Yesterday, Singapore Airlines (SIA) announced that they will be honouring the mispriced business class tickets at its economy class prices. The mispricing, caused by a computer glitch, affected 400 Australia-based passengers, who had bought the tickets through travel agents.
According to the Sydney Morning Herald, the business class tickets were sold for roughly AU$3,500 (US$2,899), while the original price was AU$6,000 (US$4,970) a piece. That’s AU$2,500 lost per ticket.
SIA originally announced that they will be demanding the difference from agents and passengers should they choose to retain their business class seats, or shift to economy class. However, they soon retracted their statement, saying now that they are planning to honour the mispriced tickets.
“To ensure no disruption to our customers’ travel plans, Singapore Airlines wishes to advise that it will honour all affected bookings. Singapore Airlines will be contacting affected customers and travel agents to advise that their Business Class bookings will be honoured at the original fare purchased.”
Well, the reason for this course of action doesn’t seem to have a legal grounding. In fact, despite the public outcry against it, it seems like SIA may be well within their rights to demand full payment for those business class seats.
Vulcan Post approached law professor Goh Yihan for some insights. Aside from his role as Associate Professor at SMU Law School, he also writes on legal issues on Singapore Law Blog. In a recent post titled “Was Singapore Airlines Liable for Business-Class Seats Sold at Economy Rates?“, he explains that SIA’s eventual choice to honour the cheaper tickets was probably not legally mandated.
As an attempt to explain the situation more simply, Singapore Airlines’ working relationship with its agents is subject to certain laws, to which SIA had every right to state the conditions to. In fact, Clause 11 of SIA’s Conditions of Contract clearly states this:
11. None of our agents, employees or representatives, nor those of any other carrier on which you may travel, has the authority to alter, modify or waive any provision contained in this ticket, these Conditions of Contract and our General Conditions of Carriage, or those of any other carrier on which you may travel.
This means that the terms of the tickets cannot be amended. And if what SIA’s spokeswoman said last week was true, “[t]he airfare conditions for the fare clearly stated that it was only valid for economy-class travel”.
“This means that the travel agent is generally not authorised to vary the terms of the ticket,” wrote Prof. Goh in his blog post. “And if the airfare conditions on the ticket expressly provide that the fare is only valid for economy-class travel, that should be the end of the matter: SIA is probably not legally obliged to honour the cheaper fares.”
Of course, the issue is far more complex than the amended version here, and the full blog post can be accessed here.
Why Did SIA Honour The Mispriced Tickets?
Where it really gets complex is whether the agents are actually liable to pay up for the price difference. While SIA may be entitled to the full payment, is it really the agents or passengers’ fault that the tickets were mispriced?
And does it really matter?
Lars Voedisch, Managing Director of boutique PR firm PRecious Communications, believes that SIA didn’t have a choice but to forgo the difference.
“It’s David vs. Golliath, the perception that big companies in general will come down hard on the ‘small man’ if they make a mistake. Now it’s vice versa, so the whole issue is not just about SIA but a general big vs. small.”
What could have occurred, should SIA have pursued the issue as planned, was a PR disaster that could have damaged SIA’s brand severely. Despite all legal debates, customers having to fork out a few extra thousand for tickets they probably only bought for the incredible prices would be unfair, and being unfair doesn’t suit SIA well at all.
“For SIA it’s about being a gentlemen’s brand,” says Voedisch. “They’ve always portrayed themselves like proper gentlemen, somebody that stand to his word, and – in this case – someone who stands up for one’s mistake. Coming across as petty or cheap would not suit the SIA brand.”
Could SIA have gotten away with not honouring the mispriced tickets? Probably. Would they have survived the backlash? Probably not. Reputation, in this industry, is everything, and SIA can’t afford to risk theirs at all.