Why It's Sometimes Cheaper to Fly with a Fake Layover

Booking a flight has never been easier, thanks to the internet. But understanding why tickets cost what they do remains something of a mystery to most travelers. That disparity has come into sharp focus lately thanks to the case of Skiplagged, a tiny airfare listings website that was sued late last year by giants United and Orbitz for showing the situations where it's actually cheaper to book longer flights than necessary, flights that go through your destination and beyond it to a final stop. This counterintuitive method of saving money, known as "hidden cities," requires that you hop off the plane at a layover (which is where you actually want to go), even though your ticket is for the final stop.

In their lawsuit, United and Orbitz accuse Skiplagged's creator, 22-year-old programmer Aktarer Zaman, of "intentionally and maliciously" interfering with their businesses by showing these results, which are scraped from airline reservation systems, but which airlines don't present to travelers as viable routes. The companies are seeking over $225,000 in damages and to have the results removed from Skiplagged. Zaman is crowdfunding his own legal defense and raised nearly $60,000 so far. He's said on Reddit and elsewhere that "what Skiplagged does is definitely not illegal."

On that point, he wins agreement from some critics. "Although the issuance and usage of hidden city tickets is not illegal in the sense that one could be fined or sent to jail by the government, it is unethical and a breach of a passenger's contract," writes American Airlines (which isn't taking action against Skiplagged directly — yet).

Still, most airlines believe it shouldn't be allowed because it creates safety and logistical problems, as they may hold back planes while trying to find a passenger who never intended to fly, and need to search checked luggage left by a non-continuing passenger. For travelers, the method requires that you don't check any luggage, otherwise it would end up at the extraneous final destination.

Call it an airplane pricing hack or loophole, whatever it is, the "hidden cities" method—also known as "point beyond ticketing"—has actually been around for years, although it took Skiplagged to make it more apparent. "Finding these has always been difficult before Skiplagged because you'd have to guess the final destination when searching on any other site," Zaman writes on Reddit.

The airlines themselves left the door open for this loophole in a way. Following the Airline Deregulation Act of 1978 in the United States, they began moving from simple distance-based pricing, toward prices that are calculated on a bewildering array of variables. While there is some dispute over whether deregulation has been good for flyers overall, it's clear that average airfare across the country (on a per-mile basis) has fallen considerably since then, as much as 50 percent, adjusted for inflation.

If fares are relatively cheaper today, calculating them has also become far more complicated. As Diego Escobari, an economics professor at the University of Texas Pan-American explained in an email to Motherboard: "Airlines use very sophisticated algorithms than include a number of things: number of competitors in the market, time to departure, seat inventories, demand expectations, whether it is a hub, weekend, weekday, time of the day and time of the week the price is bought, in addition to first class, economy, frequent flier miles, blackouts, oil prices (just to name a few factors)."

In a very basic sense, the airlines try and forecast supply and demand as best as they can for every single ticket, and then price each one accordingly so as to sell for the highest possible profit. This results in price discrimination, or charging different prices for the equivalent seat on an airplane.

Making the situation all the more complex for travelers is how frequently airlines adjust their fares, changing them up to every hour, according to one of Escobari's recent studies. Further, airlines look at previous buying patterns over specific routes in determining their ticket prices. So if they observe more people flying business class between two destinations, say San Francisco to New York, they might set higher ticket prices in coach knowing average customers are willing to pay more.

In the case of Skiplagged, another factor comes into play: airlines often price certain routes knowing that travelers are likely to connect on to another flight. "The airline will charge lower fares for passengers travelling on two legs because it gets money from both legs," explains David Gillen, director of the transportation school at the Sauder School of Business in British Columbia, "This is what Skiplagged is exploiting."

Some computer scientists believe the airlines should share more of their pricing information with travelers, including viable "hidden cities" options. "Factual information (like fares associated with flights) should be available to everyone," says Oren Etzioni, CEO of the Allen Institute for Artificial Intelligence, who previously founded Farecast, an early online airfare price predictor that was acquired by Microsoft and folded into Kayak. "Of course, the airlines may wish to hide this information, but consumers deserve better," he adds. Not everyone agrees that's viable, however. As Escobari puts it: "given the huge number of factors that affect airline pricing it would be impossible to explain to the average buyer how prices are set."

Whatever becomes of Skiplagged, the controversy surrounding it has hit upon one central irony of the modern airfare marketplace: some computer programs are setting the prices while others try to pick them apart in search of the best deals. As a matter of fact, ITA Software, a Google-owned company that powers Orbitz's own airfare search engine, began as a project from some MIT engineers to try and find the cheapest airfares. Given the cleverness with which Skiplagged got around their own pricing strategies, Orbitz and the airlines may be better off buying it up instead of trying to crush it.