United Busts Creative Tix Users

By Ben Chapman

JULY 15, 2002 -- Agencies and companies are facing thousands of dollars in debit memos following United Airlines' recent crackdown on creative ticketing practices.

New tracking capabilities and continued acute revenue losses prompted United in mid-June to send letters to all the corporations and agencies with which it has preferred relationships, warning them to cease back-to-back bookings and issuing debit memos reflecting monies owed for transactions going back 18 months.

This latest skirmish between buyers and airlines is the result of price-driven purchasing that encroaches on the majors' embattled yield management schemes. United's move to recoup losses on back-to-backs comes on the heels of other carriers' recent efforts to curtail short-lived attempts by some travel management companies to regain commissions on domestic flights by booking U.S. segments through overseas locations.

In late May, Delta Air Lines, Northwest Airlines and US Airways announced their disapproval of commission payments on U.S. segments booked overseas for U.S.-based agencies. Delta threatened not only to recoup commissions paid on these bookings, but also to end its relationship with any agency that defied its decree. Northwest Airlines eliminated commissions paid to foreign agents on tickets for travel originating outside the country of sale, a move echoed this month by American Airlines eliminating in October commissions on domestic segments booked overseas.

The controversial practice of back-to-back booking-when two separate Saturday night stay tickets are purchased to avoid the high price of a one- or two-day ticket without a Saturday night-is prohibited by carriers' tariff rules, but still is practiced by some agencies, corporations and rogue travelers. United said it will issue debit memos to agencies for the full walk-up price of segments that are found to be part of back-to-back bookings, or make travelers pay the difference before boarding.

The aggressive tone of United's letter offended travel buyers who sit on both sides of the issue of back-to-back ticketing. Business Travel News obtained a copy of the correspondence sent on June 13 to travel buyers in the northeast, signed by United vice president of eastern sales Daniel Walsh. It reads: "As a result of an audit of tickets purchased for travel on United Airlines, we have detected a sizeable number of transactions that involve violations of United's tariff rules, commonly referred to in our industry as back-to-back ticketing. Participating in this practice is akin to visiting a retail clothing store with the intent to buy a white shirt, finding a red shirt on sale and switching the sale tag to the white shirt. Both situations involve a wrongful effort to obtain a discount to which the customer is not entitled."

Deb Vasseur, corporate travel manager at Greenwood Village Colo.-based environmental engineering firm CH2M Hill, said travelers in her program strongly are discouraged from back-to-back ticketing in company travel policy. Instances of back-to-back ticketing in her program are extremely rare or nonexistent, she said.

However, Vasseur on June 19 received a letter identical to the one quoted above from United vice president of western sales Sean Donohue. "The letter not only went to me, but to our CFO," Vasseur said. "Luckily, I received my letter first so I gave our CFO a heads-up to expect one, and I advised him that we do not practice back-to-back ticketing." Vasseur took some umbrage with the tone of the letter, as did other buyers contacted by BTN. "I did contact Mr. Donohue to say the letter was a little abrupt," Vasseur said. "He returned my phone call and said that was not his intention and perhaps the letter would have benefited from gentler wording."

Elizabeth O'Hara, United director of sales processes, said "Economic conditions have led us to look at this type of revenue leakage more closely," adding that United's recent enforcement of $100 change fees is another instance of revenue protection by the airline.

Additionally, O'Hara said the carrier has new technology developed with an undisclosed third-party that enables it to more efficiently identify violations of tariff rules. "Typically, we look first at the ARC locations, because they are the ones that have agreements with us to enforce our tariff rules," she said. "But we also have agreements with corporations to follow our fare rules. We can look at the problem from either angle." O'Hara said United has not classified the revenue improvement it expects through stricter enforcement of fare rules, but that the airline expects the gains to be substantial.

Typically, the cost of debit memos for back-to-back ticketing is passed back to travel buyers, said Lisa Miller, vice president of corporate account services and sales at Minneapolis, Minn.-based Northwestern Travel Management. Northwestern, like many other regional and mega agencies, recently received debit memos worth thousands of dollars for the full fares on back-to-back segments going back 18 months. "We received a shocking amount of debit memos from United in the past week," Miller said, "mostly for a few corporate accounts that used back-to-backs." Agencies said United is not playing fair by suddenly issuing debit memos on transactions that are months old. "United should give us a grace period on this," Miller said. "They said that back-to-backs are no longer allowed, and then they hit us with retroactive debit memos."

The head of another midsize agency that received nearly $100,000 in debit memos said, "Every other carrier brought this issue to the table within the past two years, but United seemed to look the other way. I know people in Denver were told by their sales reps to 'keep doing it until you get caught.' "

The megas are not immune to United's debit memos. Navigant International has received some debit memos for a few clients, even though president Thom Nulty said his agency does not condone back-to-back ticketing. Steve Shook, vice president of strategic sourcing at Carlson Wagonlit Travel, has heard an "internal buzz" about the United debit memos.

Agencies are in dialog with United right now trying to reduce the payments they will have to make on the debit memos. "United absolutely is pursuing collection," said the head of one regional agency that was slapped with $20,000 in debit memos, "but they've agreed to lower the amount we owe by 25 percent, and they will let us pay in three or four quarterly payments." Another agency contacted by BTN has negotiated to pay half of the amount it owes the carrier.

Meanwhile, hidden-city ticketing may have become creative ticketing's new cause du jour. "Some of the majors have matched America West's walk-up fares on competitive routes, like Boston-Phoenix," said one agency head, "but the majors' routes are not direct, so people are now getting off in Dallas or Chicago and saving substantially on their fares."

America West validated this claim. "United, for example, is getting aggressive with agencies in regard to hidden city ticketing, in part, because of their retaliation against us," said Scott Kirby, America West Airlines executive vice president of sales and marketing. "It's cheaper to fly to Phoenix than to any of their hubs."