Update: United will not honor these tickets
As I and others predicted, United will not honor these tickets. Here's what United's Director of Consumer Insights posted on Milepoint and Flyertalk:
Hi Everyone, over the weekend, we discovered a united.com programming error that allowed customers to obtain Mileage Plus travel awards to and from Hong Kong for as little as four miles roundtrip per person, substantially below published levels, which we disclose to customers. We have since corrected the error and will be in contact with customers who have tickets issued at the incorrect award amounts. Customers will be given the choice to redeem at the correct mileage amount or re-deposit their award with all fees waived. We regret any inconvenience this has caused you, and appreciate your understanding.
Shannon Kelly
Director, Customer Insights
United Airline
There's no mention of any gesture of goodwill, so perhaps United felt even more confident about some of the points I listed below. It does make sense that given the glaringly obvious mistake and the fact that these award tickets would not only be costly, but alienate frequent flyers and profitable customers that would otherwise book award, upgrade and revenue seats that were unavailable due to the glut of mistake awards. But I'm convinced that equally or more important to United is precedent. The last thing United wants is to set expectations that whenever there is a mistake fare, whether revenue or award, they will honor it. They're lucky that at least this time, with the nature of the pricing error, there was no way anyone could have believed this was in fact the award price. Had the mistake been a revenue ticket at half the usual price, the outcome likely would have been different.
[Original Post Follows]
Reader Sam asks why I haven't opined yet on the United mistake award glitch that until as recently as early afternoon Sunday was allowing people with insufficient miles in their United MileagePlus account to ticket itineraries to Hong Kong, for just 4 miles. Interestingly, people who had enough miles for the award were charged the full amount and had the miles deducted from their account; similarly, people who didn't have any United miles at all were only able to put the award on hold, and today at least some have had their held awards cancelled.
Before I get into the post, let me clearly state that although I have a law degree, I'm not a practicing attorney and this is not legal advice–it's purely my own opinion, and at that, there are many that have far more experience in the nuances of Department of Transportation regulations and with prior mistake fares and how they were resolved.
Scrivener's Error and Unilateral Mistake
Now, there is a Department of Transportation Section that *may* pertain (we'll get to that in a minute) but first, if this was purely a contract law issue, the best way to describe what happened would be scrivener's error: there was a clerical error, in this case giving a total of 4 miles, even though the correct number of miles for the award was also visible on the page. Not only was there this clerical error, or pricing glitch: it was obvious to all who “purchased” it that it was a mistake. This means that only United was mistaken here, not the consumers, so it was a unilateral mistake. Now, if the facts had been a bit different, say it was a revenue fare, and business class was pricing at $1800 instead of $3800, it wouldn't have been obvious to every consumer that this was indeed a mistake. With a 4 mile first class award and the regular award price on the same page, however, no one can make that argument with a straight face.
Are businesses obligated to honor a scrivener's error pricing glitch? No–legally speaking, a price is an offer, not an obligation. In practice, businesses typically write off the losses from those orders that actually got shipped at the mistake price, and for any orders that haven't shipped yet when they discover the error, they refund the customer, or give the customer a choice between a full refund or a discount off the product or service. Most businesses also have terms to protect them, noting that they are not obligated to fulfill orders that result from pricing errors, even if the orders are initially confirmed. That said, some businesses, such as Zappos, have honored major pricing glitches (in Zappos case, to the tune of $1.6 Million) even though they weren't legally obligated to, as a matter of principle and customer service.
Department of Transportation and 49 U.S.C. 41712 § 399.88(a)
Ok, you say, but the U.S. airline industry is its own animal and in any case is regulated by the Department of Transportation (DoT). In particular, the Department of Transportation rule on Enhancing Airline Passenger Protections (EAPP#2) has a Section 399.88(a) that looks relevant:
“Section 399.88(a) states that it is an unfair and deceptive practice for any seller of scheduled air transportation within, to, or from the United States, or of a tour or tour component that includes scheduled air transportation within, to, or from the United States, to increase the price of that air transportation to a consumer after the air transportation has been purchased by the consumer, except in the case of a government-imposed tax or fee and only if the passenger is advised of a possible increase before purchasing a ticket. A purchase occurs when the full amount agreed upon has been paid by the consumer. Therefore, if a consumer purchases a fare and that consumer receives confirmation (such as a confirmation email and/or the purchase appears on their credit card statement or online account summary) of their purchase, then the seller of air transportation cannot increase the price of that air transportation to that consumer, even when the fare is a “mistake.”
A contract of carriage provision that reserves the right to cancel such ticketed purchases or reserves the right to raise the fare cannot legalize the practice described above. The Enforcement Office would consider any contract of carriage provision that attempts to relieve a carrier of the prohibition against post-purchase price increase to be an unfair and deceptive practice in violation of 49 U.S.C. § 41712.”
[Bolding is mine]
Let's take a few aspects of this in turn.
Does This Even Apply?
Section 399.88(a) on its face does not necessarily apply to award tickets, although it doesn't explicitly exclude them either (although it is clear that the DoT does not regulate frequent flyer programs). While you could argue that an award ticket has a price, it just happens to be in miles rather than in dollars, the regulation is so new that there haven't been any other cases involving award tickets. The good news is that it looks as though we'll find out soon, thanks to this United mistake award pricing glitch.
Full Amount
Now, purchasers of these tickets will probably be quick to say that 4 miles was the full amount. It's pretty hard to argue that with a straight face though, even though 4 miles did appear in the total, given that the full amount of miles was given above it, on the same screen. And all of the purchasers knew that the full amount for the award ticket was much, much higher. 4 miles simply isn't a reasonable amount for this award, even if United had been running some kind of award sale. So in my view, the “full amount” condition simply isn't met.
Agreed Upon
Back to unilateral mistake–how could there be agreement when initially United was apparently unaware that the 4 miles was being offered as the total? That said, the fact that later in the section it says “the seller of air transportation cannot increase the price…to that consumer, even when the fare is a “mistake” does weaken this, since it implies that the airline need not “agree” in the usual contractual “meeting of the minds” sense.
Cannot Increase the Price
I get that the airline cannot increase the price. But is it obligated to go through with the purchase? No–in my reading of this, it can cancel a transaction made at a mistake price. What they cannot do, as it says in the second paragraph, is to use a contract of carriage provision that allows them to unilaterally cancel a ticket, and then reinstate it at a higher price. In other words, they cannot do a bait and switch, where they knowingly provide a low fare to lure you into booking a ticket, and then cancel it and price it higher. Or, even if the fare was a mistake, they cannot hold you to the ticket and raise the price on you.
Now, a more liberal interpretation of this would argue: even if the airline just cancels the transaction, it effectively is raising my price, because I cannot purchase a similarly priced fare anywhere. So, it will be interesting to see more elaboration from the DoT on what this really means–and this United mistake award will be a real life case study.
What Is United Thinking About This?
Naturally I have no insider knowledge. But if I were United, I'd be focused on these questions:
- Have we fixed the bug that caused this?
- What are the numbers? How many “bookings” were there and at what cost to us?
- What are we legally bound to do?
- What are our legal risks, if any, if we simply cancel all tickets that have not yet been used?
- How profitable/valuable to us as customers are the people who booked these tickets?
- What is our PR risk if we cancel all the tickets that have not yet been used?
I've no idea what the numbers are at stake, but naturally many of the awards were not on United metal or not just on United metal, and involved partners such as Lufthansa, for which United would have to pay for that award. So there could be a significant amount of real money at stake. And put yourself in the shoes of a United shareholder–wouldn't you pursue all avenues to void these tickets, of course with the least amount of negative publicity possible? Fortunately for United and unfortunately for the purchasers, there probably won't be a lot of public sympathy if these tickets get cancelled, the way there might be if the fares were good, but not crazy. Envy, yes, but sympathy and outrage against United (apart from those directly affected)? No.
While a 2010 WSJ Journal article noted that “United Airlines, Continental Airlines, Southwest, JetBlue and Singapore Airlines all say their policy is to not cancel tickets even when a mistake is discovered, no matter how large the error,” it's hard to see this as quite the same as the $1062 + taxes business class fare from LA or SF to New Zealand in 2007. While nobody familiar with airfares would imagine that the $1062 fare was anything but a mistake, you could still imagine a few folks buying the ticket thinking it was simply a fantastic promotion. But a 4 mile first class award to Hong Kong, especially with the correct number of miles required listed above it? Hmm…Not to mention, media relations' job is to make the company look good in whatever article is being written about it, and it is, after all, 5 years on from that New Zealand mistake fare, and the world has changed–for United, the airline industry, and the world economy.
So Will United Honor These Tickets?
Similar to most folks, I'd be very surprised if United honored tickets for anyone who hasn't yet travelled by the time they start contacting people. Here are my predictions:
- Those that have already flown will have their tickets honored (it's pretty unusual for a company to try to make a consumer pay something back for a product or service that's already been delivered)
- Those that had the full mileage amount deducted from their accounts will be able to keep those awards as is, but United will not refund any mileage just because the total said “4 miles” on the purchase screen. These customers will be able to cancel and redeposit without penalty if they choose not to keep the tickets.
- Those that didn't have any miles deducted due to not having enough miles in their accounts will have their tickets cancelled but receive some gesture of goodwill, such as extra miles.
Of course, if I'm completely wrong and everyone gets their tickets honored, what an incredible mistake award fare! And in that case, I'll be sure to write up some Hong Kong travel tips based on my trip there next month.
In the meantime, you may want to make sure you have enough United miles and Ultimate Rewards points that transfer 1:1 to United miles ready for the next opportunity.
Apply: Ink Bold Business Card – 50,000 points transfer 1:1 to United
Apply: Sapphire Preferred – 40,000 points transfer 1:1 to United
Although after Singapore First Class Bookable on United and First Class Star Alliance awards to Hong Kong for 4 miles (even though not expected to be honored, unless you already flew or are about to fly), how much better can the opportunities get?
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