Was It Legal for American Airlines to Cancel Mistake Fares on Hold?

Yesterday I posted about a mistake fare on American Airlines that allowed you to fly from Washington DC to Beijing for just ~$450 round trip in Business Class. Other versions of the deal were also available to Shanghai, and I even read about people flying from the West Coast, though I was never able to replicate it.

Those that booked the flights last night and actually paid for their flights had their reservations ticketed. I have not read any reports of a ticketed/paid reservation being cancelled, and I think it’s highly unlikely that would happen given DOT regulations. This is nothing like the United Airlines fare of a few weeks ago that the DOT allowed cancellations for – this is rather clear-cut in being protected in my mind.

The more interesting question, however, is in regards to reservations that were on hold. For some background, the DOT requires airlines to provide one of two options to passengers buying airfare: A complimentary 24 hour hold OR the ability to cancel a booked ticket within 24 hours of the purchase. AA is one of the few that allows a complimentary hold.

American Airlines has cancelled all mistake fare reservations from last night that were on hold. People wanted time to figure out their schedules so they understandably made use of that option, only to wake up today and find their holds cancelled. I’ve only heard of one case where someone’s hold was intact and able to be ticketed today.

The reason I question the legality of cancelling the holds is rather simple: since the DOT either requires a free cancellation or a hold, one would thing that reservations made either way would be dealt with the same. It doesn’t make sense that you can cancel one and not the other. I’m not a lawyer by any means, but one would think that these should be treated the same way by the DOT.

And that brings up a slightly worrisome point – maybe AA is preparing to cancel the ticketed reservations. I think this is very unlikely, but watching this over the next few days will be interesting.

Oh and by the way, here’s a quote directly from the AA FAQ page (emphasis in the answer is mine):

Q: How do I guarantee my fare on aa.com?
A: Reservations placed on hold on aa.com will be guaranteed for 24 hours or until midnight the following day, whichever gives you more time. In the event that your reservation is canceled during that period due to advance booking requirements, please contact Reservations.

For example, if you are purchasing a fare with a 7-day advance purchase requirement and today is the last day to qualify, you must purchase your ticket today.

Even according to AA’s own rules, the hold is guaranteed with no special restrictions or text that says they “reserve the right to cancel” or something similar.

So let’s take a step back. If AA cancels the hold, that means they are required, by law, to have a 24 hour cancellation policy, which they currently do not offer. Which again means they are in violation of the law. In my non-legal opinion, AA is in violation of the law in any case.

Note that it doesn’t matter whether the base fare for your flight was $0 or not – in the eyes of the DOT the “surcharge” of $350 is considered to be part of the ticket price, so that’s what they’ll be looking at. Even if it was $0, it would be a sticky situation for AA.

There’s actually an easy way to have avoided this issue of holds being cancelled. If you booked via an OTA like Priceline or Orbitz, they offer the 24 hour cancellation option. Given that these fares were available on those websites, and that those websites also have their own in-house loyalty program that gives a few dollars cash back, you should have booked with an OTA.

People simply can’t think straight when a fare like this comes around, so I completely understand why many booked directly on AA.com and opted for the hold instead of booking on an OTA. But for future reference, always go to an OTA to book a mistake fare if possible!

Future Mistake Fares

My major concern is that these recent mistake fares are now causing the DOT to look at this rule more closely and interpret them differently. I think we can all agree that these laws were created to protect consumers against things like name changes or unfair price increases after a transaction. Those of us that book these mistake fares (myself included) are taking advantage of the law. We’re following the letter of the law but not the spirit of the law.

And from the DOT’s ruling on the last United mistake, in which the fare was on a specific internationanl website using a different currency, they essentially sided with the airline. The more these special cases come up, the more the DOT will see that the law isn’t being used as intended and may opt to change it. That will most likely be bad for us consumers.

Stay tuned for the complete fallout with this one.