The Not So Friendly Skies

@TBPInvictus

I’m excited about skiplagged.com, the website that is currently being sued by United Airlines and Orbitz for enabling “hidden city ticketing” (which you should read up on before continuing).

I needed to travel to Cincinnati last spring. During a period in which my plans were tentative, round-trip fares were in the mid-$300 range or so, maybe close to $400. By the time I’d firmed them up, round-trip fares were around $900, and I was seething (along with trying to figure out why, if there was little demand and ample supply, the price would go up instead of down, but that’s another story). Although it was quite time consuming, I did manually what skiplagged has apparently now automated, i.e. found a “hidden city ticketing” opportunity that brought my round-trip price back down to under $400. The solution for me: I found a one-way, multi-city ticket that went NYC > Cincinnati > Chicago and sent an empty (but paid for) seat from Cincy to O’Hare. On the return, I found another one-way, multi-city ticket (different carrier) that went Cincy > NYC > Boston and sent an empty (but paid for) seat from NYC to Logan.

The airlines are, of course, apoplectic that someone has found a way to exploit and expose the inefficiencies and opacity of their ticketing schemes. So they’ve sued:

“Purchasing a ticket to a point beyond the actual destination and getting off the aircraft at the connecting point is unethical,” according to the letter by American, which isn’t party to the case.

Overbooking and bumping people, of course, is perfectly ethical. Also, I’m not sure if any airline official has yet commented on the ethicality of not lowering fares in the face of the price of oil – the airline industry’s single largest expense – being halved. Funny how prices aren’t sticky on the way up, but only on the way down. And before you shed a tear for the industry, read on:

The International Air Transport Association, an industry group based in Geneva, estimated that the industry’s profits would grow 26 percent next year, to reach a record $25 billion, not adjusted for inflation. The group expects $19.9 billion in collective profits in 2014. In 2013, the industry had nearly $11 billion in profits.

Airlines have been screwing passengers for decades – nickel and diming travelers with charges for bags, for peanuts, for earbuds, for blankets, for pillows and, of course, for a few extra inches of legroom. They are among the most reviled industries extant. Now Delta’s going to introduce a five-tiered seating plan. I’m sure that will work out well. Below is a leaked photo of what economy class will look like:

Screen Shot 2015-01-01 at 6.16.13 PM

Technology has – and continues to – let multiple genies out of multiple bottles. And they aren’t going back in. Technology will continue to disrupt all manner of businesses and squeeze out inefficiencies, just as Uber, Netflix, Amazon, eBay, and countless other companies have done. There is no going back. If it’s not skiplagged who gives the airlines their comeuppance, it will be someone else. Either way, the jig is up.

If you want to contribute to skiplagged’s legal defense fund, you can do so here.

Finally, I went to Cincy to meet with Bonddad, who runs one of the most underrated blogs (on economics and markets) in the blogosphere. He should be in your bookmarks.

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  1. dcramer commented on Jan 2

    And the lawsuit has already caused a Streisand effect: “Update: Dec 30, Skiplagged is facing significantly higher than normal traffic. Please try again later if you encounter any issues–you will be amazed. Thanks”

  2. 4whatitsworth commented on Jan 2

    “Purchasing a ticket to a point beyond the actual destination and getting off the aircraft at the connecting point is unethical”, Wow, really? How about gauging passengers for baggage fees and not giving a Sh*t? I flew Spirit Airlines once and ended up paying more for my baggage than my upgraded seat. Then I rolled a disabled person to the gate because there was no one to help her. The gate agent that did the overcharging just walked by this little old lady in a wheel chair so I ended up pushing her to the gate!

    I think one of the things that has slowed down the economy is that to do a big deal you need to get on the plane and it is an absolutely awful experience these days who really wants to fly?

    One can’t help but wonder how low an airline can go, and why our new culture of “tolerance” allows this to happen!

    • DeDude commented on Jan 2

      Its about airlines building and exploiting inefficiencies in the markets. The airlines have been allowed to merge to the point where there no longer is any real competition in their markets. As long as pretty much everybody you can fly with treat their passengers as cattle (milking and slaughtering them), the market discipline enforced by costumer choice will not happen. I realistically have 5 airlines to chose from and for every bad experience I put them on the black list – it takes about 6-8 flights before I am out of airlines and have to start over again.

    • Concerned Neighbour commented on Jan 2

      This lack of competition you describe in the airline industry is increasingly common in other sectors as well. Often times there is the illusion of choice, where multiple “competing” brands are owned by the same megacorp. We once enforced laws against this kind of industry concentration, but now corporate profits and a rising stock market matter more than all else.

    • Iamthe50percent commented on Jan 2

      In the ’60s and ’70s, I loved flying. Heaven is a 707 with Coach Lounge. Now, I’d rather travel by cattle car.

  3. Jojo commented on Jan 2

    This one way booking is something that has existed for many years. I remember reading about it on the frequent flier websites (how to maximize your miles, etc.). Good travel agents used to do this for their better customers if asked.

    I think what has gotten the airlines upset is that someone has figured out how to automate a previous manual only process.

    If a lot of people start taking advantage of this, there will be a lot of empty seats on some legs that the airlines can’t easily scalp extra revenue off of! [lol]

    • DeDude commented on Jan 3

      Yes it will be very disruptive to their current business model. In order to be competitive on non-hub routes (say A-C) they have to use lower price. However, their hub (B) routes are almost always near monopolies, so they rake it in on A-B and B-C tickets (no real competition). If people find an automated way to do A-B much cheaper by purchasing A-C tickets it will kill the fat profits on both A-B and A-C routes.

      When will we get an app rather than a website to do this for us?

  4. Publius commented on Jan 2

    This article summed up my feeling about flying Delta:

    http://thecooperreview.com/deltas-new-airplane-seating-chart/

    They didn’t mention that First Class isn’t really First Class. It’s Economy Y-6-rho, and Delta reserves the right to send you down to Purgatory if you don’t give them five-star reviews on Yelp.

    • DeDude commented on Jan 3

      That is very funny – and sad.

  5. ilsm commented on Jan 2

    I have flown so much for business there is no place I will go for fun that requires being herded onto an aluminum tube with wings!

    Think, the guys who buy, install and certify air traffic systems learned how from DoD acquisition processes!

    There are two FAR’s one for fedeal buyers and one for aviation!

    If you fly you have to remain hopeful the triple redundnacy “works”.

  6. theexpertisin commented on Jan 2

    I have used the technique many times over the years. Hell, I thought lots of folks did this. I do politely mention at the gate upon arrival that I will not be continuing the next leg of the trip. You would think they would use that information to assist stand-by passengers or alleviate the too common overbooking issue.

    On rare occasions, I received a mildly negative comment from airline personnel. Mr. Ritholtz listed a few of my comebacks quite well in this article.

  7. rd commented on Jan 2

    If I recall, the financial industry has trotted out the “unethical” line as well for people walking away from mortgages (giving up the house as collateral per the mortgage contract) or declaring personal bankruptcy.

    The same corporations generally have no problems “restructuring” loans and bonds or “re-organizing”.

  8. Iamthe50percent commented on Jan 2

    What’s unethical? I bought it. i decide not to use it. If I buy a candy bar from a vending machine and throw half away, am I unethical?

    • Whammer commented on Jan 4

      Exactly right. To say it is unethical is a farce.

  9. lucas commented on Jan 2

    I discovered that the price always goes up dramatically when you repeat your ticket search the same computer as your original search. It is clear the ticket websites record your IP address and search info. Now I do all my searches at the library, but pay at home.

    About Bondad: I used to read his blog daily, until I got tired of reading his completely unprofessional responses to disagreement, and especially his refusal to incorporate all data into his analysis, especially regarding housing. Finally, he seems to think anything going up is a “positive” outcome, and anything going down is a “negative” outcome. He seems unable to recognize that in some contexts, going up is a bad thing, for example, the topic currently under discussion: the price of airplane tickets.

  10. intlacct commented on Jan 6

    They sound like the banksters who said it was unethical to declare bankruptcy and walk away from an underwater mortgage.

    “Purchasing a ticket to a point beyond the actual destination and getting off the aircraft at the connecting point is unethical”

    Isn’t this the essence of an option?

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