• The 'great airline ticket giveaway' that just won't go away

    By Bob Sullivan, Columnist, NBC News

    The letter warned the recipient that she still hadn't responded to that great offer from "US Airlines" of two free airline tickets, and time was running out. Call the toll-free number now! it urged.

    Fortunately, Red Tape reader Mary McNamara ignored it and passed it on to me. But somebody must be calling the enclosed toll free number, because the "great airline ticket giveaway" just won't go away. Complaints about it can be found across the web from a couple of days ago, and from at least two years ago.

    Let's take care of the basics first. There is no airline called "US Airlines" -- you're thinking of U.S. Airways. That’s no accident; that’s a technique. A variation of the letter is from "American Airways," a bastardized version of American Airlines. Call the number, and you don't get two free airline tickets; you get invited to a 90-minute presentation where you will be encouraged to join a travel club.

     

    In the words of travel expert and consumer advocate Chris Elliot: "I have yet to find a travel club that is legitimate."

    I called the toll free number and was told I had to travel from Seattle to Portland to attend a meeting before I could receive my free tickets. But the operator, who identified himself as Josh, gave me the option of calling a friend or relative in the Chicago area and sending that person on my behalf to a meeting there. Thanks to their generous referral program, he said, I'd get free tickets just for talking a (soon to be former) friend into attending.

    To save yourself the trouble of calling and listening to the pitch, someone recorded their call and posted it on YouTube.

    Elliot, by the way, also received one of these free airline ticket letters recently, and wrote about it on his blog.

    The free ticket letter offering has been around for at least two years, and inspired a lot of complaints in April 2011. It is such a nuisance that U.S. Airways had to post a "scam alert" on its website.

    A representative to the airline told me that she's worked in the company's public relations department for seven years, and the free ticket letter "just kind of resurfaces from time to time." She reiterated, with a heavy sigh, that the airline was in no way affiliated with the offer.

    Why would such an offer persist for years, despite all the warnings about it?

    "People don't pay attention to details," said Elliot, also the author of the book, “Scammed.”  "US Airlines could exist, and the victims are quickly seduced by the offer. In other words, this thing is still around because it works."

    When I asked "Josh" for more details, he said he was working for a company named Universal Travel Deals. The point of the 90-minute meeting -- he called it a "meet and greet" -- was to drum up business for local travel agencies, he said.

    "Hopefully, to get people to book travel through them, rather than through those websites, like Travelocity or Expedia," Josh said. 

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    There are also complaints about Universal Travel Deals in various consumer sites online. When I called the number for a firm named Universal Travel Deals in a Chicago suburb called Tinley Park, a woman who answered confirmed her company was managing free airline ticket offers. When I said I was a reporter, she took my name and number and said she'd have someone return my call. I’m still waiting.

    Elliot said he's seen various telephone numbers come and go for the offer, which is a sign that something is wrong.

    "The numbers have changed, which suggests to me that they may be moving from state to state," he said. "That's a common tactic to stay a step ahead of state regulators. My guess is this isn't a big enough fish for the Feds to get involved. Either that, or the FTC hasn't received enough complaints about it."

    Do letter recipients ever end up with free airline ticket vouchers? That’s unclear, but this much is certain: nothing is really free in this world, and certainly not airline tickets. Letter recipients never get anything just by calling. They have to attend sales meetings, which, according to the few stories posted online by people who claim they’ve attended, exact their own costs.

    If you receive an offer like this, please do three things.

    1) Read it carefully. It's good practice to find the misleading elements, such as names like "US Airlines."

    2) Throw it out and ignore it

    3) Complain to your state attorney general and the Federal Trade Commission so someone actually takes a close look what's going on. (Here's a handy contact list for state attorneys general).

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  • Airlines secretly cash in on unused tickets

    Outraged over a spike in airfare for pre-booking an aisle seat, Consumer Advocate Ralph Nader talks with Msnbc.com's Dara Brown about his ordeal and what consumers can do to protect their pockets.

    By Bob Sullivan, msnbc.com

    With so much talk about airline fees lately, you might overlook perhaps the largest source of ancillary revenue for the industry — and a big headache for you — that lets airlines make money for nothing. A lot of it.

    If you've ever been on a "full" flight that was full of empty seats, perhaps you've wondered: What happens to the paid fares when passengers don't show up for flights?

    The airlines keep much of the money, of course. No-show fliers get vouchers for the unused value of their tickets good for a year from booking, but stiff change fees often eat heavily into that value. And much like unused gift cards, their value disappears into thin air when not used by a strict deadline.

    No one knows how much money the airlines make on unused, expired tickets — they aren't required to say — but experts suspect it's a gigantic haul.

    "The airlines collected $6 billion for baggage fees last year, and undoubtedly it's more than that. ... This is an issue that has been around a long time," said travel expert Chris Elliott, author of  “Scammed.” "Just look at the rates of overbooking on flights — 10 to 20 percent — that's how many no-shows the airlines expect."

    Consumer advocate Ralph Nader has been on a crusade for the past year trying to figure out how much money the airlines are making by flying nothing and trying to nudge the industry toward a more forgiving policy.

    "We're talking billions of dollars," he said. "My drawer is often full of unused tickets because plans change. The point is, why a year? The statute of limitations for contracts is three to six years."

    Before you assume Nader is tilting at windmills, recall that a similar Nader crusade helped force airlines to compensate passengers when they were kicked off overbooked aircraft.

    Nader recently sent letters to all major U.S. airlines asking how much they earn from unused tickets. He got a polite refusal delivered by the industry group Airlines for America, which called the information "confidentially and commercially sensitive."

    "Consumers understand that if nonrefundable tickets cannot be used, their value will be lost," the letter said.

    The letter, signed by association general counsel David Berg, goes on to say expiring airline tickets are no different from time limits on refund policies of "other retail shopping outlets, from clothes to computers, and are neither deceptive nor unfair."

    Nader wasn't impressed by the airlines' response.

    “The writer was thrashing around for every analogy he could find, filling the page and a half with non-sequiturs," Nader said. For starters, any analogy between clothes and airline ticket return policies breaks down pretty quickly. After all, if the time to return a sweater has passed, you still get to keep the sweater.

    Undeterred, Nader has filed a request under the Freedom of Information Act with the Transportation Department seeking the same data.

    But is it really unfair for airlines to keep the money spent on unused tickets and to load up restrictions on refunds?

    One convincing argument offered by the industry is that plane tickets are a "perishable" item, akin to concert tickets. Once the plane leaves the ground with an empty seat, an airline can't make money off it, so why should it be expected to offer easy refunds? No one who buys a ticket to a rock concert or a sporting event expects a refund if they miss the event.

    Of course, that analogy breaks down, too. Airlines do, in fact, make money off seats sold to no-shows — they overbook. And concert tickets are much easier to sell when buyers' plans change. Most airline tickets aren't transferable.

    But the key argument put forth by the airline industry is that traditional, self-regulating market forces take care of the problem. Consumers don't have to buy discounted non-refundable tickets. Full-fare tickets, which can be changed at will and offer refunds, are always an option.

    "Consumers can choose between airlines with different service options and select tickets that vary in price, depending on their flexibility," Berg said in his letter to Nader.

    Not really.

    Something is seriously wrong with the price of refundable tickets. Nothing says "broken market" like swollen prices that bear no resemblance to the value of a product offered and show no signs of price competition.

    The gap between refundable and non-refundable tickets is absurd. An airline industry official tried to argue the point with me during a recent chat and priced a one-way, nonstop ticket between New York and Chicago. Non-refundable cost: $112. Refundable cost: $870. Clearly, free market forces are not at play and are not effectively offering a variety of choices and conditions.

    No one really believes refundable tickets are a genuine option: On the refund portion of its website, Continental Airlines states clearly that "most tickets are not refundable."

    "It has nothing to do with value," Nader said. "It has to do with algorithms. It's not like you're getting a real break with non-refundable tickets. The computer has permitted this to happen. The airline could never do all the calculations which allow them to take advantage of consumers in this situation with humans — it would be too labor-intensive."

    Nader isn't optimistic that the Transportation Department will offer him any useful information about unused ticket revenue, but he's already shaking the trees at another government agency: He's pestering the Federal Trade Commission's anti-trust division to investigate. He believes that because most airlines have exactly the same policy about unused tickets, there's evidence of collusion and price fixing. As evidence, he points out that, while he asked multiple airlines for data, he got a single response from an industry trade group.

    "They are colluding to achieve to a uniform policy so they don't have to look over their shoulder," he said. "I've never seen anything like this. They are colluding over the information. It has got to be slapped down."

    When asked about this accusation, Steve Lott, a spokesman for Airlines for America, pointed to the letter the agency had already sent Nader. It says the trade group responded on behalf of the airlines "as a matter of convenience."

    "DOT for decades has been well aware of air carrier policies and has not objected to them. Many of those policies are far superior to refund policies available to consumers in most other industries," Lott said.

    The truth of the matter is that airline no-show and refund policies are unique and need to be evaluated as their own beast. If they were Nordstrom-level, no-questions-asked liberal refund policies, airlines wouldn't ever be able plan anything, as fliers would book and cancel trips constantly.

    On the other hand, a harsh no-refund policy — something that was floated in the dark airline industry days after 9/11 — would be anti-consumer and probably hurt the industry by making fliers gun-shy. A clear middle-of-the-road policy is called for, along with better refundable ticket options.

    The real problem is that today's no-show policies are tilted too far in the airlines' favor.

    "An even bigger rip-off is when you do try to use (a ticket credit) and you get hit with a $150 change fee and the fare differential, and the credit is essentially useless," Elliott said. Also, many consumers miss the fact that the credit is valid only for one year from the original booking — not from the day of the flight or the day of cancellation.

    "I hear from people every day who misunderstand that and are told their voucher is worthless," he said.

    Of course, the truth is straightforward: The airlines need the money.

    "The airlines are so woefully mismanaged right now that if they didn't do this, they would be unprofitable and would cease to exist," he said.

    RED TAPE WRESTLING TIPS

    There are many honest reasons that consumers miss flights. Even though airlines' stated polices on their carriage of contract may sound strict, many make exceptions. A common one: the "flat tire rule."

    If you are late to the airport because something happens on your trip there, many airlines will simply put you into the next available flight where there's room, often without a change fee. Just ask nicely.

    Elliot also points out that while airlines rarely offer full refunds, consumers can get a little money back when their unused ticket value expires. Some taxes, such as passenger security fees, are eligible for refund. Airlines won't automatically offer tax refunds; you'll have to ask.

    It's always a good idea to see whether Southwest Airlines is flying your way, as it has the most understandable change fees in the industry.

    And as always, when life intervenes on your plans, don't be afraid to call the airline and ask for an exception. 

     Don't miss the next Red Tape:
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  • Ticket scalping an Olympian headache

    By Bob Sullivan, Columnist, NBC News

    VANCOUVER -- "I NEED TICKETS" screamed the signs hanging from the necks of the scalpers, in the style of a homeless person asking for a handout or a hitchhiker looking for a ride to Manitoba.  They meandered in and out of the crowd in Vancouver's Robson Square, the center of Olympic fan activities in the host city.

    Bob Sullivan

    The line outside the official Olympics box office was much longer than the lines around scalpers on Wednesday.

    You've seen this scene before, but its overtness – taking place right outside the official ticket pickup location -- was striking.  Scalping must be legal in Canada, eh?

    I love ticket scalpers. As people they are often slimier than moss-covered rocks.  But as a student of markets and consumer behavior, they provide me with endless hours of amusement. Ticket scalping is one of the purest forms of a true marketplace you'll ever find -- buyers and sellers negotiating under extreme time pressure, both saddled with limited information and high risks, bidding on a commodity that is both perishable and scarce.  Fifteen minutes before game time, this market is extremely efficient.

    Event holders hate scalpers, of course. They say they are trying to protect consumers from fraud. Counterfeits happen, as do lies about seat location, but given the complete anonymity of the transactions, I'm constantly amazed at the relative lack of fraud in scalping.  While related, scalping (a secondary ticket market) and fraud (counterfeit tickets) are really different problems.  In reality, I think promoters are just jealous. When scalpers sell tickets at well above face value, they embarrass promoters by revealing that the tickets were underpriced.

    Naturally, the more amateurish the ticket buyers, and the more professional the sellers, the more money the scalpers make. And the more anonymous the transaction -- say, the more distance between hometowns of buyer and seller -- the easier it is to run a scam.

    That brings us to the subject of Olympic ticket sales, which create ideal conditions for all manner of scams and overpricing.  The Olympics arrive only every four years and often play out in small venues, making tickets scarce and valuable. Buyers invest an outrageous amount of money and time just to get to the scene. If they come without tickets, the pressure to get some is immense.  So they usually come hat in hand to scalpers.  Moreover, would-be scammers who sell for local baseball or football games have at least a small chance of seeing their victims in the future. Olympian scams pose almost no risk to the criminal, who will probably be half a world away by the time the ruse is exposed.

    Perhaps the largest Olympic ticket scam in history occurred two years ago. During the Beijing games, dozens of Olympic athlete families were scammed by a Web site, estimated to have stolen millions of dollars from would-be fans.

    The Vancouver Olympic Committee set out to prevent a similar debacle, using the only trick that such agencies ever consider: making money off scalping. In Vancouver, neither scalping nor exchanging tickets is allowed. Resold tickets can be "deactivated" and made invalid for events, the Olympic committee warns. It says anyone who wants to sell tickets must use the "fan-to-fan" Internet marketplace set up by the Olympic committee. The good news: tickets are relatively easy to find. The bad news: the agency makes 10 percent off both the sale and the purchase of the tickets. Even worse: High demand tickets are being sold eBay auction style. This week, opening bids for tickets to the "preliminary round" Canada-U.S. hockey game were listed as high as $10,000 -- not including the $1,000 "marketplace" fee.

    So how is state-sponsored scalping doing at tamping down illicit sales? I went to Vancouver without event tickets to have a look. Knowing about the ticket troubles in Beijing, I fully expected the organized Canadians to have beaten down the business. Far from it.

    'Relaxed about things'
    Placard-wearing sellers were easily found, yelling like carnival barkers at the crowd, just above the child skating rink and popular free rip-cord line set up for the Games revelers. Within earshot -- heck, close enough for a body check -- were uniformed sheriff's officers (provincial law enforcement) ignoring the activity. Tickets were going for double their face value, more in some cases. The scalpers showed no fear of law enforcement. It was easy to spot the ringleader, going from seller to seller, whispering something in their ears every few minutes.

    Vancouver -- a city where people say "I'm sorry" for passing you on the sidewalk -- is trying its darnedest to be friendly for the World.  Volunteers in blue jackets that say "Ask me" are everywhere. So I asked. Is scalping legal?

    "No. But you know, we are a bit more relaxed about those things here," said one, who for obvious reasons didn't want to be named. But he then warned me about the counterfeit ticket problem, before asking why Americans don't know where Manitoba is.

    Ten minutes later, I spotted two men and a woman wearing electric yellow sheriff's jackets, standing about 20 feet from a man selling tickets. I turned my back to him, quietly showed them my press pass, and inquired: "What is the law in British Columbia?"  I discovered that I'd apparently stumbled on the Canadian equivalent of the Pentagon Papers.

    "You'll have to ask the by-law people."

    "You can't tell me what the law is?"

    "You'll have to ask the by-law people."

    "What if I don't ask you as a reporter, just as a person who might buy a ticket. Is it legal to do so?"

    "You'll have to ask the by-law people."

    Not among my best interviews.

    I was about to ask the obvious question ("What's a by-law person?") when one of them spotted a polite way out of the conversation.

    "Go ask him, that guy on the bike over there."

    The guy on the bike was a Vancouver city cop.  He also didn't want to be quoted. But he was serious.

    "It's illegal to sell anything without a permit in the city of Vancouver," he told me.  "You are subject to a $250 fine and seizure of the items you're selling."

    The fine hardly seemed a big risk, given the potential financial rewards, but the officer assured me that he was not to be taken lightly.

    "I have about 50 or 60 tickets right here," he said, pointing to his backpack.  "Some guys lost a lot of money today."

    At this point, I scanned the horizon.  No scalpers were in sight.  Clearly, they were afraid of this cop.

    He also warned about counterfeiters.

    "The guys from France of Germany are long gone by the time you are at your event and can't get in," he said.

    Despite this policeman's welcome clarity, my confusion over the legality of ticket scalping grew even more as the day wore on. While I was hearing about confiscated tickets, the Vancouver organizing committee was busy telling reporters that scalping was indeed legal.

    "It's important for those of you who may not be from (British Columbia) to know that scalping is not illegal here," committee spokeswoman Renee Marie-Valade said at a news conference, according to a transcript provided by NBC. "So we are certainly aware that people may be selling tickets. We keep a close eye out for it."

    She then went to great pains to steer prospective customers to her agency's Web site.

    " The best advice to any consumer who is still looking to buy a ticket … particularly if you are thinking about buying from someone that's offering them on the street is to be very, very wary of that because that ticket may end up leaving you disappointed at the entrance to the venue," she said.

    Almost scammed
    Just how big a problem are counterfeits?

    Joseph Rupolo of Long Island, N.Y., said he stopped his father on Tuesday, just moments before he was about to shell out $200 at Robson Square for fake tickets to a women's hockey game. Rupolo, an intern for the NBC Olympics team, had seen legitimate tickets at the office, with their trademark hologram logo. The tickets his father was about to buy were missing the logo.

    "I checked the competition schedule later that day and found that Sweden wasn't even competing against Japan that evening," he said.

    He then spent the afternoon pricing tickets on Craigslist and other online sources -- which are plentiful, if risky. A man named Cory offered to sell tickets to the men's hockey semifinal for $1,000.

    "I have the hard copy tickets here in Vancouver and will exchange in person at my place or at a bank. I will provide full proof of purchase and validity upon exchange," he wrote in an e-mail.

    Goal! Eventually
    Robert Broughton of New Westminster, British Columbia, told me he actually managed to successfully buy scalped tickets earlier this week in the Vancouver suburb of Richmond, but not without a bit of agony. First, he tried to attend the women's 3,000 meter speed skating race, but prices ranged from $250 to $400 each. He headed back to the train, where a seller hard-pitched him a ticket for $300, even though the event had already started.

    But over at Thunderbird Arena, where women's hockey is being played, he managed to buy a spare ticket from an "amateur" seller for face value at $50 -- after milling about for nearly an hour.

    His advice: "Don't waste your time talking to professional scalpers, especially ones with thick English accents. Their sole objective is to cheat you."

    Yes, many scalpers are pros. In fact, Broughton recognized some of the sellers from 1994, when he attended the Lillehammer, Norway games.

    For obvious reasons, there is no good data on the amount of scalping at Olympic Games, and no way to know if Vancouver is doing better or worse than other games. With 1.6 million tickets for sale this time around, there's plenty of opportunity for mischief – and last-minute ticket purchases.  It's quite clear, however, that the Vancouver Olympic Committee's efforts to stamp out fraud and scalping by profiting off of it have not been an unqualified success.

    Houston-based attorney Jim Moriarty, who was a ticket scam victim in Houston, now runs a Web site called Olympic Ticket Scam.  He blames continued ticket problems on the International Olympic Committee's convoluted process for purchasing tickets and the fact that it makes tickets so scarce that athlete family members have trouble getting into events.

    "There is a Code of Points used in the judging system for gymnastics. Where is the Code of Ethics for ticket distribution?" he asked in a recent post on his Web site. "There are volumes of rules and regulations for each Olympic sport; for judging; and for procedures. ... The specifics for distributing tickets? Not so clear."

    Broughton, the Canadian fan who bought tickets from scalpers, also complained that Olympic tickets are kept artificially scarce, with many going to corporate partners, leaving few for local fans and travelers. As evidence for his complaint, he pointed to empty seats at many events.

    "After the game started, there were at least 500 empty seats at a supposedly sold-out event," he complained. "I'm still steamed about all the empty seats at the women's ice hockey game on Sunday. I would love to hear a reporter ask the' People In Charge' who holds these tickets, so that we all know that they were inconsiderate enough to leave them in a desk drawer."

    Reporters did ask Marie-Valade about the empty seat problem.  She said the committee had a "ticket SWAT team" looking into the problem, and offered this explanation.

    "It's a complex environment because we have tickets that are sold to the public. Typically, what we are seeing is those seats that are sold the public are being used. Some of the blocs that you are seeing may in fact be not used through a variety of different programs that we have," she said.  "We have an obligation to provide seats to athletes who may or may not be able to come watch the sports. There are a range of Olympic Family programs that provide seating. We are always looking at those and there's a whole team of people who go to each sport event and look at where the empty seats are and come back and analyze what we can do for the next one to make sure those seats are filled. "

    Readers of Ron Paul would say that attempts to regulate ticket sales have predictably failed, and that a thriving black market has developed -- as always happens when any agency seeks to artificially control the distribution of goods and services. There is little argument that capitalism is alive and well in Vancouver.  Right next to the scalpers were tables of women selling the must-have fashion accessory of these games -- poofy red mittens that say "Canada" and include the familiar maple leaf.  They sold for $23 on Robson Square.  At the drugstore five blocks away, they cost $12.99.

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