Publish date:

Lawsuit's Progress Points to Hope for Frugal Fliers

Movement in a case involving a 'hidden city' ticket could mean that airlines eventually will be forced to change their ways.

Tired of paying too much for air travel? Fed up trying to understand the ever-changing fare structures and complicated pricing policies that exist, particularly in cities dominated by a single major carrier? You're definitely not alone.

The good news is, there's a chance the airlines may finally be forced to change their ways, according to travel attorneys and industry analysts familiar with four separate lawsuits challenging the ramifications from prohibitive pricing policies like "hidden city" ticketing that are pending against

Northwest Airlines

(NWAC)

,

US Airways

(U) - Get UNITY SOFTWARE, INC. Report

and

Delta Air Lines

(DAL) - Get Delta Air Lines, Inc. Report

.

Travel agents, corporate travel managers and pro-consumer activists have been yelling for years that sky-high fares charged by airlines that dominate certain hubs reek of conspiracy and monopoly pricing. But, until recently, consumers have continued to pay the price -- whatever it may be -- to fly where they need or want to go.

"It just amazes me how little legal action has been pursued, considering what the airlines have been allowed to get away with in terms of gouging the consumer," says Paul Dempsey, head of the transportation law department at the

University of Denver

. "The anticompetitive practices the airlines engage in would be tolerated in no other industry."

The first lawsuit -- Detroit attorney Nelson Chase filed it against Northwest in 1996 -- was given the precedent-setting go-ahead to proceed by federal Judge Gerald Rosen in Detroit in April. The other three lawsuits were all filed within the past month -- one by

Keystone Business Machines

and another by

BLT Contracting

, both based in the Pittsburgh area, and one by

Nitrogenous Industries

of Atlanta and Norman Volk of New York.

Judge Rosen will hear all four suits because each involves a conspiracy claim and each names Northwest as a defendant. Having several similar cases before the same judge -- whom one lawyer describes as "a little Napoleon anxious to effect change" -- can only help the plaintiffs' claims, says Paul Ruden, senior vice president of the

American Society of Travel Agents

.

According to Northwest and all of the other major airlines, travel agents who sell a "hidden city" ticket and travelers who purchase and use them are violating the terms spelled out in the "contract of carriage." Hidden city, or "point beyond" tickets, as they are sometimes called, refer to those purchased for direct flights from point A to point C via the carrier's hub (point B). Such routings are typically cheaper than those for nonstop flights to or from a hub, simply because there are more ways to get from point A to C than from point A to B.

TheStreet Recommends

Chase filed his suit after his travel agent was slapped with a $600 debit memo penalizing the agency for selling him a ticket from New York to Columbus via Detroit -- for hundreds less than Northwest's going rate for a ticket from New York to Detroit. He stands by his argument that it is the travel agent's duty to represent the traveling public, and if a routing is available for sale, he or she should be able to sell it without any repercussions in the form of fees or ruined business relationships.

If consumers purchase a product, they should have the right to use all, part or none of it, maintain the plaintiff's lawyers, and this is exactly the point they will seek to prove if and when they get their day in court. The airlines argue that a ticket is not a product, but a contract with terms that must be fulfilled (including agreeing to fly each segment of the trip so as not to leave them with an empty seat that could have otherwise been sold to someone else).

For the most part, only the airlines seem to see it this way. "It is no different than if you buy a six-pack of soda because it's cheaper than the two-liter bottle, but decide you only want to drink four of the cans," says Lucy Hirleman, owner of Newfoundland, N.J.-based

Berkshire Travel

. "Who's going to tell me I have to finish every drop from every can? That's absurd."

It seems especially absurd when the airlines themselves created these loopholes. As a consumer himself, how can the judge help but question the legality of a policy that forces consumers to use an entire product that they have paid in full for?

For their part, the airlines argue that the high prices charged for hub tickets are countered by a proportionate amount of low-fare discount tickets, and that absent the ability to charge higher fares for the high-demand flights, they would be forced to raise leisure fares. However, should Chase and the other plaintiffs win and the airlines are forced to change their ways, analysts see no reason consumers should fear instant fare hikes. Northwest spokesman Jon Austin said that while the airline would have been happier with a dismissal, it is still confident the case is baseless. The other airlines named as defendants in the four suits declined to comment.

Regardless of what they claim, the major airlines will never get away with across-the-board increases, thanks to low-fare competitors like

Southwest Airlines

(LUV) - Get Southwest Airlines Co. Report

and soon-to-be-launched

New Air

, who will keep them in check.

The airlines' claim that they need to charge higher prices at their hubs to balance out the others is "just a bogus way of justifying the stupidity of the pricing system," Hirleman says.

The fate of airline pricing rests largely in the hands of

Garwin Bronzaft Gerstein & Fisher

, the New York firm representing the plaintiffs in all four cases. The next step is discovery, during which time they will seek to uncover proof that "absent the airlines' policy preventing the sale and use of hidden city tickets, travelers could easily circumvent higher hub fares and save hundreds of millions of dollars." Given the level of scrutiny airlines are already under by pro-consumer lobbyists and legislators on Capitol Hill, coupled with increased angst about rising business fares, it doesn't seem like this should be too tough to do.

As with any major court case, nothing will happen overnight: Lawyers familiar with the pending suits don't expect a trial to begin before the end of next year. But most industry observers feel the long-term ramifications will be worth the wait. "Having an anticompetitive claim before a federal judge, as opposed to easily influenced legislators on Capitol Hill, is like the difference between stepping into the ring with

Pee Wee Herman

or

Mike Tyson

," says Kevin Mitchell, the president of the

Business Travel Coalition

. "This could essentially knock out monopoly hub prices and change airline pricing as we know it."

Stacy H. Small is the Senior West Coast Editor for Travel Agent Magazine. She is also a freelance writer for publications including Conde Nast Traveler and National Geographic Traveler. At time of publication, Small did not hold any position in the stocks mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Small cannot provide investment advice or recommendations, she welcomes feedback at

stacysmall@aol.com.