Over the past few days quite a few of my friends have dropped me a message, as they saw reported in the news that Lufthansa are suing a passenger for dropping the last sector in an itinerary.
I originally wrote about this case back in December 2018, and my article also touched upon a couple of other cases in the EU that are similar.
Lufthansa lost in court and are now appealing the verdict. Which I think is brave of them.
Given I’ve had so many comments from friends, I thought it was worth re-visiting this in a little more detail, touching on the quite bonkers world of airline revenue management, where you pay more for less.
The crux of the matter is airlines want to protect the revenue premium that they can charge for non-stop flights.
This case involves Lufthansa, but let me use the example of London to New York for simplicity. There are essentially just three airline groupings flying the route non-stop, and they all charge a premium for the privilege of flying non-stop. Even more so if you want a flexible ticket which you can change to the next available flight. Businesses will have corporate route deals which reduce the costs, give extra flexibility, or given them a percentage cash back if they meet a minimum commitment (for example).
Flying non-stop is the quickest route, and thus because a lot of business travellers value their time, airlines charge more the convenience. And the market tends to pay it.
In order to compete with non-stop flights, airlines will charge lower prices for connecting flights. It’s less convenient to make a connection, so it’s generally less expensive. British Airways has to complete with Air France who fly non-stop Paris to New York, so a Paris to London to New York fare is typically cheaper, than the Air France non-stop equivalent.
So when you buy a fare like that which involves a connection, Paris to London to New York, have you bought a Paris to New York ticket (as the airlines would argue), or have you bought a ticket that involves a number of flights in sequence? Surely the answer is both?
This is quite often called ‘Hidden City’ ticketing. I’m buying a ticket to a place where I don’t want to go, but through somewhere I do want to, which is where it becomes a ‘hidden’ city.
Taking that Paris to London to New York ticket example, if Lufthansa prevails, I could fly Paris to London to New York, and if I decided not to return at all, they would be able to charge me the difference between a one-way and a return. Again, air travel being bonkers means that a one-way ticket can cost *more* than a return.
How would an airline calculate what they were to charge me? Would that be the difference at the time I booked the flights, or when I travelled? How do I know when I book the ticket what the penalty is? I know if I buy a non-refundable ticket because I’m told that. I know if I’m buying a non-changeable ticket, or what the change fee is, because again, the airline websites typically tell me.
What’s to stop airlines changing their fare rules to penalise passengers and creating specific higher fares in case passengers miss their flight, specifically for the purpose of penalising them?
I’m not going to focus on the perceived legal issue here. I’m not a legal expert, let alone in German civil law, so will let those eminently more qualified than me pass judgement on the merits of the case.
Particularly with premium leisure travellers, I think the trick that Lufthansa are missing is that most likely, passengers wouldn’t make the journey at all if they paid the ‘full’ price of the non-stop flight. After all, the reason that someone may travel many hundreds or thousands of kilometres out of their way is to get a better deal.
I know that personally speaking, perhaps being a bit of a diva now, if it’s long-haul over eight hours, I’m exceptionally unlikely to want to travel anything less than business class. I’ll tolerate premium economy if I have to, but if it’s economy I simply won’t travel.
By having these less expensive, but more inconvenient fares, the airlines are quite likely to be driving more travel to themselves, as opposed to losing revenue for those passengers taking a non-stop flight.
Business travellers will fly direct anyway, and will be sticking to their corporate policies so there’s no (or little) harm done to that market.
This is exactly the edge case the frequent flier programmes are designed to incentivise. Their goal is not to reward the frequent business traveller that has to travel for work (although they do that too), but to get people who wouldn’t ordinarily travel, to make an extra trip. If they trigger another level of their programme, earn some miles (which the airlines control when they are redeemed) or earn an upgrade award, then that just feeds the habit.
I’m pretty confident that if these lower priced business and first class, but inconvenient trips weren’t about, passengers would either travel less, book a lower class, or travel a different airline.
Lufthansa are playing a very dangerous game here. If they win, they may end up driving a significant sector of their business away.