Why multi-city airplane fares are suddenly soaring
The next time you try to buy an airline ticket with one stopover or more, you could pay twice as much as you expected.
Three airlines — American, Delta and United — quietly changed how they price multi-city tickets online recently, often displaying dramatically higher fares than they used to. Airlines say they've just closed a loophole that allowed passengers in the know to save a few bucks, but consumer advocates claim the airlines are making yet another concerted money grab.
Here's how it used to work: Say you wanted to fly from Newark, New Jersey, to Los Angeles for vacation and then continue your trip to San Francisco. Those flights used to cost about $592 when you booked them through an airline website as a single ticket. Now, the same itinerary will cost you about $1,311.
What's going on? Think of multi-city tickets as a puzzle, where you can combine a series of cities to form a complete fare. The airlines have changed the game. You used to be able to combine the pieces into a single fare with no extra cost; now when you combine them, you get a more expensive ticket. The only way to get that $592 fare on the Newark-Los Angeles-San Francisco route would be to book them as separate tickets — but the airlines' websites don't let you know you have that option.
"All of the three major carriers' multi-segment itineraries are pricing significantly higher when booked online as one ticket, versus if each segment was sold separately," says Peter Vlitas, senior vice president of airline relations for Travel Leaders Group, one of the nation's largest travel-agency companies.
"The three major U.S. airlines may have just provided the traveling public with the best argument for using travel agents in decades," he adds.
Change sparks charge of unfair practices
To some observers, the changes are warning signs that a once-competitive industry has resorted to collusion to raise its profits. Although the airline industry denies it is doing anything improper, there are calls for an investigation.
Airlines describe the move as nothing more than a routine system change dictated by a competitive marketplace. "Airline customers benefit immensely from the intense competition in the airline industry," says Vaughn Jennings, a spokesman for Airlines for America, an airline trade group. "As with any consumer product, it's the marketplace that ultimately determines the price and service offerings."
But not everyone agrees with that assessment. Sen. Robert Menendez (D-N.J.) last week called the airlines' actions "unfair and deceptive" and urged the Department of Transportation to investigate.
Unfortunately, there is unlikely to be a public outcry over the increased fares. Pricier multi-city tickets are more likely to affect business travelers, many of whom are on expense accounts, than leisure travelers. Also, complaints about too-high airfares are fairly rare, at least from this consumer advocate's perspective.
That's because passengers generally don't have anything to compare their ticket prices to. In the case of the multi-city fare, the airlines' websites offer consumers no hint that there's a separate-ticket option that would save them money.
But there's a bigger problem: How could the three remaining legacy airlines, who together hold a commanding market share, happen to do this at almost exactly the same time?
"American Airlines, Delta Air Lines and United Airlines may have coordinated on a complicated and comprehensive scheme to change airfare rules," says Kevin Mitchell, founder of the Business Travel Coalition, which represents business travelers.
Already under investigation ...
It wouldn't be the first time major airlines stood accused of working together in violation of the law. Last summer, the Department of Justice confirmed it was investigating possible collusion among major airlines to limit available seats, effectively propping up airfares. A department spokesman confirmed that investigation remains active.
Mitchell says it's highly unlikely that the market forces Jennings spoke of led to the latest changes. In order for that to have happened, airlines would have had to look deep into the fare databases in a "complex and far-reaching way" and probably would have needed considerable time to analyze the data and decide what to do. This change happened too quietly and too quickly for that.
Although this relatively obscure pricing change isn't likely to affect your next vacation, the next change — or even the previous one — could. And the fact that critics are accusing the domestic airline industry of collusion yet again suggests that the industry, which is down to just three major airlines plus Southwest, may not be as competitive as it claims to be.
Meanwhile, Namrata Kolachalam, a Department of Transportation spokeswoman, confirmed that the department received Menendez's request for an investigation. "The department is reviewing it and will respond back directly," she said.
It should be an interesting summer for air travel.
Christopher Elliott's latest book is "How to Be the World's Smartest Traveler" (National Geographic). You can get real-time answers to any consumer question on his new forum, elliott.org/forum, or by emailing him at firstname.lastname@example.org.More from MoneyTalksNews:
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