It’s been a couple of weeks since I awarded American, Delta, and United a Cranky Jackass Award for blocking most fares from pricing on multi-city trips. Since that time, they’ve all been tweaking their fares and rules furiously. United appears to have backed off the most while American has been somewhat more conservative. Delta? It’s still the most aggressive. This situation is getting Jackassier. (Someone call the OED, this word needs to be added, stat.)
Some Background You Can Skip
I won’t go into great detail about the background (you can read the last post for that), but in short, the airlines have been struggling to find a way to control how many people have access to those really cheap ultra low cost carrier-matching fares. For example, they want someone flying from DC to Dallas to be able to buy it, and they want the same thing for someone flying from Dallas to San Francisco. Both of those routes (including nearby airports) have multiple low cost options including Southwest, Virgin America, and Spirit. The problem was that being competitive on those routes meant that people flying from DC to San Francisco via Dallas could also take advantage. Airlines didn’t like that.
To fix the problem, the airlines dropped the hammer. They made it so that fares could not be combined with other fares on a single ticket except for a simple out-and-back roundtrip (from point A to point B and back to point A). This solved the problem of people being able to combine the DC to DFW and DFW to San Francisco fares on one ticket, but it also caused a bunch of other problems. Notably, it meant that multi-city trips, which are fairly normal for business travelers, wouldn’t price.
This led to some pretty strange results. For example, someone flying DC to Dallas, staying for awhile, then flying to San Francisco, staying for awhile, and then flying back to DC on American (with a short connection) would pay, as the example went last time, $1,837.20 to buy everything on a single ticket. Bought separately? Those were a mere $412.80.
Of course, your regular leisure traveler isn’t going to buy that ticket. It sounds insanely expensive. But a business traveler might. Big companies that use online booking tools present their employees with options for the trip at hand. The employee isn’t going to worry about the price if it’s something that shows as being within policy.
What’s Happening Now
In the last couple weeks, the airlines have been furiously trying to tweak this whole thing to fix this new problem. United has mostly backed off its plan but not on all fares and not in all markets. For example, it allows multi-city pricing on all 22 coach fares it files between Washington and Dallas/Ft Worth, but in its Chicago to Orlando market? Its lowest fares don’t allow it. Only a fare that’s $90 each way above the lowest will price.
American is similarly inconsistent, but it tends to be more restrictive. Let’s update that trip that we’ve been using with Saturday’s pricing.
You can see that the individual fares have shifted a bit on each leg, but not really by much. That’s normal. Bought independently, this particular itinerary is now $418.80. But bought together? The price has now dropped to only $628.20. Bargain! (But still more than buying separately.)
In the Washington to Dallas/Ft Worth market, American blocks its lowest fares from being used on multi-city tickets. It’s only the fare that’s $215 more one way that will work on a multi-city ticket. But in the Dallas/Ft Worth to San Francisco market where United has more influence, only American’s first super cheap $39 one way plus tax fare won’t allow multi-city combinations before the next one at $114 plus tax does.
Then there’s Delta. Delta is still the most restrictive of all. What it appears to have done is kept its old non-refundable fares banned from working on multi-city tickets. But it has now added new fares that do work on multi-city tickets. Those fares aren’t cheap ones, and they don’t exist in all markets.
In Dallas/Ft Worth to San Francisco, Delta’s lowest fare is $104 plus tax. The first fare valid on multi-city tickets is $185 plus tax based on a roundtrip. That’s one of the better deals. Try one of its own markets like Orlando to Minneapolis, however, and it’s a different story. The lowest fare ($99 one way plus tax based on a roundtrip) won’t allow it, nor will the next 7 filed fares. The first fare that allows multi-city tickets is $252 one way plus tax based on a roundtrip.
What the F***
If this sounds all over the map, it is. That’s because the airlines are struggling to maintain multiple different pricing strategies in a variety of different markets. They implemented one strategy to start matching low ultra low cost carrier fares. Then there were unintended consequences when people could start combining those fares in markets that airlines didn’t intend to sell them.
Then what happened? They came up with another solution to fix that problem and surprise… there were more unintended consequences… this multi-city issue. Now they’re trying to fix that as well. Who knows what they’ll screw up next.
This creates problems both internally and externally. Internally, I had one person in sales at one of the big three airlines tell me, “You need to create an inaugural Cranky Piñata Award and give it to AA/DL/UA sales teams.”
Externally, all this does is erode even further what little trust may have still existed. So, customers, be careful. Always check one way pricing, and don’t trust the airlines when it comes to displaying the best fares for your trip.
To those on the airline side, is that really the message you want to be sending to customers? It may be time to rethink how you’re handling this.
Interesting (not really) that when the airlines implemented this ridiculous pricing strategy that they were all in line with each other and it was rolled out within days of one another. Yet now with the light shining on the situation each carrier’s solution seems to be individually specific to its own system. Collusion is a serious charge and I’m not going there but this doesn’t look good by any stretch when it’s viewed as a whole.
The airlines seem to be doing the right thing for everyone – I don’t see what you’re so upset about.
If airlines in their current form are to be profitable companies and sell tickets based on supply/demand rather than regulated fares, then there needs to be some sort of segmentation of fares and markets.
A policy on combination of fares into a single ticket is just another way of segmenting markets. Those who are time poor and willing to pay end up paying higher fares, while those who are cash poor but willing to spend a few hours hanging around in a transit lounge get the bargains.
Yes, this policy on ticket combinations is certainly a complete pain for travel agents trying to get the best deal for their clients but it does achieve market segmentation and (unlike the period from 2001 to 2010) airlines also get to be profitable like normal companies
Many companies just about break even on their commoditised products (e.g. simple non-changeable non-refundable round trip fare booked 6 months in advance), but make their big profits when a customer wants some sort of bespoke product like a multi-stop itinerary changeable and refundable issued on a single ticket. There is nothing stopping corporate customers buying separate tickets if they are cheaper, especially if said corporate traveller is going to stop in each city for a night or more.
Would it perhaps help if airlines published a disclaimer somewhere in the small print saying ‘fares may be cheaper if bought as separate tickets’ in the same way that many travellers now know you pay extra for changeable tickets ?
I’m with David on this one.
I think the only bit of this that’s worthy of a Cranky Jackass is how it was rolled out. (Not that I’m on the nominating committee.)
If the big three went from the state they were in a month ago, to the state that they’re in right now it’d be acceptable. Yeah the communication could be better, but what do we expect when corporate America doesn’t want to pay for anything?
I don’t think that corporate travel managers are worrying about this in individual cases, but it adds up with all of them. So corporate travel managers are pushing back, and they have lots of negotiating power.
The upshot is that the cost of a multi-city fare has gone up dramatically (by a factor of more than two) in the last few weeks relative to what it was *before* all of the Sprit-matching fares. eg A multi-city trip booked a bit in advance that cost, say, $800, a few years ago or $400 a few weeks ago (by combining cheap Spirit-matching fares) now costs $1600 or more. And that’s probably enough of a cost raise that it will lead corporate travel managers to revise their travel policies, ultimately costing the airlines that pull this cr*p business.
There are several points where I disagree and one or two where I argue you are objectively wrong…
Multi-city is not bespoke, and at my level (relatively senior professional) most companies I have ever heard of require the purchase of nonrefundable economy fares where they are available. Furthermore, I have to live within a travel budget… I don’t want a refundable fare involved, and the airline insisting I have to have one is absolutely jackassery on its own merits.
Also, the business traveler just doesn’t want to be screwed, and there is no way the airline could convince me that a 2x or more cost delta is justifiable on the grounds of any kind of increased burden due to having 1 pnr.
Not much for me to add here, but as always thanks CF for keeping us all in the loop and I’m fairly impressed with UA so far in 2016. I booked ML trips often and am glad they backtracked. Kudos to them.
It seems to me that one of the issues is communication (and how inflexible fare codes are). It seems reasonable that an airline might want to create an ultra-low-cost fare code on a route where they compete with ULCCs, and as long as it was properly marketed, it wouldn’t create an issue. They could then clearly list the restrictions on the fares for who they think their target market is. If AA competes with an ULCC on say, trips from Boston to Orlando, they could call them ‘Vacation Steals’ and mandate that the fare had to be for an A-B-A round trip. They could then even further differentiate the product somehow.
Then the business trip you listed above would be on a ‘higher’ fare class of standard non-refundable fares. Again, if airlines could make a fare code (or something else) to help compete for that market, they could create a product that slotted in somewhere above standard non-refundable fares and the higher-priced refundable ticket (for example, allowing the date of any one leg of a trip to be changed same-day if available – that’d be great for times when you need a few more hours to wrap something up before moving on to the next city).
If an airline really wanted, they could even make both of these fares exclusive to their website or ‘preferred’ GDSs or something, which they’ve been trying to do anyways. That might make the IT part easier, while giving the customer something and getting the carrier something it wants.
The GDS contracts typically don’t allow airlines to distribute products in their own channel and not on the GDS. The only exception to this is when technology constraints exist.
TimH – Delta has that capability today with its Basic Economy fares. If it wants to add the rules that they can’t be combined on more complex trips and disclose that info, then that works for me.
From my days learning IATA rules, are these three not in breach of these rules governing maximum permitted mileage etc.?
I assume they have the ability to restrict this on the cheaper fares.
IATA MPM doesn’t apply to domestic routings, only international ones. It’s more common to file fares that have a specified routing, such as ‘must be nonstop’ or ‘must connect through ORD’ or ‘must not connect through ATL’ than to file mileage limitations on domestic fares.
I don’t think it’s a coincidence that this scheme was introduced on the heels of spending-based point earning. In a world where you earn based on what you pay, expense account employees’ incentives are the same as the airlines’: make the ticket cost a lot.
Employers MUST fight back with policies, restrictions, and required booking agents. Two can play this game.
By the way, it’s not just business trips that will suffer; thinks of the millions of unsuspecting foreign tourists traveling to all points in the USA (ie., arrive in New York, fly up to Buffalo to see the falls, over to Chicago, on to Disneyworld in Florida, out west to the Grand Canyon and on to San Francisco. Wow, the domestic airlines will reap a bundle this Summer ! Horrendous and ridiculous of course. What’s troubling me is that if UA/DL/AA can come up with this “circle trip” formula, what is to stop them from just raising ONE WAY fares as well ? (“We’ll get you one way or the other”). Just a matter of time.
JoEllen – These rule changes apply to domestic travel only, so if people are buying international tickets there are other rules that apply. If, however, they’re buying domestic tickets separately from international ones then yes, it would apply.
Yes, that’s what I mean’t…..pricing for those who purchase fares for domestic trips (separate from their over-the-water segment(s).)
Couldn’t this be addressed somewhat easily by imposing a minimum stay requirement (e.g. 4-6 hours) on each city as a requirement for cheap multi-city ticketing?
Suppose my real goal is to go from A to C, and that ULCCs have cheap fares A-B and/or B-C. If an airline imposes a 6-hour stay requirement for B, I’m going to have far less incentive to book multicity via B.
grichard – I’m not sure that there’s the ability to do increments of an hour on minimum stay. There might be, but they probably would have done that already if they could.
It seems to me like a 24 hour minimum stay would solve most of these problems much more cleanly. Is that difficult to implement?
Yeah, some business travelers who want to have a day stop in one city (eg early AM LGA-DFW, day in Dallas, evening DFW-SFO) would get caught, but much less collateral damage than the current mess.
Alex Hill – Well I’m not sure about 24 hours but certainly 1 day (meaning you have to change calendar days) is doable… if you’re talking about a roundtrip fare. For a one way fare, you can’t have any min stay.
OK. So since these Spirit-matching fares are mostly one way (hence the issue), can the fare rules say “only combinable with one day minimum stay”?
Alex – I don’t think so, otherwise they probably would have done it that way.
You can’t blame the airlines for wanting to make money since that’s the goal of every business, but doing things that can easily be worked around like this is dumb.
Seems to me if you had to do three separate tickets to do one trip to make it cheaper, then there is no need to stick with one airline for your entire route, which means AA/DL/UA are now telling you to not use one airline for all your travel needs. I guess next McDonald’s will be telling people to buy their hamburger then go down the street to Burger King to buy french fries and then to Jack-in-the-Box to buy your soda and it will be less then buying McD’s number 1 combo.
No matter how legit (or not) this strategy is in reality, people have a strong sense of what is “fair” and transparent, and get angry when they encounter situations with businesses that violate their senses of fairness and transparency. I would argue that this is at the heart of much of the public distrust/dislike of the airlines.
I would suggest you give the piñata award to the airline revenue management teams. Delta’s in particular. These are the guys who came up with this bright idea. Not the sales teams. Their life is nothing short of hell right now. :)
hhegeman – That’s the point. The sales teams are the pinatas because they’re being batted around by their customers and their rev mgmt team.
Ah. Sorry. I had them confused with the Donald Trump pinatas. Got it.
What I don’t understand is why the airlines want to deliberately open up an incentive to use different airlines for the different flight segments. Not all of us fly enough for the frequent flyer points to amount to a pile of beans, and although I have my preferences I really don’t care which flying Greyhound I wedge my 6ft 4 frame into.
OT but if you want jackassier in the OED then, basically, you just need to send them examples of people using it. This blog would count. Get it used in a few newspapers and you’re sorted.
I would think that a corporate travel agency would be more interested in doing what’s best for there employer rather than the airlines. They can and probably should be booking the best fares for there travelers regardless of what the airlines think. Most business travelers just want to get from point a to b to c and I think are very capable of working with multiple PNR’s if needed. Unless the airlines are colluding by sharing passenger information they would never know if a passenger is using a different airline to go from point a to b and then to point c. Even then if it’s a legal flight it doesn’t matter nor is it any of there business. Only way there going to be stopped from playing all of these games is to hit them where it hurts the most which is in the pocketbook. Might be a bit more work on the travel company’s part to issue separate tickets but that is what there paid to do and I don’t think it would be a problem.
Dave – That’s not how it works for companies that use online booking tools. Yes, if you have a real person doing the work, they can get around it. But the big companies that use booking tools can’t just flip a switch and make that magically start happening.
And woebetide any corporate traveler who tries to piece together a multistop itinerary their way (saving proof of the $$$ it will save their employer vs doing it the booking system’s way) but then has to change it and gets hit with multiple change fees or segments not flown (if less than the change fee) that they have to explain to auditors or management.
Far easier and safer as a corporate grunt just to do what the online travel system suggests and not rock the boat.
Airlines deserve a Jackass Award for their pricing practices, annually, from the day they got deregulation to the present, and most likely, based on their history, to the day they go kaput.
No one, certainly not me, is asking airlines to file fares or price tickets to lose money. What I see, is airline filing fares to jab, thwart, or kill off competition, and any concern for customers for a fare level is entirely accidental.
You say UA has 22 coach fares from Washington, DC to Dallas. Now, I submit that this is just plain nuts, a disgrace, if you will!
Take UA IAD to DFW, Tues. Apr 26. UA’s booking page on its web site gives 27 flight options for that date, 3 nonstop (all operated by Mesa), with one-way fares on the morning and evening non-stops at $68.44, plus $19.26 for taxes and fees, $88.10 total. The midday nonstop fare totals $127. The lowest fares on the other 24 flights, all with at least one stop and/or connection and most on UA metal, range from $208 to $703.
The fare rules for the $88.10 fare (which is a 7-day advance purchase fare) take 8 screens, with fare rules saying the trip at this fare must commence by11:58pm, May 25, 2016. There are blackout dates, all of which have now passed.
Does anyone seriously believe UA has this $88.10 fare filed to make money, or is it one like most discounted fares that are there but to send a message to its competition. I note that the fare code for this fare is NAA07AWN. Does anyone see anything amusing about this code as AA is the main non-stop competition on this route and WN is big in the BWI/DCA-DAL nonstop market?
Someday, DOJ and DOT will find airline pricing is and has been a practice that is fatally flawed and must be stopped. Let fares be based on supply and demand, from one point to another, in a give cabin, on a given flight(s), on a given day, at a given time, over a specific route, as one-way, or as round-trip, whatever is lowest, however you fare it out. The fare at any minute is what the airline offering it says it is, and can change from one minute to the next given changes in supply and demand. If you want to price something $1 one minute and $1,000 the next, go to it. Of course the general rules for prevention of customer-discrimination and anything that might be necessary to prevent illegal anti-competitive practices or avoid anti-trust violations would be preserved. But, what we have today with air fare pricing, gone!
I’m predicting that this is going to cost the legacy carriers in the US. The legacy carriers in the US have steadily lost market share in the US for the past decade, while the low cost carriers have continued to to gain market share, and why not? If you fly Southwest airlines, you still get 2 pieces of luggage. JetBlue only recently started charging for checked luggage. Nonetheless, JetBlue charges 20 dollars for luggage while American, United and Delta want 25 dollars for luggage. Now they’re trying to deliberately make the flights more expensive. Well newsflash legacy carriers! You’re going to lose! Your service is inferior and you’re more expensive.
I just priced on American (April 24th), a multi-city trip around the USA: PHX – LAX – SEA – BOS – MIA – PHX. The cheapest fare came out to $4345.20 in Economy if purchased all at once. I then priced each flight as a one way ticket on the same flight numbers, and the price was $862.
PHX – LAX, aa5628 $49
LAX – SEA aa1832 $148
SEA – BOS aa6874 $332 (on alaska)
BOS – MIA aa2454 $109
MIA – PHX aa1471 $224