American Airlines Suing Skiplagged Over Loophole It Uses To Find Cheaper ‘Hidden’ Fares

Topline

American Airlines filed a lawsuit last week against Skiplagged, a travel website that helps passengers find cheap flights through “hidden cities,” a so-called loophole in the industry’s ticket pricing system that can help passengers save money but has airlines up in arms.

The American Airlines logo is seen atop the American Airlines Center in Dallas, Texas, Dec. 19, … [+] 2017. On Thursday, American Airlines filed suit against Skiplagged, a travel website that sells tickets that let people save money by exploiting a quirk in airline pricing, accusing the website of deception. (AP Photo/Michael Ainsworth, File)

Associated Press

Key Facts

To use this loophole, customers buy a ticket on a multi-leg journey with a layover in the city they are trying to get to, even though that journey has a final destination elsewhere, and simply leave the airport during the layover instead of getting on the next flight.

Doing this is often cheaper due to airlines’ pricing schemes: The companies want to entice customers to purchase multi-leg journeys that are more burdensome for travelers but more efficient for airlines that route travelers through their hubs.

Skiplagged operates an entire website designed to help customers find these cheaper options, allowing them to book flights directly through its website.

In its lawsuit, which was filed in federal court in Texas on Thursday, American Airlines is arguing that Skiplagged “has no authority to form and issue a contract on American’s behalf,” and says that “every ‘ticket’ issued by Skiplagged is at risk of being invalidated” because the company purchases the ticket from American Airlines pretending to be a regular consumer, a violation of the company’s terms of service.

The airline alleges that the site “often charges consumers more than if they had booked a ticket directly with American or through an authorized agent of American,” including by charging a $10 or 10% fee on top of American’s advertised fare.

American Airlines’ lawsuit also accuses Skiplagged of illegally displaying its trademarked logo and name to sell tickets, which it said falsely suggests American endorses the practice and will help customers if problems arise.

Neither American Airlines nor Skipplagged immediately responded when Forbes’ reached out for comment.

Surprising Fact

By reviewing prices on both Skiplagged and American Airlines’ websites, Forbes was able to identify a number of flights in which Skiplagged was able to offer lower prices through this “hidden cities” strategy, but these cheaper prices are only possible on certain trips. Those trips are clearly marked and prominently advertised on the website. In addition to these cheaper tickets, Skiplagged allows consumers to buy normal flight tickets on its website.

Key Background

Skiplagged was founded in 2013 by then-22-year-old Aktarer Zaman who was born in Bangladesh but grew up in New York, according to a profile of Zaman from CNN. Zaman said the website was initially a side-project, but he eventually devoted his full time to it. He explained that the “hidden cities” strategy long predates his website, but prior to Skiplagged, there was no single accessible place to find these cheaper tickets. Skiplagged has been sued by airlines before. In 2014, United Airlines sued the company on similar grounds as American Airlines, arguing that Skiplagged is “unfair competition” that promotes “strictly prohibited” travel. However, in 2015, an Illinois judge dismissed the lawsuit on the basis that Skiplagged did not operate in the jurisdiction of the court in which the lawsuit was filed. Additionally, Orbitz, a travel agency that had joined the lawsuit as a plaintiff, settled with Skiplagged in a settlement that involved Skiplagged agreeing not to redirect customers to Orbitz website or use Orbitz’s brands, logos, trademarks, images or other copyrighted materials.

Tangent

While the “hidden cities” strategy isn’t illegal, multiple airlines—including American Airlines—have said it violates their policies and are attempting to crack down on the practice, whether the customer purchased the ticket on their own or through a third-party like Skiplagged. In July, American Airlines banned a Florida teenager from its airplanes for three years after it discovered the teenager was employing the tactic, Business Insider reported. Additionally, in 2018, Lufthansa sued one of its passengers who purchased a flight from Seattle to Oslo that connected in Frankfurt, but disembarked and left the airport in Frankfurt. For this reason, Skiplagged includes an “angry airlines” warning ahead of any purchases that tells customers “airlines don’t like when you miss flights to save money so don’t do this often.”

Crucial Quote

“Find flights the airlines don’t want you to see,” reads Skiplagged’s website. “We’re exposing loopholes in airfare pricing to save you money.”

Chief Critic

In its lawsuit, American Airlines describes Skiplagged as “a middle-man improperly inserting itself between American and flight consumers” that “employs unauthorized and deceptive ticketing practices.” The airline also said: “When things go wrong with tickets booked through Skiplagged, American gets blamed, even though those problems are the direct result of unnecessary complications caused by Skiplagged’s improper practices.”

What To Watch For

How the lawsuit progresses. American Airlines is seeking a permanent injunction to ban Skiplagged from selling tickets on its flights and using its trademarked logo and name, an accounting of all sales of American Airlines’ flights made by Skiplagged and damages the company alleges it has incurred as a result of Skiplagged’s business model.