Articles
09/04/2019

Hidden city ticketing: risks and possible forms of protection for airlines in light of the recent Lufthansa case

Hidden city ticketing is a practice increasingly used recently, which involves booking and purchasing a multi-city flight with an intermediate stop and then flying only the first flight, getting off at the layover city or continuing travelling on one’s own to other destinations.

In this way, a passenger exploits to his advantage the peculiarities of the “hub and spoke” model, by which airlines tend to convey air traffic to a single airport (hub) first and then to all other destinations (spokes). A direct flight to a hub airport is typically more expensive, while it is relatively easier to find a cheaper solution by buying a ticket for a spoke destination involving a stopover at a hub airport.

Indeed, it is not unusual that a connection flight from city A to city B – with a stop in city B – is cheaper than a direct flight from city A to city B.

German airline Deutsche Lufthansa AG recently filed a lawsuit in civil court against a passenger who had booked (and paid) a flight from Seattle to Oslo with a stopover in Frankfurt. More specifically, Lufthansa objected that the passenger had hopped off the plane in Germany, without continuing travelling to the final destination, saving a lot of money on the total price of the ticket (compared to the price of a direct Seattle-Frankfurt flight) [1].

That is why Lufthansa decided to file a lawsuit, coming to the extent of alleging breach on the part of the passenger. Lufthansa’s suit was dismissed in first instance but Lufthansa filed an appeal with a Berlin court, alleging breach by the passenger of the contract of transport, claiming the fare difference, including interest, as damages.

As is known, both availability and price of airline tickets are not based on the actual costs incurred by airlines to operate each individual flight but on the basic economic law of supply and demand: such market strategies are aimed at keeping both ticket price and load factor (i.e. the percentage of seats filled with passengers per each flight) high. Said parameter is crucial to determine the break-even point and, therefore, the economic sustainability of an air transport undertaking in the medium and long term.

However, the fact that airline ticket prices are not so much based on the distance travelled, but primarily on the law of supply and demand – influenced by certain strategic decisions made by airlines depending on load factor – can sometimes involve certain distorting effects on fares. Such distortions, exploited by consumers more or less legally, form the basis for the phenomenon called “hidden city ticketing”, which is becoming increasingly popular, also in consideration of the exponential growth of the procedures to book and buy airline tickets online.

It is not therefore hard to imagine the reason behind the airlines’ efforts to counter said strategy, which however seems hard to prevent. Different in this respect is the approach taken by airlines.

At domestic level, Article 4.5 of Alitalia General Conditions of Carriage makes no direct reference to hidden city ticketing, only providing that «If the passenger does not arrive at the boarding gate by the prescribed time, Alitalia will not be obliged to transport the passenger and may cancel the booking of first flight as well as of subsequent flights». However, such provision does not seem appropriate for preventing the phenomenon analysed here, for applying only to the purchase of return tickets (i.e. should the carrier cancel the booking for the second flight, the passenger will not incur any consequences, having decided ex ante not to use the second flight to the final destination). This is the reason why purchasing a ticket using hidden city ticketing strategy in most cases works only for those flying a one-way flight (and travelling without hold luggage, which is automatically sent to the final destination).

Likewise, ascribing any delay in take-off to waiting a passenger not showing up at the gate seems a possible but little-more-than-hypothetical strategy. In a nutshell, the extreme situation might occur that, against a passenger claiming compensation for delay, the airline goes to the extent of invoking, as an exempting circumstance or a cause outside of its reach, its having had to wait for the “shadow passenger” not showing up at the gate, which is very hard, if not impossible, to claim.

At international level, Rule 6, J), paragraph 2 of United Airlines’ General Conditions of Carriage reads: «The practice known as “Hidden Cities Ticketing” or “Point Beyond Ticketing” is prohibited by UA». Such provision too, albeit very clear and direct, seems however hardly applicable, since, by purchasing a ticket, a passenger merely acquires the right (and not the obligation) to use the transport service provided by the airline. This contributes to shed light on the reasons why the prohibition under examination is without any penalty.

To conclude, hidden city ticketing appears to be a side effect of the fare policies applied by traditional airlines in order to effectively sustain their economic model and the profitability of their investments against the increasingly aggressive business strategies pursued by low-cost airlines.

However, at least to date, hidden city ticketing would seem hardly prosecutable from a strictly legal standpoint. In the wake of the distortions created by fare policies drafted according to criteria based on the law of supply and demand, there is indeed some risk that users may in turn engage in distorting behaviour. Therefore, unless one expects some revolutionary judgment to come from German courts, it is likely that hidden city ticketing will become an increasingly common practice just like overbooking, i.e. the practice where airlines sell more tickets than the aircraft’s capacity in order to maximise their profits.

 

 

 

This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Filippo Di Peio.

 

 

 

[1]The passenger, arriving at Frankfurt, indeed boarded another flight to Berlin.

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