There’s never a shortage of lawsuits involving airlines, but there’s one in particular that came up recently which I thought was worth talking about. A woman is suing Delta for what’s called “marrying” segments, and her lawyers are trying to get class action status for this. (I believe “class action” is Latin meaning “only the lawyers win.”) She says this means Delta violated its Best Fare Guarantee, though it’s hard to see how that’s possible. Either way, it’s a fascinating and complex topic. I warn you, this is going to get pretty wonky.
How is a Leg Different Than an O&D? (aka Questions You’ve Never Cared to Ask, Ever)
As you may or may not know, the price you see displayed for a flight is a combination of two things: filed fare and flight availability. It’s the availability bit that’s at the heart of this lawsuit. But before we get into that, we need to define a couple terms: leg and O&D. This is a leg:
Wait, no. A leg in this case is a single flight. Meanwhile, O&D is short for “origin and destination.” That’s a whole one way trip including connections. I think I can explain this best graphically using the Long Beach to Chicago via Salt Lake example that will take us through this whole post.
Fares are Filed By O&D, but Historically Availability is By Leg
With that out of the way, let’s get down to business. The pricing folks at every airline file a whole set of fares for every single O&D they fly, not every leg. There are thousands and thousands out there. When you decide to go from one city to another, the reservation system will know to look for the lowest fare filed in that O&D. On rare occasion, you might see it combining the two local leg fares together because they’re cheaper, but that is pretty rare (the O&D fare is usually cheaper) and not the issue at hand here anyway.
With so many fares on so many O&Ds, each airline has to decide how many seats to make available at each fare on each flight. The way the airlines do this is with so-called buckets. Traditionally, you can think of it like a big Russian nesting doll where the biggest doll is the entire airplane for a single flight. The yield management people at each airline decide they will sell a certain number of tickets on each flight to fill those seats. (It could be more than the actual number of seats if the airline oversells the flight.)
For our first flight from Long Beach to Salt Lake, let’s say that there are 60 coach seats and they’ll sell only 60. That biggest nesting doll holds 60 tickets, but some are in the smaller dolls inside.
The revenue managers know that there isn’t enough demand to sell 60 seats at that highest fare that the big doll represents. Instead, they know that there are only 20 people who will pay for that high fare. That means they’ll need to sell 40 at a lower fare. So the next doll down can only hold 40 tickets. If one is sold, it still deducts from the 60 that the biggest doll holds. It keeps going from there. The smallest one has the cheapest fares in it.
Once they sell the cheapest fares out, that doll, or “bucket” in airline-speak, is full and the next highest one starts filling up with the next highest fares. These buckets are represented by letters in airline reservation systems. In coach, Y is the highest bucket for pretty much every airline, but then each airline has a different hierarchy from there. For Delta, the coach hierarchy from highest to lowest is Y, B, M, S, H, Q, K, L, U, T, X, V, E.
This makes sense, right? (Or did I bore you to sleep too long ago?) The problem until recently has been, as mentioned, that most of these buckets were controlled on a leg basis. So you have fares on an O&D basis (Long Beach to Chicago) but buckets on a leg basis (Long Beach to Salt Lake and Salt Lake to Chicago). You can see how that would be challenging to manage.
Here’s the line-up of fares in the Long Beach to Chicago market for next March:
You see Delta’s lowest fare is an X fare at $163 (this includes some but not all of the taxes, so it’s not final price). But what if there was an X fare at $1,000 in Long Beach to Salt Lake alone? Delta’s revenue managers might get to a place where they really want that latter fare but they wouldn’t want the cheapie former fare. That’s too bad. They either had to have the X bucket open or closed for all. Of course, there were some ways to deal with this. Delta’s team made sure to file fares of similar value in similar buckets. But that’s not easy, nor does it really match up with how you’d ideally like to control things.
The Dawn of O&D Availability Control to Do What Always Should Have Been Done
It was with great glee that airlines started developing systems that allowed them to control inventory by O&D. These systems could “marry” segments together. That meant if somebody picked Long Beach to Chicago with a Salt Lake connection, the system would recognize that it was a connection and marry them to show availability specifically for that O&D only. Here’s a perfect example in our market.
You can see that Delta is willing to sell an X fare in Long Beach to Salt Lake but it’s not willing to do it if you’re going all the way to Chicago, even though it’s the exact same flight. I should also note that you could try to trick the system by searching for Long Beach to Salt Lake and then Salt Lake to Chicago, but when you pick the segments, the system will recognize what you’re doing and marry the segments.
This Silly Lawsuit
To me, this makes sense. If fares are going to be priced by O&D, then the buckets should be controlled by O&D as well. Delta is selling a product, and that’s a ticket from one place to another. The mechanics behind how the airline makes that happen shouldn’t matter. This lawsuit, however, thinks this is all one big scam.
The argument is that Delta says it has a Best Fare Guarantee on its website, and Delta is not giving the best fare because it’s closing buckets on connecting O&Ds that are open on individual legs. This seems incredibly stupid to me.
Delta’s best fare guarantee says that if you can find it cheaper on another website, then Delta will refund the fare difference and give you a $100 voucher. There’s one problem. You can’t find it cheaper anywhere, and the plaintiff isn’t arguing that you can. She’s arguing that Delta is hiding the lower fare from everyone and discriminating against connecting passengers.
The problem here appears to be that the plaintiff has just enough knowledge to get herself into trouble. Using ExpertFlyer, she found an example of this happening and thinks it’s a smoking gun. But ExpertFlyer isn’t a place to buy tickets. It just shows raw data, and in the wrong hands, that can be misunderstood easily.
There will come a time when airlines do more to price discriminate, trying to offer different fares to different people. But those don’t qualify for the best fare guarantee anyway. The terms and conditions actually gut the guarantee pretty much completely, noting that “fares not available to the general public” don’t count. But that’s an issue for a different time. This lawsuit is fare more simplistic than that, and it seems completely baseless.
[Original chicken leg photo via Shutterstock]
There is possibly some merit to the case. If the LGB-SLC and SLC-CHI sectors each have availability at $100 for a one-way ticket, but the LGB-CHI route has a cheapest fare of $500 one-way for the same flights in the same seating class, then to claim that $500 is the best possible fare is at worst sneaky and at best less than transparent.
Yes, buying a LGB-SLC and SLC-CHI tickets separately gives 2 separate tickets which is a different product to the LGB-CHI through fare, of particular relevance when bad weather causes disruptions, the former making connections at the passenger’s risk while the latter shifts the risk to the airline. I completely understand why these tickets have different fares as they reflect very different risks / obligations between passenger and airline – an airline has the absolute right to charge a premium for the burden of the missed-connection risk.
However, to claim that $500 is the best fare for a LGB-CHI route must mean some very convoluted wording in the guarantee legal bits, or there’s something wrong with the way the guarantee is marketed. At the very least, Delta need to make it much clearer in the guarantee as to what it means and when it applies.
David – That’s not the issue here as mentioned. The plaintiff says she looked at fares in her O&D, found a low one, saw the inventory available on a leg basis but then couldn’t book those seats on the O&D. So she wanted leg availability but the O&D fare.
I agree with Cranky, commenter David, and Delta. Any best price guarantee can only apply to the same product, and as Cranky and David point out, separate tickets for two legs is not the same product as a ticket between a city-pair. When I buy a ticket from Long Beach to Chicago, Delta’s job is to get me from Long Beach to Chicago. If one of the legs is delayed or cancelled, it’s still Delta’s task to get me to Chicago. And if Delta wants to charge more for taking on that burden (and, also, price my ticket based on demand between Long Beach and Chicago) that seems perfectly fair. The real reason the two-separate-leg fare should not qualify for a best price guarantee is that it simply is not the same product as the city-pair fare.
The defense of the O&D service as a premium offering deserving of a premium fare makes sense only to the airline industry, which, in typical take it or leave it fashion, is never explained to the customer. Consumers expect the whole product to be more of a price value than the sum of its parts.
For instance, if I go to my local Honda dealer and purchase all of the parts and accessories necessary to build an Accord, it will cost me many times more than buying the actual car off the showroom floor. If I go to Best Buy, a 42 inch Samsung TV will cost me far less than if I bought the parts to build it myself.
Consumers are wired to expect one entire complete product will cost less than all the parts priced separately. The exception to this basic business philosophy is the airline industry. While selling Hondas and flying airplanes are dramatically different enterprises with dramatically different risks and expenses, the airline industry, which has for decades practiced intentionally confusing pricing, should not be surprised that the public doesn’t like it. If the airlines want travelers to accept O&D as a premium service, they will have to re-educate the public. But I wouldn’t hold my breath.
Bill – That’s the opposite of what’s happening here. It’s rare that the O&D price is higher than the sum of the leg prices.
I have seen this with different airlines many times, what I would do in the past is book the Long Beach to Salt Lake and just get off in the connection at Chicago (only works if you have carry on bags only) and not fly on the last leg, because often times it works out much cheaper then buy the direct ticket from Long Beach to Chicago.
I hope she wins and the airlines are forced to change, airline pricing is way to complex and needs to be simple. X amount of dollars for seat and that it. Selling the same seat for different amounts is wrong.
I spent some time puzzling over this. There is something about hidden city booking going on here.. but beyond that I’m lost.
Airline pricing is, for me, totally non-transparent. Why can there be a factor 2, 3, 4 or more difference in the ticket price between two people seated next to each other in the same plane, same origin and same destination.
Is this huge spread in fares for (almost) the same product fair? Cranky, please explain why?
My opinion is that pricing is a complete nebulous process and that the traveller should just pick a good deal from what the airlines are handing out. I am willing to put up an argument why unwillingness to sell X fares on a through ticket, with availability of the fare on the individual legs is price discrimination.
MathFox – It all depends on how you define the product. If you’re willing to book in advance, then you pay less. But you’ll pay more for the right to book closer to departure and have more flexibility. While the hard product on the airplane is the same, you’re still selling something different.
If you required a single price for all, then you’re going to end up with much higher fares for leisure travelers and lower fares for business travelers. The won’t be good for a lot of people.
The working of an airline is not a simple one and isn’t even understood by everyone who works at one. So the general public doesn’t understand the working so think they are being ‘scammed’. With that in mind, lawyers-judges-juries can easily be convinced something is underhanded and side against the airlines.
Yes, the lawsuit is frivolous. However, if that’s what she wants, then break the fare and issue two tickets.
The most likely upsetting scenarios are (a) the LGB to SLC flight is cancelled causing her to miss SLC to CHI, resulting in a no-show, xl, new ticket purchased at current fare level or (b) she gets to SLC (her point of origin) and finds her CHI flight is cancelled making her fully responsible for her own accommodations or (c) she makes a change to the one or more of the flights and the add-collect and change fees induce heart failure.
People may think they are smart enough to game the system – but the airlines are way ahead of them.
Suddenly it becomes clear why DL yanked all their data from ExpertFlyer…
Morgan – This lawsuit came after Delta yanked its stuff from ExpertFlyer. I’ll have more on that garbage tomorrow.
Glad to hear that. Pulling all data from ExpertFlyer is typical Delta anti-informed-consumer BS.
Typically lawsuits don’t come out of nowhere though. I’d say there was a very good chance that this person had contacted Delta with this information previously and that’s why Delta decided to pull its information from Expert Flyer.
Thanks for the detailed explanation, CF. I work for an airline in these departments and it’s rare for someone to discuss O&D vs. Leg pricing in such an understandable way. Agreed, the lawsuit is frivolous. And why shouldn’t the airlines charge what they want and how they want just like every other service or product provider in the U.S. Isn’t that was deregulation was all about? Let the business (airline) charge what they want and how they want. If she thought it was unfair or didn’t like the rules of their pricing, she could have gone to another airline for that LGB-CHI route and made her statement with her wallet, rather than trying to build a phony lawsuit.
I encountered the O/D availability problem recently — I had bought 4 tickets to Long Beach via Salt Lake on a Delta K fare for myself and the kids, but the 5th ticket for my wife would have gone into the S bucket (triple the fare). There were still K seats on the SLC–LGB leg, and even cheaper X seats going through SLC to Orange County (with a 4-hour layover), but only S seats going through to LGB or on the first leg alone to SLC. So my wife enjoyed her layover in Salt Lake (long enough to go into town), a flight alone without the kids, and by the time she arrived in Orange County I had already made it home and was able to drive to pick her up.
On second thought, perhaps I should have filed a lawsuit — Delta is clearly discriminating against families of 5 who need to travel to Long Beach. Too bad Cranky can’t join the class action.
One thing this doesn’t address and something I think would merit litigation is hidden city booking. If I’m flying to a major hub like Atlanta the fare is almost always cheaper if I connect onto some smaller airport than just flying the single leg into the big hub. Hello? To the average consumer this makes absolutely ZERO sense. If you use the loophole and don’t take that last flight now days the airlines cancel your return flight, if booked. I know I’ve heard explanations before but it just doesn’t ever pass the logic test. That seems like a bigger issue to fight over than this technicality.
Just because something makes zero sense or are illogical (to you, and even if it did to the airlines), it doesn’t make it illegal or against any regulation. That case would have even less legal ground than the this best fare guarantee one.
Think about it this way. This is an oversimplified fake example, by the way. Assume that DFW – ATL is a high-demand, business travel heavy route where the fair market value of a flight is $375. Now assume that DFW – Savannah, GA is a low-demand, leisure travel heavy route where the FMV is only $300. Now further assume that DL doesn’t fly nonstop to SAV from DFW, and the value of a nonstop flight is higher than that of a connecting flight, thus dropping the value of DFW-ATL-SAV to $275. That’s really what’s at work here – the pricing is based on the value of the O/D route, irrespective of connections along the way. DL can’t charge $450 to fly you from DFW to SAV just because you are connected through ATL, which costs $375, because nobody would buy it. Conversely, DL isn’t going to charge $225 to fly you to ATL just because it’s shorter than the flight to SAV; they’d be leaving money on the table because people flying the route are willing to pay more than that.
Now, the question is, should the airlines have the right to cancel your reservation if you play the hidden city game? Not ready to go there, but think about it from the airline’s point of view. If you buy a ticket DFW-ATL-SAV with no intention of getting on the puddle jumper to SAV, the airline now can’t sell your seat on the second leg to someone else, and have lost out on the revenue. That’s why they don’t like it.
Kind of in the same vein, if I need to make a fare change and the fee is $200 but a new ticket is that or less why would I cancel the first flight? Just purchase the new ticket and abandon the first. They still can’t sell the first seat.
Oh, sure they can sell both seats, its called overbooking. ;-)
The problem with the Fair Market Value argument is that it doesn’t account for market failures, for example monopolistic or predatory behavior. Back in the late 1800s there was a problem with rail ticket prices: different routes between two major cities may be served by different railroads which would compete fiercely, but the smaller towns between the cities would be served by just one railroad, resulting in much higher fares due to lack of competition. To stop this price gouging, a regulation was passed that fares to intermediate stops could not be higher than between the terminals (I can’t find the reference now, but I think it was in the 1880s). This regulation definitely goes against value-based pricing, but it was an effective means of stopping monopolistic and predatory price-gouging.
So with rail travel, regulation forced ticket pricing to conform to a basic human expectation, that part of a journey shouldn’t cost more than the whole. Of course, air travel is different from surface travel, in that there are not many fixed routes with intermediary stops, and connections usually take place at major hub cities rather than small towns. So a rule that a ticket on a connecting flight cannot cost more than a comparable ticket on one leg would probably not have the same desired effect of protecting against market failures.
A – This all comes back to the product you’re buying. I’ll build on what MeanMeosh said already here. You aren’t buying the sum of legs here. You’re buying the O&D. If I’m in, say, Chicago, and want to fly to Jacksonville, but another person wants to fly from Chicago to Atlanta, we may end up on the first flight together but that doesn’t mean we’re buying the same product at all.
The person going to Atlanta is buying a nonstop flight on Delta, and nonstops provide more value to travelers. People will pay more for convenience. Meanwhile, with me going to Jacksonville, I have to connect. Furthermore, there are airlines with nonstops in the market that I’m competing against, so I need to be more competitive on price to attract travelers.
Now, if you buy a ticket to Jacksonville and get off in Atlanta, you’re buying one product and using another. That’s a violation of the contract of carriage.
Cranky, using a product for a different function than intended is not generally illegal. It gets a little complicated with service agreements, but that’s the general rule — jailbreaking a phone is allowed by law, but it may void certain warranties or obligations by the seller. My understanding is that the same is true for hidden-city ticketing: it’s not illegal, but it relieves the carrier from certain obligations like honoring my return ticket. I’m not sure what other sanctions are allowed (mileage forfeiture? banning me from future travel? suing me for a difference in fare?), but from what I’ve read, this is a somewhat murky area of law where not everything is settled.
Ron – I didn’t mean to suggest it was illegal. But it is against the contract of carriage so it’s not permitted. Unless a law is passed making these types of rules illegal, then airlines can enforce this. The remedies I’ve seen start with the more automated ones… cancel any continuing segments if someone misses a single flight. But then it goes up from there. If someone is an egregious violator, then they can confront that person and demand payment of the full fare for the routing actually taken. (I’m not sure how easy that is or if it’s been successful, but it’s most certainly been done.) I’m sure airlines can also ban someone if they want for this type of behavior, though that’s likely to only be for a repeat offender.
The flight in your example is a direct flight and the airlines may consider that a premium service. There is probably less competition on that flight so why should the airline sell it for cheap. The one stop to the small city is not a premium service. There may be 2 or 3 other airlines offering service from your origination to that small city view ORD, CLT, etc… That competition could make the cost lower.
You want the premium service of a non stop but would like to pay connection prices for it.
There is no way to win a suit, even make a claim, againist airlines in these cases. Like in UA’s “Low Fare Guarantee” program, you have to make the claim on the same day on which the ticket is purchased, or within four hours if the ticket is purchased after 8pm local time, AND, AND, AND, allow UA to verify the lower online fare, at the time of the claim. Any of your faxes, screen prints, etc., are not eligible for UA verification, of course!
If anyone in the history of the world has been made a successful claim with UA under this program, I’d be the shocked. All UA needs to say: “We found nothing to verify the other fare. Our fare was best again!”
When DOT said it was OK for airlines to use “capacity-controls and that is done through these purely arbitrary capacity-controls and these crazy fare buckets, the airlines got the upper hand on the buyer-seller relationship. Customers’ efforts to fully comply with the rules and regulations of any fare will always lose out to the airlines’ whim to open or not open a fare bucket. Arbitrary and capricious it is, but DOT says it’s OK. Customers pretty much have to accept whatever the airline tells them about any bucket being open or not.
I really don’t understand why airlines can’t set fares that make sense for them–not too high, not too cheap–that are based simply on restrictive conditions we can decide to meet or not and not have to resort to capacity-controls and these fare buckets. Like there aren’t restrictive conditions that can control demand so not all seats get sold at the super discoung level? Capacity-controls and these fare buckets are great for the airline but frustrating for the customer.
Or, maybe we can let all fares be set by a vibrate market, like we buy and sell stocks,.. Carriers offer by flight, by day and we customers buy, or not, or ask for a better offer. Hidden city ticketing, point beyond ticketing, throwaway ticketing, back-to-back ticketing, all unnecesary. But, as usual, I dream!
JayB, They can and they set fares that were “not too high, not too cheap” back in the CAB days. Twas much more expensive for everyone (except the last minute flyer) to fly.
Airfares are this strange form of communal pricing. The passengers on cheap tickets need the passengers on expensive tickets and vice versa. If an airline averaged out all the prices for a given leg (or O&D route) half of the people on the plane wouldn’t/couldn’t buy the ticket, so the airline would have to raise the fare, and some more people wouldn’t/couldn’t buy the ticket, and this repeats until there is an equilibrium. (Its sort of like Death Spirals in Heath Insurance: https://en.wikipedia.org/wiki/Death_spiral_(insurance) )
I, for one, am very disappointed. I thought it was a turkey leg, not a chicken leg.
Badda boom. Seriously, I enjoyed an article about pricing, which always fascinates me.
Next let’s take on the topic of, if the airline offers the “best” fare and someone else offers it also, are they both the “best” fare? Wait til she gets ahold of THAT one.
This is red meat for dorks. I love it.
Airline pricing is fascinating.
The problem, as CF pointed out is that a little knowledge is a dangerous thing.
Rather than complain that airline pricing is “anti-consumer” or deliberately complicated, take time to understand it.
There are many factors at play: supply, demand, forecasted demand, competitor activity, willingness to pay etc.
One bugbear in the UK is that it’s cheaper to fly DUB-LHR-JFK than it is to fly LHR-JFK. But once you understand the dynamics in play, it makes perfect sense. And you can play the airlines at the game and fly over to DUB to start your flight. One of my friends saved £££s doing that in Business class.
ExpertFlyer (and Google’s version) is a great tool and as an ex-travel agent who misses access to GDS systems, I could spend hours staring at booking classes and itineraries.
Suppose Delta flew LGB-ORD nonstop, in addition to the SLC connection. Does it file two different sets of O&D fares (one for the non-stop, one for the connecting options), or is it the same fares either way?
As for those screenshots – are these reservations programs still running on MS-DOS? This looks like the 1980s.
Oh, they’re not running on MS-DOS. Thats far too underpowered to run a GDS.
Its running on a mainframe of some kind. Probably an AS/400 variant from IBM or something of the sort.
tharanga – Absolutely. Each fare that’s filed is tied to a specific routing rule. You can file a routing that would only permit nonstops or one that would only permit connections. That’s the hard stop way to do it. But you could also just manage the inventory as well. You could make lower buckets available on connections but higher ones on nonstops.
“””””Suppose Delta flew LGB-ORD nonstop, in addition to the SLC connection. Does it file two different sets of O&D fares (one for the non-stop, one for the connecting options), or is it the same fares either way?”””””
Airlines can have a different fare on a nonstop then a connection.
Back in my TWA days the 4pm(ish) nonstops LAX-JFK on the airlines was at higher F/C/Full Y prices then other nonstops during the day since that was the last flight out of L.A. that got people back to NYC that same night. They would have a different fare base code, for TWA that was flight #8 so would be F8/C8/Y8.
I know that not all ticket are sold with the same conditions and would expect a refundable ticket to be sold at a higher price than an unchangeable one… I would expect the price difference reflecting the risk for the airline. The refundable ticket comes with a premium over the low cost ticket, that covers the expected loss of income due to cancellations.
What you say is that instead of just the risk premium “business travellers” pay more than that and that extra pay is used subsidize “leisure fees”. Is such cross-subsidy fair (I assume the legal eagles have done their work on the contracts (of adhesion)). Air transport is a highly regulated industry and many routes have little competition. For the traveller there is little choice other than accepting one of the offers from the industry.
MathFox – They are really co-dependent. Business travelers need high frequency to make their lives easier, but there’s not enough business travel demand to support those frequencies. But once you add leisure demand, then you can fill those planes with enough revenue to make them profitable. If you think that business travelers can get you there 75% of the way with only 25% of the people on the airplane, then the remaining 25% of revenue can come from 75%. Business travelers win because they get high frequency. Leisure travelers win because they get lower fares. Without the two working together, it falls apart.