The DOT Temporarily Stops Penalizing Airlines for Mistake Fares, But Does It in a Vague and Confusin

Since the dawn of time (or airline reservation systems), there has been no joy as great as that a traveler experiences when he finds and books an absurdly cheap mistake fare. The Department of Transportation (DOT) knows it, but has decided the time has come to put an end to this gravy train… at least for now. Airlines will now no longer have to honor those fares (though they still can if they want), at least until a final rule-making is published. Unfortunately, this temporary measure doesn’t appear to be have been thought through very well. Leave it to the feds to make a sensible policy into something vague and incomplete.

As a former airline pricing analyst, I know the agony of the mistake fare. I filed two in my day. The first was a web-only fare (when those still were offered) from Baltimore to Phoenix for under $100 which we caught quickly. But the second was from Indianapolis to Santa Barbara for $62 roundtrip. Some travel agent found it and sold a few dozen before we could pull it. We honored the fare and moved on, but it was the cause of endless ribbing for weeks. It used to be more common than it is now since automation has improved and checks prevent these from happening. But they most certainly haven’t been eliminated.

For the last few years, it’s been good to be a traveler in the US. After the DOT instituted a rule stating that fares can never be increased post-purchase, the department took a strict interpretation that this also applied to mistake fares. Did you file a $162 roundtrip fare from LA to Maui in First Class, Delta? Too bad. You have to honor it. (And, by the way, my family thanks you.)

In reality, it seems rather silly to force airlines to honor simple and clear mistakes. Mistakes happen, and travelers are happy to pounce on them. But if airlines file a $1 fare in a market, is it fair to force them to stick with that?

I can already hear the rebuttals. “Airlines take advantage of us whenever they can, so it’s only fair that we get a break every so often.” But I just don’t buy it. If something is a clear mistake, then airlines should be allowed to back out of the deal. They should just have to do it quickly to avoid keeping people hanging. (For the worst example of that, see Korean Air and the Palau incident.)

DOT, seeing that its post-purchase rule was having some real unintended consequences, has now issued some guidance. (Thanks, David, for the heads up.) In short, it’s not going to force airlines to honor mistake fares while it works on a permanent solution. That’s fair, but it just isn’t put together well.

There are two rules that must be obeyed for the DOT to agree not to make airlines honor mistake fares.

  1. The airline has to “demonstrate that the fare was a mistaken fare”

  2. The airline has to “reimburse 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”

So, uh, how do you demonstrate that something was mistake? Do you just have to look really sorry? Is there a numerical threshold to prove it? No, not at all. Ah, but this statement is footnoted, so this has to clarify for us, right?

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. If a sale does not qualify as a mistaken fare situation, the carrier or other seller of air transportation is bound by § 399.88.

What the heck kind of clarification is that? This should be straightforward. Something like “if the fare is less than x percent of the current lowest selling fare,” or something along those lines, would do the trick. But no, it’s just very vague and there isn’t a timeline given on how long airlines have to decide whether to honor the fare or not.

The second piece is much more clear. If the airline won’t honor the mistake fare, then it has to pay for anything the purchaser bought expecting the fare to be honored. This is meant to specifically deal with situations like the Korean Air/Palau problem where the airline took forever to decide not to honor it. By that point, people had spent a lot of money preparing for their trips, and Korean Air screwed them. That can’t happen again. But don’t get any ideas. The airline can ask for proof of purchase and cancellation so you won’t be able to game the system.

If this all sounds half-assed, it is. The reason? This is just a temporary solution. There will eventually be a permanent rule-making on this, and DOT could reverse itself and decide that airlines should have to honor mistake fares. But for now, it looks like the party is over… unless airlines decide to honor mistake fares on their own. There’s certainly precedent for that, but it’ll be on a case-by-case basis.

I just hope we see the permanent rule-making soon.

[Original traffic stop photo via Shutterstock]

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