Why Airlines Should Be Able to Cancel Mistake Fares, But Why There Need to Be Rules

This article was prompted by a pair of recent Virgin Australia mistake fares – one was a cheap economy class fare while another one was a business class fare.

Both of those were not honored. The business class one was cancelled 6 days after booking while the economy class one was first honored. Only to be cancelled some days later…

While I have nothing against airlines cancelling mistake fares – everyone can make a mistake and should have an opportunity to fix it – I certainly think it is worth bringing up the issues that exist with airlines and mistake fares.

Below, I will share my views on why I think airlines should be allowed to cancel mistake fares, but I will also look at why it cannot be under the current “grey zone” arrangements and what I believe would be an ideal system to deal with mistake fares.

 

Why Airlines Should Be Able to Cancel a Mistake Fare

As mentioned above, I believe that airlines should have the right to cancel a mistake fare. The reason is very simple – people make mistakes. And, anyone doing the job of filing a fare for example, can make a mistake. I also believe people should have a chance to fix a mistake.

That said, I also believe that mistakes come with a responsibility. Which I think is where airlines that decide to cancel mistake fares and communicate that poorly fail.

 

Problems with Mistake Fares

First of all, I want to take a look at some of the things that are problematic with the way error fares currently work. Meaning, airlines having (more or less) unlimited rights to cancel fares they deem to be mistakes.

Proliferation of Legitimately Low Fares

The first thing I want to mention here is, of course, the increasing availability of “legitimately low fares.” With airlines like Norwegian, WOWAir and Scoot operating long-haul routes, it is not uncommon to see fares lower than $100 for a transatlantic flight.

With that in mind, how is a “normal consumer” supposed to tell whether, let’s say, Virgin Australia is trying to grab AirAsia X’s share or whether it it made a mistake?

Overwhelmingly Positive Coverage

Which brings me to…

In the past, “mistake fares” might have gotten coverage on FlyerTalk and some other “avgeek portals.” However, nowadays – with the growth of social media and flight deal blogs targeted at the general public – the reach of these error fares is much higher.

Which in itself would be OK. But, the problem I see is that there seems to be way more “positive coverage” in which the airline is associated with low fares than “negative coverage” in which airline is associated with cancelling a ticketed reservation.

While I don’t have any solid data except for my personal observations to back that claim, the reason I believe the above is true is the following:

  • People that see a post about a “super low fare” are enticed to share it with their friends even if they themselves are not planning to book it
  • People that don’t book a fare are not generally proactively looking to find out at whether a fare was honored or not – and they are even less likely to share that information with their friends

 

Bait-and-Switch in Case of Premium Class Tickets

This problem is associated with premium class tickets. Let me demonstrate this one using the fare that made me write this article as an example. Virgin Australia had a business class fare which they later claimed was a mistake – and they offered the passengers to be downgraded into economy class.

As mentioned by OMAAT, passengers that booked directly with Virgin Australia were sent an email stating the following:

If you are happy with the first option of keeping your booking and travelling in Economy, please click the green ‘ACCEPT CHANGES’ button below and your updated ticket will be emailed to you.

If you would like to take up the second option to cancel your booking and receive a refund, please give us a call on one of the below listed numbers.

People that booked through Expedia – including me – received the following email:

Expedia Cancellation Email

Pretending I didn’t know that it was cancelled because Virgin Australia decided to call it a mistake, I messaged Expedia. First, I was told that the flights were cancelled because the schedule of my flights changed and they are working with the airline to reissue the ticket (what? really?). Then, almost 24 hours later, I got the following message:Expedia

Disregarding the misleading information they were providing (perhaps, I will write more on that in a separate article), one thing stands out to me in both of the above cases.

In the first case, it is much easier (just clicking vs. calling a call center) to get downgraded than to get a refund.

…bait-and-switch?

In the second case, until their third reply to my messages, the possibility to get a refund was not even presented proactively. Instead, in the beginning I got two messages ending with:

Please reply with your authorization to reissue the ticket in economy class. Thanks, EST.

…bait-and-switch?

Lack of Regulation Resulting in Ambiguity

On top of all of the above, it seems like in most cases, airlines are not legally obliged to honor “mistake fares.” While in most cases it seems to be a “grey zone thing,” in the United States it is official based on Department of Transportation’s notice:

…the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses 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, in addition to refunding the purchase price of the ticket.

The biggest problem of that is that in the worst case there are no rules, and in the best case the rules are ambiguous – leaving a lot of questions, such as the below, open:

  • How long does an airline have to determine it’s made an error?
  • Can an airline decide that a fare sold a week ago for $500 and selling today for $750 was a mistake so that it can sell an extra one at $750?
  • Is a statement saying “a human mistake happened” enough of a proof that a fare was indeed a mistaken fare and not an airline’s decision to backtrack on a bad business decision?

I am not accusing any airline of abusing the ambiguities above.

But, I have no doubt that they create a moral hazard.

A moral hazard that – sooner or later – some airline will take advantage of when they decide that the return on investment (i.e. the value of the “positive coverage” plus the incremental revenue of those that keep their downgraded ticket versus the damage caused by the “negative coverage”) is high enough.

 

What I Think Needs to Happen Sooner or Later

I think we can all agree that people make mistakes and they should be able to fix them. We can make a mistake when deciding which way to turn at an intersection. We can make a mistake when buying clothes. And, we can make a mistake when filing fares.

However, the way the system is set up at this point gives too much power to an airline that issued a mistake fare as compared to the passengers that booked it. There are no:

  • Definitions specifying what constitutes a mistake (error) fare
  • No time limits as to how far after the mistake an airline can cancel issued tickets

…and so on.

As such, I think regulations – or even airlines themselves having a policy similar to “Best Fare Guarantee” – saying something like the following would make sense:

  • Requirement to notify all affected customers as soon as the mistake is discovered, within the following timeframes:
    • Within 24 hours of booking in case of reservations departing within a week
    • Within 72 hours of booking in case of reservations departing later than a week ahead
    • Fare considered valid if no notification is issued within the above timeframes
  • In case of premium class bookings, offering a refund by default – or in case of offering a downgrade, making it equally easy to go with either choice
  • Requirement to submit proof (documents that show the real intended fare, etc.) to the relevant aviation or commerce authorities
  • Tickets remaining valid until the above authorities accept the fare to be a mistake and publish it in a public “database of error fares”

I think with the above, both people wanting to take advantage of cheap fares – as well as airlines – would be well protected. Airlines would have the chance to fix their mistakes if acting promptly and passengers would know what to expect. And wouldn’t book positioning flights and so on based on a fare that might be cancelled anytime.

And, while I don’t think the above will be implemented any time soon or at all, I think it is important to talk about this. As much as some people might think this will “ruin error fares…”

What are your thoughts?

Have you ever booked an error fare that was cancelled? If so, how was it handled?

Do you have any other ideas how mistake fares could be handled?

 

Travel Products to Consider

Disclosure: KN Aviation is, among others, a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon.com and affiliated sites. As such, if you purchase products or services through some of the above links, I might earn a commission.
 

Leave a Reply

Your email address will not be published.