Airlines sometimes publish error fares that can occur due to a variety of factors. Qantas published one of these fares in first class a few days ago and I think the airline gets a bit too much credit for the way it handled it.
Qantas does not really accept error fares in first class
For a period of approximately eight hours on Thursday, August 22, 2024, Qantas published a very cheap first class fare between Sydney (SYD) and Los Angeles (LAX). Specifically, the airline offered round-trip first class fares of approximately AUD 5,000, about 75% less than the normal published fare of ~AUD 20,000.
Around 300 of these tickets were reportedly booked during the period in which this error occurred. In the days following the announcement of these fares, Qantas has attributed the issue to a coding error. Qantas has clarified that these fares will not be honoured, but will offer passengers either business class tickets at the price paid or a full refund.
In a statement, the airline clarified that “this is a case where the fare was actually too good to be true,” and Qantas says the option to rebook into business class is a “goodwill gesture.”
According to email to customers:
You have been sent an updated ticket and itinerary for the same dates booked for travel in our Business cabin. Any future date changes will be subject to our standard fare rules and any applicable fare differences. If you proceed with this offer, you do not need to take any action.
If you do not wish to take advantage of this offer, you can request a full refund by replying to this email and confirming directly that you wish to cancel and refund this booking. We will then issue a refund to the original method of payment.
Qantas’s Error Fare Conditions of Carriage state:
Sometimes mistakes happen and incorrect fares may be displayed. If an error or mistake in the fare price is obvious and you have a ticket and/or a confirmed booking, we can:
(a) cancel the Ticket and/or Booking;
(b) provide you with a refund in accordance with Article 14 (Refunds);
(c) offer you a new ticket at the correct fare at the time of booking; and
(d) You will be issued a new Ticket provided you accept the Offer and pay the correct Fare.
My opinion on Qantas’ handling of the error tariff
I’m not really sure if Qantas should have accepted this fare or not. Of course I like it when airlines accept error fares, but I don’t expect it and think the most important thing is that the airline communicates promptly.
I would say that this wasn’t a case where an airline posted a fare of a few hundred dollars and it was the best deal. Of course, this fare was much lower than usual, but as far as error fares go, it wasn’t exactly the most exciting ever.
My only strong opinion on this is that some people are giving Qantas a little too much credit for the way it is handling the situation. For example, Bloomberg writes that “Qantas is choosing to bear the cost of the chaos.” 2PAXfly says that Qantas is acting heroically and that this will cost the airline millions of dollars:
“As a single flight in business class to the USA costs around AU$6,000 on offer, I calculate that a loss of just under AU$4,000 per leg times the return flight (x2) and then times the 300 passengers who took up the offer results in a loss of around AU$2.4 million for Qantas.”
“Again, well done Qantas. This is the right solution to a potential PR disaster. Qantas goes from bumbling, error-prone tech expert to hero in a single email.”
I respect those views, but personally I come to a very different conclusion. I think Qantas is doing what it is technically entitled to do, but there is nothing “heroic” about it. I would also do the math very differently and would go so far as to say that Qantas’ loss from accepting these tickets in business class is approximately zero.
When someone books a cheaper flight, you can’t simply compare that to the standard price the airline is willing to sell a seat at and call the difference a loss. If Qantas sold 100% of its business class tickets between Sydney and Los Angeles for A$12,000 round trip, it would potentially be the most profitable airline in the world.
In reality, people secure business class seats in all sorts of ways, from award seats to upgrades to cheaper fares in other markets. For example, when someone books a business class award ticket, airlines don’t calculate that this is a loss of many thousands of dollars. Rather, it’s part of the general mix of booking methods to ensure that as few seats as possible remain empty.
In this calculation, the question should not be how much Qantas wants to charge for a ticket in a particular city pair, but rather what type of passenger is being displaced. Unless 100% of seats are filled, these “error fares” are profitable because AUD$5,000 is far more than the extra cost of carrying an extra passenger.
Even if every seat is occupied, the question remains whether there is anyone else in the cabin who has paid less (by whatever criteria Qantas applies), whether it is on an award ticket, an upgrade or something else.
Conclusion
Qantas recently had a $5,000 AUD error fare on flights between Sydney and Los Angeles. The airline is not honoring the fare, but is offering passengers a business class seat or a refund. We’ve seen worse handling of error fares, but I’d hardly say this is overly generous or even costly for the airline.
What do you think about Qantas’ handling of this error fare?
