News media are awash in stories that American Airlines refused boarding to a teenager and banned him from the carrier’s services for three years. Fox BusinessWashington Post, and many more have covered the incident, which took place last week. His offense was identified as “skiplagging.”

I confess that after many decades in the travel business, I had never heard that term applied to what we know as “hidden city ticketing.”

Whatever you call it, the airlines generally prohibit it in their contracts of carriage. American’s action makes clear that it takes the matter seriously. Travel advisors who have received debit memos about this were already aware.

A website, called Skiplagged, has emerged with a business model seemingly based on the principle of locating and selling hidden-city tickets. The site features the headline: “Ridiculous travel deals you can’t find anywhere else.” I don’t know whether that is true, but for my purposes here, it doesn’t matter. It is reported that United sued to stop the site from promoting purchases that violate its Contract of Carriage. The suit was dismissed but not on the merits. The Illinois federal court held that it lacked jurisdiction because the defendant (from New York City) didn’t live or do business there. Orbitz settled its own suit against the site on undisclosed terms. It seems likely that United will sue again, but only time will tell. 

Further evidence of the seriousness with which airlines take this issue may be found in the updated American Airlines Addendum to Governing Travel Agency Agreements (GTAA) any violation of which “will invalidate all commission obligations to Agent.” The Addendum is specific regarding hidden-city tickets, among other fare-avoiding techniques:

Prohibition of Abusive Practices. Agent acknowledges that Hidden City/ / Point Beyond Ticketing, Back to Back Ticketing, Throwaway Ticketing, Automated Re-Shopping (whether conducted by Agent itself or through a third party that is authorized, enabled or assisted by Agent), Duplicate and Impossible/ / Illogical Bookings and other Fraudulent, Fictitious, or Abusive Bookings, violate American’s Rules….

It is the Agent’s responsibility to ensure that ticketing or bookings done by Agent are not for and do not involve Hidden City/Point Beyond Ticketing, Back to Back Ticketing, Sales Location Shifting, Block Booking, Throwaway Ticketing, Automated Re-Shopping, Duplicate and Impossible/Illogical Booking and other Fraudulent, Fictitious, or Abusive Booking purposes.

Rule 16 of the Delta Air Lines Contract of Carriage is similar:

C) Circumvention of Published Fares

Delta prohibits ticketing practices intended to circumvent the published fare that Delta intends to offer for your true itinerary. These practices include …

3) Hidden City/Point Beyond Ticketing – The purchase or usage of a fare from a point before the passenger’s actual origin or to a point beyond the passenger’s actual destination.

The enforcement of such rules is not a matter of law as such, but of contract. Absent unconscionability or other overriding public policy (such as race discrimination), the law will enforce agreements as written.

It may be helpful to some advisors to understand why the airlines are so adamant about hidden-city ticketing. Here is an example.

The complexities of an airline’s route and fares network and the airline’s understanding of its costs for various flights lead to a situation where hidden-city ticketing will be advantageous to some travelers. For example, a flight from A to C, stopping at B en route, may create a situation in which the fare from A to B is more expensive than the fare from A to B to C. In that case, a passenger can save money by buying the A to C ticket and deplaning at B.

The airline’s contract position is based on at least two ideas: (1) the passenger represented he was traveling from A to C and the airline acted on that representation in selling the ticket; deplaning at B makes the initial representation a case of fraudulent inducement that deprives the carrier of revenue; (2) if the passenger deplanes at B, his seat on the B to C leg goes empty; thus, the airline loses by having sold the ticket for A to B for less than it had intended and it loses the revenue it could have obtained by selling the now-empty seat from B to C.

I am not aware that publicly available data exists showing the extent of hidden-city ticketing or its costs to the airlines. We can, however, assume that the airlines will not quietly accept this practice if they have the means to detect it. Increasingly, I suspect they have that ability. If so, any advisor that knowingly helps a traveler buy a hidden-city ticket is putting their relationship with that carrier at risk and exposing themselves to financial liability for the lost revenue.

If you have any reason to believe that a client is planning to exploit a fare differential in a hidden-city situation, you should advise against his doing so in writing. If it discovers the ruse, this may give you some negotiating leverage with the airline. It also protects you against the client who is bumped like the teenager in the American case and claims ignorance of the rule.

I offer these observations not as an endorsement of the airline practices, but to help advisors understand both why airlines object and to caution that current technology, combined with the market dominance of the Big Four carriers will, as American’s recent action suggests, lead to more rigorous detection and punishment of these practices. Therefore, you undertake them at your peril.

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