Airlines, eBay battling over travel credits

Summary:The nation's airlines are trying to halt eBay from the long-standing practice of promoting airline-credit auctions, just as the busy summer travel season gets under way.

eBay is at odds with the nation's airlines as they try to halt the long-standing practice of selling travel credits, just as the busy summer travel season gets under way.

For years, airlines have tried to discourage passengers from selling frequent-flier miles and other incentives. The airlines have made headway in curbing the practice, but the vast reach and popularity of eBay has reinvigorated sales. An Internet marketplace such as eBay allows buyers and sellers to barter more easily than ever before.

Last week, eBay promoted the airline-credit auctions prominently on the front page of its Web site, coinciding with sweeping price cuts announced by most airlines. One example: a round-trip ticket anywhere American Airlines flies in the continental United States for a starting bid of only $49.99. But as the seller observes, "Best if you were to have a destination in mind, because I will have to make the reservation in your name and then deduct the miles from my account."

eBay has allowed the sales despite complaints by airlines. On Wednesday, Delta Air Lines threw down the gauntlet, e-mailing people selling Delta vouchers on eBay to inform them that they were violating the airline's rules.

The sale of vouchers "subjects the violator to liability for damages and litigation and transaction costs," Delta said in its message to Gerry Murphy, who has been selling and trading the vouchers online for more than a year. "Improperly obtained Certificates/Tickets are void and will be confiscated."

"I don't know what I'm going to do," said Murphy, a carpenter from New York who has racked up scores of vouchers because of frequent visits to his sick father. He counts on the income from the vouchers to help pay for more airline tickets.

The airlines say this backdoor exchange hurts their business and customers. Northwest Airlines' incentive programs were "designed to recognize our customers for their loyalty, and not created for third parties to profit on," said spokesman Kurt Ebonoch.

Airlines are in particularly tough times now, posting record losses, locked in fierce price wars and eliminating commissions to travel agents. The airlines cannot afford to lose any sales to this "gray market" online, but their efforts to work with eBay to end them have failed.

eBay: Our hands are tied
In the past, eBay has been contacted by several airlines and asked to shut down the sales, said eBay spokesman Kevin Pursglove. So far, the auction house has refused. eBay says the sales are not illegal, and they don't violate any of the company's selling policies.

"We are not in a position to interpret the policies of each airline," Pursglove said. "Essentially, our hands are tied."

Other airlines besides Delta have contacted customers directly to stop the online bidding for their vouchers.

An eBay search on Thursday for the words "airline tickets" generated more than 50 listings for vouchers good for either a free trip or heavily discounted fare.

One Southwest Airlines voucher for sale on eBay was good for "either a roundtrip flight or two one way flights," according to the description. Other items for sale were the equivalent of cash, such as a $500 Delta Air Lines voucher good on any flight. As of early Wednesday, it had been bid up to $305.

Some people "are machines out there--brokers, travel agents, frequent travelers who spend their entire day buying, selling and swapping these vouchers," Murphy said.

Profits in freebies
People started selling their frequent-flier miles almost as soon as American Airlines popularized the first frequent-flier program two decades ago, said Jared Blank, travel analyst for Jupiter Media Metrix.

"The brokers who offered to buy people's frequent-flier miles would stick ads in USA Today," Blank said. "The paper became famous for them. There were oodles. The brokers would take your miles and then give you money."

Then the airlines sued the brokers and won--and the sales went underground.

Southwest, like most airlines, prohibits sales of its vouchers, but does allow customers to give them away. This loophole makes them among the most trafficked vouchers online. Sellers online will say they are selling Southwest "beverage coupons" or envelopes, and as a freebie they will throw in a free round-trip ticket to wherever Southwest flies. That way, they don't break Southwest rules.

Southwest still frowns on the sales it sees online. "The most effective thing we think we can do is educate the consumer that it's not in their best interest to do it this way," said Beth Harbin, a spokeswoman for Southwest.

Drafting rules is one thing, but enforcing them is another. Without the help of eBay and the other auction sites, the airlines will likely continue to watch as incentive vouchers are exchanged on the Net.

"I bet I could sit in front of my computer six hours a day and make the same money I make as a carpenter," Murphy said.

The airlines maintain that the loser in such sales is often the buyer.

"People sometimes buy expired tickets and they have no cash value, and they look to SWA for help," Harbin said. "Or they might buy a ticket for $300 round-trip and Southwest might have a cheaper fare, so that customer may be paying too much."

Henry Harteveldt, a travel analyst for Forrester Research, says there is likely another reason the airlines don't want the vouchers sold.

"Frankly, they give these vouchers and coupons out hoping that they won't be redeemed," he said. "The airlines want to reward or satisfy or placate the customer, but they know many people will forget about the vouchers."

Topics: Travel Tech

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