What We Can Learn From The DOT’s Ruling On Mistake Fares

In March of this year, American published a ~$450 roundtrip business class fare between Washington and Beijing.

American-400

American honored the fare for those who had ticketed their reservations, which they had to do given the DOT regulations at the time regarding post-purchase price increases.

While most of us were thrilled with American honoring the fares, that sentiment wasn’t universal. There were also many people who were disappointed. Specifically those who held tickets with American, as non-ticketed reservations were subsequently cancelled. American allows a guaranteed 24 hour hold on tickets, which they have to offer in lieu of a 24 hour refund (since they don’t offer that).

American-Hold

Early last week — over six months after the mistake fare — American announced they’d be offering the following to those who held the Beijing fare but subsequently had it canceled:

  • A $0 base fare (~$450 including taxes and carrier imposed surcharges) economy ticket to Beijing, which isn’t eligible for mileage accrual or upgrades
  • $1,500 off a paid business class ticket to Beijing, which isn’t eligible for mileage accrual or upgrades

Neither option was anywhere close to the original deal, which was basically a $0 base fare business class ticket which was both upgradable and eligible for mileage accrual.

I was curious what prompted American to make this offering over six months after the mistake fare happened. We now have our reason. On Wednesday the DOT issued their ruling after ~100 complaints from those who had their tickets canceled. The ruling is fascinating.

DOT-Mistake-Fares

How many people booked the mistake fare?

Ever wonder how many people book a mistake fare? The DOT published the following data regarding the roughly five hour period where the sale was available:

During the sale period, 1194 reservations were made though American in total: 589 reservations for 804 passengers were purchased immediately, while 605 reservations for approximately 830 passengers were placed on a 24-hour hold. American honored the 589 tickets that had been fully purchased during the sale period; however, before the expiration of the guaranteed hold period, American canceled the 605 tickets that were on hold.

In total there were 1,194 reservations for 1,634 passengers. The fare was valid for travel over a period of roughly two months, so assuming 804 passengers booked immediately and flew over a ~60 day period, that means there were an average of ~13 people on this fare flying to Beijing each day in each direction. Not an insignificant number!

How many people filed DOT complaints?

How many complaints did the DOT receive regarding this mistake? Over a hundred, apparently:

The Office of Aviation Enforcement and Proceedings (Enforcement Office) received over 100 complaints from consumers alleging that American improperly cancelled tickets prior to the expiration of the guaranteed hold period. American received an additional 11 complaints directly from consumers whose reservations were similarly cancelled.

The DOT’s ruling

In this case the DOT actually (mostly) sided with consumers regarding canceling held tickets, indicating that they failed to adhere to their customer service promise:

We have reviewed all of the available information, including the information submitted by American Airlines, consumer complaints, and additional information gathered by the Enforcement Office. We conclude that, by cancelling 605 held tickets before the expiration of the guaranteed hold period, American failed to adhere to the assurances in its customer service plan and thereby violated 14 CFR § 259.5(b)(4) and 49 U.S.C. § 41712.

American’s defense

This is perhaps the most interesting part of it all (I know I’m quoting a lot, but it’s worth reading):

In mitigation, American states that there is compelling evidence that the persons who purchased the mistaken fare tickets and those who put such fares on hold were prompted to do so by social media posts which both publicized the fact that the mistake fares were being offered and made apparent that the fares had been offered by mistake. According to American, there is a clear correlation between social media mentions of the mistake fares and bookings or holds made by consumers of those fares.

American maintains that the explosion of social media mentions not only prompted significantly more bookings than normal, they also put readers on notice that the fares were published by mistake. American states that in numerous social media contexts, posts were made characterizing the offered fares as a “mistake fare” and urging consumers to purchase them quickly and not take any actions that might alert American to the fact the mistaken fares had been offered.3 In American’s view, social media posts acknowledging or recognizing that the fares were offered by mistake yet urging readers to rush to book them shows an intent to cheat, as many consumers knew the fares were not valid.

American believes that the proliferation of social media sites publicizing mistake fares has resulted in individuals purchasing mistaken fare tickets in bad faith, and not on the honest belief that a good deal was available.

American continues to believe that given the clear correlation between social media postings that prompted consumers to make bookings and holds and alerted those consumers to the fact the fares were offered by mistake, enforcement action is not appropriate, as it rewards persons not acting in good faith.

In the footnotes, American refers to the following social media posts:

Examples of such posts include: “I fully expect these to be cancelled the base fare was $0…”; “Mistake Fare: Business Class from DC to Beijing for $450 RT”; “Let’s see if this sticks at all…not getting my hopes up.”; “My first mistake fare, if it clears. I feel so alive inside.”; “ It does look like a mistake fare.”; “DO NOT CALL THE AIRLINE”; “There is a rare Business Class mistake fare available on American Airlines for Flights from Washington DC to Beijing.”; “Clearly this was one of those airline computer system pricing blunders!”; “Just noticed that the base fare was $0. Damn!!! Will still try.”

Bottom line

While the DOT ultimately sort of sided with consumers here, the defense on American’s part is my takeaway, and is something to keep in mind. Social media matters, and can be used against consumers. I also found it interesting to learn just how many people had booked the mistake fare.

(Tip of the hat to JonNYC)

Comments

  1. While American tried to use social media mentions against consumers, I don’t see anything in the order to suggest that the DOT found that persuasive.

  2. Am I the only one who thinks DOT ruled in AAs favor by approving such lame settlement? There’s a world of difference between a cheap J ticket and a cheap Y ticket!

    In my case I actually believe booked a ticket ex-Houston so the price was $1100 or so which isn’t that obvious of a price mistake.

  3. Ben,
    I think you should also be careful when posting articles about mistake fares before they are corrected, because American might start going after people who publish these “in bad faith”…
    My 2 cents of legal advice.

  4. So, Ben, what are you going to be doing differently based upon the fact that, as you agreed, “Social media matters, and can be used against consumers.”?

  5. @Alex, there is a simple work around for this. Don’t call it a “mistake fare”. Call it a “sale fare”. Treat it as you would any other sale fare and add the caveat that it won’t be around long.

    Michael

  6. The numbers are really interesting! And I’m willing to bet this doesn’t account for people like me (and my two companions) who purchased $850 biz class fares to Beijing (SFO-HND-PEK) on JAL through AA.com during this mistake fare. We couldn’t have been the only ones!

  7. Interesting that Lucky’s initial post only described this as an AMAZING DEAL with no use of the word “mistake,” though the last quote above (“Just noticed that the base fare was $0. Damn!!! Will still try.”) was a comment on said post.

    Still absurd that AA tries to use that as defense…at least they honored those who ticketed!

  8. So if you happened to find this mistake on your own and you don’t happen to have a Twitter account, you’re supposed to know there’s blogs out there saying there’s a mistake fare? Let’s be honest, we all knew that it was, but my point is that American’s defense is lame at best. They still broke the law and cancelled tickets because they could, and they got away with it.
    My only takeaway from this ruling is that this country is really run by corporations, not the DOT or any other government agency. When it comes down to it, corporations will do what they want to do, and if they can’t, they’ll lobby and pay government officials off to rewrite the law to say that it is legal.

  9. Rules are rules. American Airlines ignored the rules; no matter how justified they felt, they can’t just ignore DOT’s rules.

  10. I’ve thought often that we should remove the term mistake fare from our lexicon. Call it an amazing fare or something. There is no need to try to read into the minds of an airline The fare is the fare. Their treatment of the guaranteed hold is also irksome. If the airline can arbitrarily cancel holds in the guaranteed period then there is no way it can be called a guaranteed hold and is significantly weaker than a post booking cancellation policy…

  11. Think of it this way: you go to Best Buy, and a 60″ LCD TV is marketed for, let’s say, $1000. You go to purchase it, and it pops up as $250. Do you pay $250 or $1000? Now, consider the situation where it’s marketed at $250, and you go to pay, where it rings up at $1000. The situation here is neither of those: it’s like marketing a TV for $250, selling it for $250, and then saying, “Actually, it’s worth $1000,” and trying to get back all the TVs you sold at $250. I think we all see how ridiculous that is. It’s not the fault of the consumer for purchasing an advertised fare.

  12. Bobert: If it was fair or made sense, it wouldn’t come from the DOT.

    /still waiting for DOT to get rid of it’s 1960s-era technology requirements on cars…

  13. Even if we change our lexicon, what’s to stop airlines from creating social media accounts to create damning posts to grease the DOT the next time around?

  14. Although there are tweets about the mistake fare, AA can’t prove that an individual purchases the ticket because of social media. Okay, maybe most of them do, but some of them can still stumble upon it. I don’t get why when we purchase a non-refundable fare by mistake, we don’t get to say, oops, let’s cancel that, but big corporations can always find their way around whatever non-profitable situation they are in.

  15. My thought is don’t publicize these things and keep it to yourself. For example, there’s a MAJOR loophole with a certain credit cards benefit that allows you to get double the benefit. Why share that that a public blog? Next thing I know, its on Flyer Talk and the mistake disappears.

  16. The hypocrisy of the airlines is just mind numbing. Let’s put this in perspective; what would happen if the poor customer makes a mistake in the departure date and realizes it 24.1 hours after purchasing the ticket, a 200.00 dollar change. What would happen if someone checks a bag and it weighs 51 pounds and does not have somewhere to put the excess, 75.00 dollars excess weight charge. Those are just two examples of mistakes, if the customer makes a mistake, the customer pays. It is only fair that if the airline makes a mistake, the airline also pays.

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