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Airlines fight passengers over "gray fares'

Like thousands of savvy fliers, Ronald Gelfuso knows that a longer flight can be cheaper than a shorter one. Gelfuso, a New York fashion executive, regularly saved $500 round trip by buying a ticket to San Antonio when he was going only as far as the first stop on the route, Dallas.

But last month American Airlines stopped Gelfuso. A ticket agent in New York, noticing that Gelfuso's bags were checked to Dallas, insisted that he buy a new ticket.

A dispute ensued, and when it was over, Gelfuso had missed his original flight and was forced to buy another ticket for $519. "I ran into a brick wall," he said.

Faced with sharply higher fuel costs and a dismal financial prognosis, airlines have begun cracking down on such bargain hunters who bend rules stated on the ticket. They are using computer programs to catch rule breakers and, in some cases, suing travel agents who promote the practice.

Another way travelers are skirting airline rules is to use travel agents who backdate tickets to take advantage of discounts that require advance purchases.

Another _ used to avoid the requirement on many discount tickets that the traveler stay through a Saturday _ is to buy two round-trip tickets at the discount fare.

Half of each ticket can be used, and the traveler saves money because even two tickets at the discount price cost less than the full fare on one.

It has also been possible to take advantage of differences in international fares. For example, New York travelers headed for London could buy a ticket from Montreal to London and then simply board the plane when it stopped in New York.

The saving comes in cases where fares are lower between Canada and Britain, under agreements negotiated between the two nations, than between the United States and Britain.

Such "gray" fares have been used more often, and more openly, in recent years _ whether by travel departments of major corporations or even by passengers flying the supersonic Concorde.

A magazine that recently began circulating nationally, Best Fares, openly reveals more than 500 such fares. The magazine has grown to about 10,000 subscribers, including the travel departments of many major corporations.

The publisher, Thomas Parsons, said the airlines had not taken any legal action against the magazine, but "I'm sure I'm not one of their best-loved people."

The most common, and controversial, practice is to buy a cheaper ticket to a distant city and get off at a stop along the way. The tactic is called "hidden city" ticketing in the industry.

For example, someone traveling on Continental Airlines from San Diego to Houston and buying a ticket at the last minute would normally have paid $492 this week. But by buying a ticket from San Diego to Austin, with a stop in Houston, the fare would be $152.

Although the airlines frown upon the practice, it does not violate any government regulation, and some consumer groups argue that in fact there is nothing illicit about the tactic.

The airlines have nothing to blame, the groups say, but their own wacky pricing systems. The airlines, however, contend that the practice violates the contract that passengers enter into when buying a ticket, which states that they will fly to the specified destination.

That it is often cheaper to fly farther is mainly a product of the way competition has evolved since the industry was deregulated 12 years ago. Airlines base fares not only on the distance of the flight but also on how much competition they face on the route.

Often, the fares to "hub" cities like Dallas or Detroit, in which one airline dominates, are higher than to cities at which there is more competition. An airline will often match a competitor's fares on some routes, even if it means charging a lower fare for a longer flight.

Al Becker, a spokesman for American Airlines, estimated that last year more than 200,000 of the airline's 74-million passengers used hidden-city tickets.

Like other airlines, American has sent letters to travel agents reminding them of the airline's policy about such fares.

In some cases, American has sued travel agencies to recover lost revenue. And earlier this month, the airline changed its prices to San Antonio, effectively closing the loophole that Gelfuso and others were flying through.

American has also developed a computer program that enables it to spot people using hidden-city fares, albeit not until days after the flight. The computer checks ticket stubs collected during boarding at each leg of the trip to determine whether a passenger actually flew the entire route.

Another way an airline can spot a hidden-city ticket is when a passenger tries to check luggage to an intermediate point rather than the final destination.

Many passengers have used tips to persuade curbside porters to check their luggage to the hidden-city destination. But passengers report that the airlines are growing wise to the practice and are instructing porters to flag these travelers.

United Airlines has reportedly developed a computer program similar to American's, but a spokeswoman for the airline declined to comment. Indeed, many airlines are hesitant to discuss the subject, for fear it will encourage the practice.

Northwest Airlines did say that it has developed an accounting system enabling it to track travel agents who backdate tickets to secure discounts requiring advance purchases. The system compares the date on the ticket with the date on which the reservation was made in the computer.

Foreign airlines are clamping down on the variation of the hidden-city tactic in which passengers take advantage of currency exchange rates. British Airways has been especially aggressive in this area. On most flights, it has eliminated such loopholes simply by raising its fares from Canada.

But an airline's most potent weapon is to cancel a passenger's reservation or deny the traveler access to his or her luggage. Thomas Carter, a medical researcher flying from Washington to Cleveland earlier this month on Delta Air Lines, wanted to get off in Cincinnati.

But when he asked that his bags be taken off the plane in that city, he was told by Delta ticket agents that he would have to pay for a new $136 ticket.

"I felt like my bags were being held hostage," Carter wrote in a letter to Delta. He has also registered a complaint with the Department of Transportation. But while the hidden-city tactic may violate the airline's rules, it does not violate any government regulation, said Bill Mosley, a spokesman for the Transportation Department.

Because the airlines are getting tougher, some travel professionals say the risk of using the gray fares is no longer worth taking.

Airlines say hidden-city fares violate their tariff rules. "We have a contract with a passenger to carry him from point A to point C," said Doug Miller, a spokesman for Northwest. "If they get off at point B, they take from us the opportunity to sell the ticket to someone who is going to use it."

But passengers argue that the airline has already sold the seat, and the passenger is free to leave it empty, just as a consumer is free to buy a large box of soap and discard the portion not wanted.

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