Canadian Transportation Agency rules that passengers cannot take advantage of mistake fares

In our increasingly electronic age, more air travellers are purchasing flights online, on the basis of posted fare prices.  But what happens in the case of “mistake fares”, when the wrong fare price is mistakenly posted online?  Is the airline still required to transport the passenger at the posted price, even if that price is significantly lower than the fare it intended to charge?

In the United States, Department of Transportation (DoT) regulations prohibit airlines from increasing the price of a fare after the ticket has been purchased.  While the precise impact of this regulation in relation to “mistake fares” has been the subject of some debate in the U.S., the DoT has taken the position that it applies to such fares.

Canada has no similar legislation.  The Canadian Transportation Agency (CTA) recently addressed the issue of mistake fares in the context of complaints by 83 passengers who purchased tickets for travel on Swiss International Air Lines Ltd. (“Swiss”) but later had these tickets cancelled by Swiss on the basis that the posted fares were erroneous.  These passengers had purchased tickets for multi-segment first class or business class travel between Yangon, Myanmar and Montreal, Toronto or Ottawa for a base fare price of between USD $113 to USD $150, with a total fare price after taxes and surcharges of approximately USD $1,000.  The correct base fare prices were between USD $10,000 and $15,000.  The majority of the tickets were purchased after notice of the fares was posted on a popular flying blog, which referred to them as “mistake fares”.

The fares were never posted on the Swiss website, but were distributed to other online selling agents by the Airline Tariff Publishing Company (ATPCo.). Swiss claimed that these fares had been mistakenly included by ATPCo., and that at no time was Swiss aware of the error. Upon discovering the error on September 28, 2012, it took immediate action to remove the fares. Swiss then notified its passengers that the tickets were cancelled, and provided refunds.

The CTA rejected the passengers’ position that a valid and binding contract of carriage had been created when the tickets were purchased, and that Swiss was therefore obligated to honour the posted fare price.  In doing so, it relied on case law which provides that a party may be entitled to have a contract revoked where there has been a fundamental mistake, and where a party who knows or ought to know of this mistake remains silent and snaps at the offer, seeking to take advantage of the other’s mistake.

The CTA concluded that there was no question the fares were a mistake, as they were approximately one percent of the correct fare.  It also found that the passengers either knew or ought to have known of the mistake.  It did not believe the blog post provided conclusive evidence of such knowledge, as it could not be said that the author certainly knew the fares were a mistake, and at least some passengers purchased their tickets prior to the post.  It did find, however, that a reasonable person ought to have known that a total cost of approximately USD $1,000 for first class/business class travel from Myanmar to Eastern Canada, which was lower than the equivalent posted economy fare, was not simply a low ticket price, but a mistake.  As fare price was a fundamental term of a contract of carriage, the required “meeting of the minds” for a valid contract to be formed was not present, and Swiss was therefore entitled to cancel the tickets.

Consequently, this decision suggests that passengers will not be able to take advantage of mistake fares where these fares are so low that a reasonable person ought to have realized they were a mistake.  While cases will be fact-specific, a good general rule is that if it seems too good to be true, it probably is!

The CTA also set out general expectations for carriers in addressing mistake fares. When all or any portion of a ticketed itinerary is cancelled due to a mistake fare, the carrier should, at a minimum, notify the passenger of the cancellation no later than 72 hours after the carrier becomes aware of the mistake. If the ticket was purchased less than 72 hours before the scheduled departure, the passenger should be notified at least 24 hours before departure. In either case, the carrier should refund the amount paid.

The decision can be found here.