to cater for the passengers, much less carry them, are greater than the fare paid. The airlines are going to lose money on these fares. But does that give them the right to unilaterally cancel the flights?
At least for now, the carriers seem to be erring on the side of “Yes” for that question. Both Korean and ANA have contacted the booking agents and most tickets booked at the mistake rate have been canceled. But that doesn’t mean the DoT actually approves of such an approach. Korean seems to be taking the approach that since they never changed the fare and instead simply canceled the tickets they are not in violation of the rule. ANA has similarly responded that the “genuinely regret the circumstances that prompted [a complaint]” and that they are “now in contact with the appropriate agencies and departments.” Vayama, one of the booking agents which was party to many of the tickets issued has claimed, in part,
The DOT Ruling was set up in part to prevent unfair and unethical business practices associated with pricing on the part of airlines… [T]he cause of the dramatic decrease in fares out of Rangoon was not the result of unfair or unethical business practices on the part of the airlines.
… Although we have no way of knowing at this time how the DOT will rule on this case, we are confident that the actions taken were NOT in an effort to unfairly or unethically impact any customers.
All three seem to be of the opinion that, because it was truly an accident that they should be excused from the rule. I can certainly understand the position of the airlines in this case. Maybe they shouldn’t be held responsible for a country devaluing its currency by a few decimal points. Then again, they’re the ones who publish the fares and they’re the ones who have control over such things, so maybe they should be held accountable. After all, what is the threshold for really an accident versus not?
One thing is certain: the DoT has quite a doozy of a first test for their revised rule. They’ve shown little sympathy with respect to fines handed out relative to the 3-hour tarmac rule since that went into force so perhaps that is a hint as to their consumer-friendly leanings these days.
Related Posts:
- Taking responsibility for a pricing error
- Reaching a settlement with British Airways
- The wheels of justice grind slowly on
- More coverage of the British Airways/India fare fiasco
- US DoT smacks British Airways around
- My $20 worth of fun with British Airways
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If enough people complain to the DOT, the airlines will have to back off. Getting the word out is definitely important.
I would be curious if cancelling a ticket is interpreted as “raising fare”. The customer is not really getting a fare raised, as he/she is getting a full refund.
Is it any different than when Best Buy did something similar a year or two ago around Christmas time with laptops and televisions?
While the cost to fly likely goes up, it also sets a bad precedent for airlines to be able to cancel flights that aren’t profitable at time of departure. However, many of these are mistakes, especially when converting currency. Additionally, most are published fares, but not advertised with the intent of deception, and are removed relatively quickly.
The DOT guarantees fliers the right to cancel their flight within 24 hours of purchase, perhaps airlines should get the same option?
Airlines are always under more scrutiny than other retailers. But in this case, I think that the DOT could issue reasonable requirements for fares sold in USA in USD ($) to protect consumers’ purchases.
Definitely some interesting points, Noah. The DoT has stated in their FAQ that canceling the tickets is the same as raising the fare. This makes sense in that in order for the customer to be able to travel they would, in fact, have to pay more. The airlines have historically relied on the ability to simply refund a fare to make a customer whole as their “out” in such cases. The DoT ruling makes it clear that such an approach is patently unfair to consumers.
As for the 24-hour rule, I cannot see much value in making that symmetrical. In a world where the supplier controls all of the data it seems very anti-consumer to allow the supplier to change at will, even if for only a limited period of time.
The DoT rules only apply if the travel is from, to or via the USA so my ticket from RGN-JNB isn’t protected at all. Then again, that one is still issued, I think, so I’m not as worried. Yet.
The crux of the issue does, in some sense, rest on whether it was a legitimate mistake or if there was some intent of deception. I agree that there was likely no intent in this case, but I’m not so sure that actually matters as the rule is written. We’ll see how the DoT rules soon enough, I suppose.
Tickets were not available just last week, but for almost a month. People had already flown on the tickets.
And not hundreds, but thousands of tickets.
I’m not so sure that DOT’s talk about canceling the ticket is really saying they can’t cancel the ticket. It might’ve been to guard against counteroffers. You bought the vacation for X, and we have a provision that says we can cancel for any reason, and now the price is X + $50, take it or leave it. And then they’ve got the consumer who’s excited about this trip and maybe made non-refundable plans saying, okay, I’ll pay X + $50. In that instance, arguably the travel agent and the consumer mutually “agreed” to cancel the ticket and have the consumer pay X + 50, creating a new agreement, so that this possibly would’ve been a legal defense but for the DOT guidance.
Also, just as a semantics thing-the DOT isn’t ruling on anything. They wrote the regulation, and then they gave guidance on the regulation, and presumbly KE has asked for further interpretation to find out exactly what the DOT’s interpretation of the rule is and whether DOT would consider the straight cancellation a violation of the regulation. But all DOT will be doing is interpreting the regulation, unless possibly there is a fine involved.
Funny how if airlines makes mistakes we want them to honor their side. When its someone sick or dying that bought nonregundable tickets, we want it to be refunded. Shame on you ppl that are hypocrites.
Red herring as far as non-refundable tickets – most folks outed that BS for what it was. What I’d love to see is a requirement for reciprocity of all fees.
There’s supposedly a IATA notice informing the airlines about the kyat devaluation. Some did adjust the fares accordingly and there aren’t any trouble making tickets issued on LH stock for example. Those who were lazy and didn’t supervise their business, are trying to shift the blame now.
Seems like a bad test case to push to the DoT. First, given US OFAC sanctions still apply to Myanmar there is reputational/political risk to the DoT in ruling on this case, even if (as I believe to be the case) the facts don’t involve any contrvention of US sanctions. Second, the need to position these flights out of Rangoon contrary to the residence of the traveler makes it likely that the DoT will conclude that the people who bought these tickets were doing so solely because they believed this is a mistake fare, which may weaken their inclination to commit serious resources to the case.
A rerun of something like the BA case would make a much better test case.
I don’t see how any of that really has anything to do with anything. The bottom line is the airlines offered to sell tickets at a certain fare. Customers bought what they were offering. Now they want to be allowed to unilaterally cancel the tickets with no penalty. If I want to cancel my ticket I am not allowed to do so without a penalty. The airlines want to be allowed to run roughshod over their customers at every turn if it doesn’t suit them. As noted there was apparently a notice that the Myanmar government was finally going to officially set the value of the kyat equal to what it has been in the real world for a long time. The fact that the airlines were not diligent in correcting their prices is their problem.
@RakSiam,
In theory, it has nothing to do with anything. In practice, it may well affect the likelihood of the DoT intervening, especially given they have far fewer resources than they need to address everything they should. Not saying it is right, but it may well be the way it plays out.