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Opinion

American Airlines passengers are the real losers in Skiplagged lawsuit

Carrier should put goodwill above preventing customers from responding to market pricing.

A Texas jury ruled in favor of American Airlines last month in its lawsuit against Skipplagged, a company that facilitates and sells “hidden city” airplane tickets that save travelers money.

Skiplagging is the practice of purchasing airfare for a multileg trip when the intended destination is actually a layover city. It’s a consumer opportunity created by the way airlines price flights, putting a premium on nonstops and funneling travelers through hub airports.

The $9.4 million payout was split evenly between copyright infringement and lost revenue. No payout was made for trademark infringement, which was a foundation of American’s lawsuit.

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How Skiplagged will proceed remains an open question. Appeal is certainly possible, which means that the judgment may never even be paid out. The bigger question is whether this ruling will deter travelers who create their own hidden city itineraries from continuing such practices.

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That was likely the goal of American’s suit. This is one of the largest airlines in the world. It reported revenue of $53 billion in 2023. The $9.4 million payout represents less than 0.02% of such revenue. It is possible that the cost of the lawsuit will run more than this amount.

American wasn’t worried about losing revenue to tiny Skiplagged. Rather, it needed to draw a line in the sand on hidden city ticketing, and hope that the lawsuit ruling will communicate this point to other travel websites and travelers who want to save money using this ticketing practice.

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Yet hidden city ticketing is not something that travelers discovered in a vacuum. It exists because of how American and other legacy airlines price tickets and set their schedules.

Yield management is a field that analyzes supply and demand to set prices that maximize revenue. Two factors that complicate yield management are the hub and spoke system and how airlines compete on the same routes.

The hub and spoke system brings travelers into hub airports, where they connect to other flights. This gives travelers more options than if they relied solely on direct fights. To be fair, such a system allows airlines to serve small and medium-sized cities, a dynamic that is lost on many travelers.

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Each airlines has its own set of hub airports, where it dominates flights and effectively controls air fares. When an airline flies out of a competing airline’s hub airport, it will often require travelers to connect through its own hub. Since a one-stop flight is generally less attractive than a nonstop flight, the cost of the one-stop itinerary may be lower than the direct flight. This fare reduction creates the opportunity for hidden city pricing.

Such ticketing gymnastics can be quite complicated, and websites like Skiplagged make it easier for travelers to find routings that result in lower ticket prices.

American hopes that the lawsuit ruling sends a message that companies like Skiplagged now have a weaker leg to stand on. Whether this stops companies from offering tickets in the future, or changes how they offer tickets, remains an open question.

It also has implications for hidden city ticketing on other airlines.

What the ruling does not do is ban hidden city tickets. The practice itself is not illegal, even if airline Contracts of Carriage may forbid it.

The ruling against Skiplagged does nothing to change the fact that hidden city ticketing opportunities exist, and will continue to exist, as a direct result of how airlines design their flight schedules and price tickets. If anything, hidden city ticketing is a self-inflicted wound by the airlines. It is an indicator that ticket pricing models work, and that the scraps of hidden city tickets issued are nothing more than noise in their revenue stream.

The irony in this court decision is that the people who benefit the most from hidden city ticketing are those who live near hub airports. They have the most to gain from the practice. They also provide the most revenue to airlines.

Policing hidden city ticketing with rules and lawsuits does nothing to build goodwill with passengers. This is why when flights go awry, passengers have short fuses with airlines, rather than giving them some slack. A more friendly relationship would go a long way to building bridges rather than creating barriers with the flying public.

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Another path was available here. American could have let hidden ticket passengers fly unscathed but forced them to accept the consequences of itinerary disruptions. Turning a blind eye to hidden city ticketing rather than attacking a small business like Skiplagged would have been a smarter business decision.

Sheldon H. Jacobson is a professor in computer science at the University of Illinois Urbana-Champaign. He has researched aviation security for nearly 30 years, contributing to the technical foundations for risk-based security that led to the development of TSA PreCheck.

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