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Aviation competition : restricting airline ticketing rules unlikely to help consumers
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    NTL-AVIATION-Aviation Planning and Policy
  • Abstract:
    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. The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) required the General Accounting Office (GAO) to study the potential impact of legalizing these ticketing practices. The GAO addressed the following: (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 (4) the potential effects on airfares and service of a legislative requirement to permit back-to-back ticketing. Briefly, airlines maximize profits by setting fares based on the supply of and demand for travel in each market (i.e., a specific origin and destination) by passengers with different travel objectives. When setting fares for each market, a key factor that airlines consider is the amount of competition from other airlines offering similar "products" - scheduled air travel between two different points. Hidden-city and back-to-back ticketing opportunities exist because of the way in which airlines maximize profits by setting fares that differ according to the market and type of passenger.
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