GAO-01-831 Aviation Competition: Restricting Airline Ticketing Rules Unlikely to Help Consumers

Passengers on the same commercial airline flight—sometimes even those in adjoining seats—may pay fares that vary widely. This fact has led to dissatisfaction by some passengers who believe their ticket prices are too high and that airline ticketing practices are unfair. In an effort to reduce their cost of flying, some passengers have attempted to use " hidden-city " and " back-to-back " ticketing opportunities. Hidden-city ticketing occurs when a passenger books a flight to one city but purposely deplanes at an intermediate city. Though never intending to make the last leg of the flight, the passenger purchases the ticket because it is cheaper than a ticket to the intermediate city. Back-to-back ticketing occurs when a passenger buys two round-trip discounted tickets that include a Saturday night stay but either uses only half the ticket coupons or uses all the coupons out of sequence. This practice results in a lower price than would be possible by purchasing round-trip tickets that did not include a Saturday night stay. Most airlines expressly forbid the use of hidden-city and back-to-back ticketing. When passengers purchase tickets, they enter into a legally binding contract with the carrier to receive transportation between two locations at specified prices and to use tickets exactly as issued. 1 Tickets 1 This agreement is referred to as the " contract of carriage. " The terms of this contract between the passenger and airline are contained by reference in the ticket itself and in a separate document. contain a written reference to the terms and conditions set forth in this contract. The airlines view a failure to use tickets exactly as issued—such as by taking advantage of hidden-city and back-to-back opportunities—as a possible breach of contract for which the airlines can demand compensation. Members of Congress have proposed several bills that would eliminate the prohibition imposed by most U.S. passenger airlines against hidden-city and back-to-back ticketing. 2 The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) required us to study the potential impact of legalizing these ticketing practices. 3 As agreed with your offices, in response, we assessed (1) the factors that airlines consider when setting fares; (2) the factors that create hidden-city ticketing and the pricing practices that foster back-to-back ticketing practices; (3) the potential effects on airfares and service, especially to consumers in small communities, of a legislative requirement to permit hidden-city ticketing; and …