MIAMI — Several lucky American Airlines customers recently received a pleasant financial surprise when booking their itineraries. According to Airline Reporter, American apparently ran a number of “mistake” airfares on several international routes, featuring prices well below what travelers reasonably expected to pay. While American quickly caught the error internally, some fliers will now enjoy heavily discounted tickets for only about a tenth of their normal price.
In response to the news, American released a statement promising that it “will honor mispriced fares that were booked last week,” expressing hope that its “customers enjoy their experience with American and book with us again in the future.” Most of the inadvertently offered fares seem to involve travel to or from Brazil, although it’s not clear if other destinations were also impacted.
American did not comment on the source of the error, but it appears likely the problem stemmed from a transposed data entry related to the currency exchange. With a U.S. dollar artificially overvalued against the Brazilian Real, residents of Brazil – or at least those indicating a country of residence in Brazil – will travel astoundingly cheaply with American ultimately footing most of the bill.
The misstep occurs as American and US Airways continue to merge reservation systems, a process which will culminate in October as US Airways formally flies into the sunset. Potentially, the mistake fares may trace back to small hiccups from centrally compiling all of the data. The airline has preferred a more gradual approach to combining its reservation platforms, spreading the process out rather than flipping the switch all at once in hopes of avoiding major glitches. Still, the airline likely expects some minor slips during the rather complex process, which might have influenced its decision to permit the mistake fares, even while not compelled to do so legally.American’s decision to allow the mistake fares to fly, rather than cancelling the itineraries, stands in sharp contrast with United’s recent move to ground improperly priced tickets in a similar incident. In February, United accidentally sold several first-class trans-Atlantic tickets for as little as $51. The airline subsequently indicated it would “[void] the bookings of several thousand individuals who were attempting to take advantage of an error a third-party software provider made when it applied an incorrect currency exchange rate, despite United having properly filed its fares.”
While its merger with Continental dates back to 2010, United continues to hit pockets of turbulence with its reservation system, still plagued with errors. American’s allowance of the mistake fares may signal, at least outwardly, that the airline believes it has pinpointed the root of the issue, minimizing the overall damage. Strong confidence in expecting to avoid similar slips in future could make the temporary losses seem more bearable.
United’s distinction that its misquoted fares primarily resulted from a “third-party’s” miscalculation – American’s error resulted from an internal malfunction – could offer some importance in dissecting why the airlines picked two different approaches. Additionally, without knowing how many tickets American inadvertently sold, it’s very possible that United would have incurred a much more substantial loss had it chosen to let the mistake go, potentially leading it toward cancelling the itineraries. But as for American, the airline probably calculates that the reputational boost from allowing the tickets exceeds the loss it will incur from a few drastically under-priced long-haul flights. In an era of record profitability within the industry, this seems like a strategic long-term oriented decision, even though the Department of Transportation (DOT) would almost certainly let the airline off the hook.
Back in February the DOT laid a precedent on the issue, saying it would “not enforce the requirement for airlines to honor mistaken fares provided the airline demonstrates that the fare was a mistake and reimburses the out-of-pocket expenses of consumers who purchased the mistaken fare.” The DOT reasoned that consumers intentionally “[manipulated] the search process” to benefit from the low fares – similar to the condition under which fliers recently booked their tickets with American. The airline’s decision to permit the mistake fares without a legally compelling reason to do so may sway other airlines facing similar slip ups the in future.
A high degree of dependence on technology as has overswept the industry in recent years accompanies some level of risk, as highlighted by this situation. With some rather material sunk costs likely already overhanging whether the airline cancels its mispriced tickets or not, American went for the pathway carrying the most immediate financial hit and more long-term reputational support. As a result, several lucky fliers pouncing on the deal are headed south on the cheap.