'Gray market' for airline tickets fueled by rising cost of air travel

Business travel

December 24, 1990|By Tom Belden | Tom Belden,Knight-Ridder

On company bulletin boards nationwide, notices like this are proliferating:

"The Accounting Department has a non-refundable airline ticket

for travel between Philadelphia and Miami on Jan. 15. Let us know if anyone can use it."

The pleas are similar to those found increasingly in newspaper classified ads across the country -- some from ticket brokers, but most from individuals.

This is one of 91 such ads that appeared in a recent Washington Post:

"AIRLINE TICKETS 2 Roundtrip to Hawaii. Good through Sept. '91, $1,000/OBO (or best offer)."

The notices are evidence of a booming "gray market" in airline tickets among business travelers and vacationers, a market fueled by the rising cost of air travel and the growing use of non-refundable tickets.

Although consumers find the rule unfair, reselling or even giving away an airline ticket issued in one person's name to another person is against every airline's rules -- even though the ticket cannot be returned for a refund. Only an airline or one of its authorized travel agents can sell the carrier's tickets.

But reselling a ticket is not a violation of any federal or state law.

Although some airlines compare the risk of buying a non-refundable ticket to that of buying a concert ticket that has ,, no value if not used, in reality there is a big difference: The concert ticket can be sold or given away.

Despite that an airline ticket may have cost a lot of money, it is not the passenger's property, according to the airline industry. Rather, it is a contract for the carrier to provide transportation in exchange for a fare. The key "conditions of contract" are printed on the back of each ticket.

But in practice, airlines do not ask passengers for identification on domestic flights, as they do on international ones. The only exception usually is when a passenger is using a ticket bought at special senior-citizen fare, according to airline officials.

That means that as long as no suspicions are raised, a passenger using a ticket issued to another person for a domestic flight probably will not be stopped.

Indeed, the impracticality of policing private-sale tickets has helped make the market hot. It flourishes despite stern warnings from the carriers that a passenger caught using a ticket issued in another name will not be allowed to board unless the traveler antes up for another, full-fare ticket on the spot.

United Airlines, for example, discourages the practice by telling customers caught trying to use tickets bought from others that they are breaking federal law.

"That's total nonsense," said Cornish Hitchcock, a lawyer with the Public Citizen Litigation Group in Washington, a consumer-advocacy organization founded by Ralph Nader. "Airlines can't say it's illegal under federal law. They're only illegal under the contract."

Some airlines, despite not allowing anyone caught to board the plane, say the use of private-sale tickets is not a major concern because they do not believe it is widespread.

"We don't believe it to be a serious problem," said Northwest Airlines spokesman Doug Miller. "We do try to detect it. There are red flags that we look for, but, of course, we won't say what those are. But we also don't take any legal action against anyone who does it."

Airlines say their rules are also designed to control trafficking in stolen tickets and to give them an accurate passenger list in case of an accident.

"Our desire to have an accurate record of who's on the plane is the genesis of the whole thing," said USAir assistant vice president David H. Shipley.

When airlines began several years ago selling tickets that were either non-refundable or carried some harsh penalty for changing an itinerary, the buyers were almost exclusively bargain-hunting vacationers.

Today, buying "penalty" tickets is common among corporations. In a recent survey of more than 250 corporate travel managers by Runzheimer International, the Oakbrook, Ill., travel-consulting firm, 92 percent of the respondents said they were buying some type of penalty tickets. (That does not mean, of course, that those companies are reselling or giving away unused tickets that can't be cashed in.)

Although individuals and company employees are increasingly trafficking in such penalty tickets, ticket brokers across the country are engaged in the business of selling the unused free tickets earned by frequent fliers. Most brokers deal only in first-class or business-class tickets because they carry a higher profit margin.

Penalty tickets peddled by individuals usually sell for face value or less.

While airlines are not making concerted moves to stop the selling of tickets by individuals, they have sued ticket brokers, contending that brokers' selling the frequent-flier tickets interferes with the airlines' right to conduct business. The brokers have countered that the award tickets, once issued, should be treated as the property of the frequent flier.

In general, the courts have sided with the airlines, but no case has made it to the Supreme Court.

"What the airlines are doing is like having a dress bought at Macy's and then sold to a thrift shop," said Judy Taylor, spokeswoman for the American Association of Discount Travel Brokers. "They're saying, if you buy the dress at the thrift store and go into a Macy's store with this dress on, you're subject to having the dress ripped off your back and you'll have to buy another Macy's dress, or go out of the store naked."

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