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From a recent MarketWatch article, This airline sued a passenger for skipping his flight — why we should all take note, George Hobica claims that

“Hidden city cheaters make airfares more expensive for everyone who plays by the rules,”

"Skip-lagging" or hidden city ticketing is a technique to save money by booking a flight you have no intention of taking. For example, if you want to fly from Paris to Hong Kong it may be cheaper to buy a ticket for Paris to Beijing that has a stop-over in Hong Kong, and then simply not take the second flight from Hong Kong to Beijing.

Does the practice of skip-lagging (getting off a flight at a layover location) drive costs up for flights overall?

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    The explanations I expect are "If people use hidden city techniques they get flights for less, which means the airlines have to raise prices in order to make the same profit" and "The airline could have sold the unused leg separately, which means they make less money which means they have to raise prices". – DJClayworth Feb 14 at 16:32
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    @DJClayworth: "The airline could have sold the unused leg separately". But it already did. Airlines routinely oversell/overbook flights; they know which cities they are giving hidden city prices, they can predict the unused tickets (not down to which passenger, or they wouldn't sell them the discount ticket, but a statistical expectation is more than good enough for their purposes). If they didn't fill that seat, it is because of insufficient demand on that route, not because it was reserved for a passenger that got off. – Ben Voigt Feb 15 at 1:01
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    True. But if they had known one less person was going to show up they could have oversold one more ticket. – DJClayworth Feb 15 at 2:35
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    If anything it saves the airline money. The seat is paid for whether it's occupied or not. There is a small fuel savings in not having the weight of a passenger to haul. – BobT Feb 15 at 18:52
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    I'm not sure this is enough for an answer, but this article does a decent job of explaining the cost to the airline. Essentially: Their ability to offer multiple daily flights to hubs depends on some fraction of passengers paying a premium for those non-stop flights. When lots of people "cheat" and pay the cheaper two-stop cost, their profit calculations go out-of-balance. – AShelly Feb 15 at 22:18
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Yes, the claim is justified by economic theory.

On this site, we have a strong preference for empirically based answers.

An ideal answer to this question would be an actual experiment where they compared two airlines, identical except that one had hidden-city ticketing encouraged, and one where hidden-city ticketing was eliminated, and compare the prices.

Such an experiment is infeasible, and we are forced to fall back on theoretical hypotheticals, conducted by experts. [Economics.SE is a site where they are happier with theoretical answers - which is a strong reason for the suggestions this question would do better there.]

A 2012 paper Hidden-City Ticketing: The Cause and Impact looked at this question using mathematical models.

The models make many simplifying assumptions, but the results support both the existence of hidden-city ticketing opportunities, and that taking advantage of the opportunities will have impacts on the price.

We show that the decrease could be as much as half of the original optimal revenue, but it cannot be more if the airline takes a hub-and-spoke network. Meanwhile, as a result of airline’s reaction, the fares to the final destination of a hidden-city itinerary will rise, which eventually will hurt the passengers.

[...]

[...] although the airlines have a strong incentive to prohibit hidden-city ticketing, passengers may find it attractive since it instantly saves their money. However, in a long run, using the hidden-city ticketing may also hurt the passengers through the externalities that the behavior causes. For a hub-and-spoke flight network, if hidden-city ticketing is fully admitted in certain period and all passengers take advantage of such opportunities, the optimal fares to the spoke cities will increase in that period. The rises in those fares not only immediately hurt those who travel to the spoke cities, but also significantly reduce the profitability of airlines for serving those spoke cities which in turn may result in a reduction or suspension in service towards those cities. Therefore, our result suggests that in the long run, the use of hidden-city ticketing may also decrease travelers’ benefits, creating a lose-lose situation.

Whether you trust such results depends wholly on whether you trust that the simplifying mathematical assumptions used in the model still adequately describe the real world. However, such a result seems to be a reasonable justification to support the claim by George Hobica.

  • Wow, good find. I assumed the only way we'd get that kind of analysis is if an airline published some of their own models. It occurs to me that even if the models are wrong, an airline using similar models might act as though they're correct, meaning prices would rise anyway. – IMSoP Feb 20 at 20:05

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