Matthewonlive and let's fly

United Airlines’ 4-Mile First Class Fares: The Spirit Versus the Letter of the Law

A flurry of commentary has poured forth today over the 4-mile United Airlines First Class award redemptions to China available briefly yesterday on united.com. As a frequent traveler who has cashed in on many “mistake” fares in the past and as a person with legal training in the realm of contract law, I must add my two cents to this controversy.

United has responded, stating that they will not honor the fare:

Hi Everyone, over the weekend, we discovered a united.com programming error that allowed customers to obtain Mileage Plus travel awards to and from Hong Kong for as little as four miles roundtrip per person, substantially below published levels, which we disclose to customers. We have since corrected the error and will be in contact with customers who have tickets issued at the incorrect award amounts. Customers will be given the choice to redeem at the correct mileage amount or re-deposit their award with all fees waived. We regret any inconvenience this has caused you, and appreciate your understanding.

Shannon Kelly
Director, Customer Insights
United Airlines

(a different outcome than their statement to the Wall Street Journal that the airline always honors fare errors)

There is a fine line to be drawn between a plausible fare sale and an outright, clear, and unequivocal error. Finding that midpoint can be arbitrary and extremely controversial, pushing me to argue in the past that an airline should honor all fare mistakes, period. But I just do not feel comfortable arguing that United must honor a normally 160,000-mile ticket sold for four miles.

I was quite tempted to jump onboard this deal—I even considered flying to China yesterday, just for the fun of it. But I ultimately held back, opting neither to book it for myself or blog about it. Unlike the currency conversion error that led to some great premium-class deals out of Burma, this one really felt like…stealing.

But I am not going to go so far as to call those who took advantage of this offer thieves. Many do—and I think Rapid Travel Chai, for example, offers a compelling argument why it is shameful to take advantage of deals like this—but emotions aside, United offered a round-trip fare for eight miles in first class to China and thousands of people decided that it was a bargain worth taking. (What a surprise!)

For all the nitty-gritty legal arguments that there was no mutual assent to the offer or no “meeting of the minds,” united.com serves as United’s agent and it does not strike me as all that compelling to legally excuse UA’s careless error.

So we are left with an ethical quandary in this case. My reading of the new DOT guidelines on mistake fares seem clear to me—I agree with Lucky that under the letter of the law, UA is on the hook to honor these fares.

But forcing UA to honor these fares violates the spirit of the law and ultimately I believe rules should serve as guidelines rather than steadfast dictates. If I were a DOT officer and this case was placed on my desk, I would not be inclined to fine United into compliance. This does not mean the rule loses its luster—it simply means that this first draft of the rule requires some clarification.

Finding a proper balance will not be easy. I believe there does need to be a high level of consumer protection when it comes to voiding purchased airline tickets, but in cases like this I think a strict reading of the law goes too far and hurts the very people intends to help: UA could respond to this “hit” by imposing fuel surcharges on award redemptions.

I envision some sort of 24-hour rule that applies to both airlines and consumers. A strict multilateral 24-hour cancellation penalty is not palatable—especially when people are purchasing last minute revenue tickets—but a compromise in which an airline could cancel under only very limited circumstances (taking into consideration time period and fare paid versus average/historical fare) may be a solution.

Ultimately, if the customer pushed hard enough (and many are talking about suing already) I would honor this fare if I were United. but I would also close out that person’s MileagePlus account. For people to claim to be “valuable” to United but kick them while they are down in this situation signals to me that United does not need them as customers.

There is no doubt I have blood on my hands—I did take advantage and ultimately flew on the Swiss Air $0 business class fare to Delhi in 2009, but my opinion is changing. I must concede my attitude here may be clouded by the fact that United has done so much for me over the years. Despite the rocky merger since March, United continues to be my preferred airline for a plethora of reasons, including for its mileage program, route network, and price. So it really could be that I simply don’t want to kick a friend while he is down, but it does make me think differently about airline mistake fares in general.

Maybe we shouldn’t be so fast to hop on the bandwagon next time…how would you feel if you meant to sell something for $160,000 but let it go for $4? Not quite the same, I know, but in this case was there ever even a modicum of possibility that this was just a sale? Certainly not.

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Comments

#1
AK July 17, 2012 at 08:18 pm

I was thinking just about this, "the letter" vs. "the spirit."

To me, the spirit of the law is to guard against the situation that happened with Korean Air and Palau last year, where a Y fare was filed for about $550. While it was a mistake, it wasn't necessarily an egregious one, since they ended up repricing correctly at about $1200. KE ended up canceling the tickets 2 months later.

On the other hand, this 4-mile fare was a clearly egregious mistake. Not only that, but UA has responded in a rather quick manner. Yes, people who flew yesterday will have their fares honored, but those seem to be extenuating circumstances.

#2
Mark L July 17, 2012 at 08:20 pm

I think the rule should be strictly enforced in this situation - a bit of pain now for one airline would go a long way toward ensuring that it never happens again. Part of the problem is that these sorts of mistakes have been tolerated and poor recovery from them has been tolerated. There's not enough pain on the part of the people actually responsible for this occurring to ensure solid systems are in place to prevent recurrence.

I could see mitigating the fines somewhat if there is truly a completely unforeseen issue, but someone rolling bad code into production or keying in the wrong mileage charge doesn't qualify.

#3
Aaexplat July 17, 2012 at 09:26 pm

Thanks for not broadcasting this deal to your readers. In that way you stand out positively from most of your peers.

#4
arcticbull July 17, 2012 at 10:43 pm

I dunno, when you're dealing with award space like this situation it's not the same as a revenue fare. This is space they were unlikely to sell period, and just made available for drastically reduced rates already. Chances are they carry the miles on their books at ~0.006cpm so these seats probably cost on the order of $1000. After your taxes and fees you're looking at $50, so you're not paying $950. Definitely less than the Burmese error fares ($31.50 for a retail of $5000-$15000).

In the long run if they let people fly, they're not going to lose much. Very few people booked partners, it's all UA's own space. Space they're flying you on these fares at incremental cost of carriage. They never sell a whole F cabin. So these are just one of the empty seats. If I had to guess the actual cost to carry for UA (neglecting not getting those miles off their books) is $200. And people paid $50.

I think it would be kind of lame if they didn't honor, as cost to carry will be low, and technically they're supposed to by DoT rules. And who knows, if they do a good job they may encourage some people to pay next time -- or at the very least generate some good will. That's the other side of this fight for me.

The problem with treading a "fine line" is that someone has to be responsible for judging which side things fall on. That creates enormous potential for confusion and problems. Having a "bright line" rule which is clearly defined is, IMO, better for everyone.

The onus is on the carrier to make sure they get it right the first time. If they don't then they pay for it. That's not an invitation for folks to exploit the carrier errors so much as it is an invitation for the carriers to put the proper systems checks in place to make sure they don't screw up.

It is also worth noting that mistakes like this likely were not the primary target of the DoT rules, mostly because they are relatively rare. The real targets IMO are the tour companies and charter/scheduled charter operators who would book vacation packages for customers and then try to change the price on them at the last minute. The major airlines are also affected, but I do not believe they were the primary target.

Yes, this was an egregious mistake. But if it isn't enforced then what does that say as a precedent? Not good things for consumer protection IMO.

Also, there's still no guarantee that the DoT will decide in passengers' favor on this one. More likely than it seemed 12 hours ago, but still no guarantees.

And it's not as if the purportedly injured customers just happened to wander in on this in the course of their regular travel planning. Imagine what would happen to 99% of businesses if they had customers constantly seeking to screw them with the energy of airline customers. For all their management failings, it is pretty impressive, what with their 24/7 open online systems, that this so seldom happens.

#7
Roland July 18, 2012 at 03:36 am

Thanks Matthew! This is why you're my favourite blogger.

#8
as219 July 18, 2012 at 10:30 am

Matthew,

I'm normally a big fan of your blog and your insights, but you've really blown it here. I believe you need to think about this a bit more, then clarify your comments above.

To be clear: Smart, ethical people can disagree as to whether (a) it is "okay" for pax to attempt to take advantage of fare mistakes and (b) airlines should honor the fares as a matter of law and/or good business practice. That's fine. But with all due respect -- and I mean that sincerely -- the level of hypocrisy you display in this post is breathtaking.

Let's start with your admission not only that you've obliged yourself of multiple mistake fares in the past, but you've done so when there could be no conceivable way the fare was legit (i.e., the $0 LX "sale"). Yes, Matthew, you do have "blood on your hands" as you put it.

Now let's go back to the part where you write "But I am not going to go so far as to call those who took advantage of this offer thieves." I understand you're reacting to Rapid Travel Chai's post, but honestly I'm not sure how else to read this other than your saying "I'm not prepared to say that those who took advantage of this are law breakers, but they're certainly highly unethical people," because the remainder of your post makes exactly this case.

Well, Matthew, if you feel that way -- you seem to have had some kind of change of heart -- then frankly you have a perfectly easy way to handle the situation: Send LX a check to cover the cost of the flight that you "took advantage of", with interest (and do the same for any other flight you took when you knew perfectly well the price you paid was a mistake). Unless and until you do that, you don't have an ethical leg to stand on and shouldn't be saying, implying or in any way hinting that there's anything wrong with other people doing exactly what you youself have done.

To be clear, I wouldn't at all mind your having said that because of your personal change of heart, you weren't going to jump on the HKG situation. As I said, different people will have different perceptions and beliefs about mistake fares. But when you veer into the realm of moralizing ("forcing UA to honor these fares violates the spirit of the law and ultimately I believe rules should serve as guidelines rather than steadfast dictates") and preaching ("Maybe we shouldn’t be so fast to hop on the bandwagon next time…how would you feel if you meant to sell something for $160,000 but let it go for $4?") when others do the very same thing that you have not only done but advocated multiple times on your blog...now we're talking about something else entirely. For example, just to take one quote you from your blog from April 2010:

"When airlines frequently offer $0 base fares or other sales to draw in customers, how are we to know a fare is a mistake or just a good deal? We don't. And even if we 'should have,' the ramifications of allowing airlines to cancel tickets at will presents a far greater problem than the faux moral outrage of a newspaper columnist questioning the ethics of those who take advantage of fares that airlines file."

You didn't just believe this stuff; you went so far as to publically advocate it. Now that people follow your advice, you basically call them unethical.

But the worst bit in your post is the suggestion that a reasonable solution to the HKG situation is for UA to honor the tickets, then basically "fire" the customer by closing out his/her M+ account. Aside from the fact this hypocrisy speaks for itself -- I wonder aloud whether your net lifetime spend is in the black when you subtract the value of all the mistake fares you've capitalized on -- this statement honestly makes me wonder whether as a blogger you've left the realm of passenger advocacy altogether. Maybe the airlines should all cancel your accounts for all the past mistakes you jumped on. How would you feel about that?

If I've in any way mischaracterized or misunderstood your post, I welcome your clarification.

Sincerely, as219

@as219: Thanks for taking the time to write all that--I really do appreciate your comments.

I think my post was all about the struggle with hypocrisy I am going through right now. I will not run away from the fact that my actions and words do smack of blatant hypocrisy, yet look again at what I wrote.

This particular fare mistake hit close to home, because it was on the airline that I have flown over 800,000 miles on the last eight years. When I said I couldn't kick a friend when he was down, I meant it, but the implied second half of my statement was that had this been AA or DL who had made the error, I would likely have cashed in without thinking twice. And that bothers me.

Usually with fare mistakes I can find ways to rationalize why I take advantage. Take the RGN fare, for example. Airlines were warned about the currency re-valuation and thought we do not know exactly what happened, we know that many airlines just ignored the warning and for the first time ever, we saw an almost industry-wide pricing error. Maybe it is twisted logic to say they were "asking for it" but I see this situation differently than the United fare error, where some system glitch caused this problem that was quickly plugged and customers were promptly notified of the error. (The RGN deal was available for quite a few days...).

I will be argumentative and say I stand by my earlier quote, in the context of $0 economy class base fares with huge fuel surcharges thrown in, but I look at the mileage redemption thing differently. A $0 base fare is not outside the realm of probability but an 8-mile r/t to Asia award in "easy pass" first class is.

And as for my last statement about closing MP accounts: I still believe that is a reasonable compromise. FQTV accounts are a two-edged sword that have been a great boon to the aviation industry, but when abused an airline has the power to close out accounts. I think giving people the choice is a fair solution, and I will say this as well--had Swiss given me the choice to fly to India in business class and be banned from flying Swiss again or cancel the reservation, I would have taken the trip.

As for my relationship with United, the only fare "mistake" I recall taking advantage of was the SEA-EWR deal via Hawaii and South America. Do I feel guilty about it? No. Why? Don't know. It was in economy class during low season and I had a lot of open seats on each flights. But you could make the same argument here, I realize. Having said that, my spending on UA is definitely in the black, even when you factor in the skykits and bump vouchers. Because I keep track.

So in conclusion, I am still thinking this one out. But my gut reaction remains this particular fare error was wrong to take advantage of. And it will make me think differently about fare mistakes in the future.

Best, Matthew

#10
tri July 18, 2012 at 02:21 pm

Matthew - Im sort of in the "as219" camp here. He/she has made solid points to which I don't think you've truly addressed. How can you proclaim to have taken advantage of mistake fares in the past and will likely do so in the future, and yet take a moral high ground on this situation? I've flown on a fuel dump fare, as I'm sure you have. At what line do you draw your foot in the sand? Just b/c United has a powerful network which you've critiqued MANY times, why is this different from the Swiss deal? Because this United relationship will benefit you in the future? Why does it even matter what airline it is? If you have ever knowing booked a mistake fare, then you've treaded into what you now deem as "highly unethical". You shouldnt even have to rationalize it. Honestly, at what point is a mistake fare beyond rational? RGN deal... they asked for it? Come on. You could just as easily say that United asked for by not upgrading to proper IT equipment or have properly supported IT staff. United should at minimum contact those who have booked and offer an apology for cancellation, if cancellation is what they've decided to do. As of day three, they have not offered any reliable/personal response to these tickets. However, at the end of the day, I don't think we should expect any compensation.

@tri: I am not arguing I have the moral high ground, only that unlike mistakes in the past, I could not bring myself to capitalize on this one. I never used the term "highly unethical" nor do I think those who took advantage of it are. But mistake fares are an ethical question and I cannot make the difference between this fare mistake and the Swiss one any more clear: Swiss means nothing to me, UA means something to me. I am not saying that is right, but it is what it is.

Since it was so many UA very frequent flyers who took advantage of it, my point is more to say why kick a friend when is down then to condemn all mistake fares. But my last line of my hold posts true: I will think twice about mistake fares in the future.

#12
Nic July 18, 2012 at 05:06 pm

Having been on the ROR deal. I think the thing that bother me the most, was that it took them 2 months to cancel and an extra month to get my money back.
Do I expect UA or others to never have a glitch, NO. Errors happen all the time. UA came out pretty quickly with a communication and that makes a lot of difference from other dales and matched my expectations of what a company should do in these kind of situations.

#13
Anzhelika July 18, 2012 at 07:58 pm

@Matthew, RESPECT!

#14
mike July 20, 2012 at 05:24 am

I think that United should be punished. Especially if someone experienced detrimental reliance after booking an award (i.e. nonrefundable hotel reservations, rental cars, plans in China that cannot be changed, etc.). It is against against contract law if someone contracted for 4 miles yet already traveled prior to United's notice of antipatory repudiation and United clearly would be liable if they took the full miles in that instance.

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