With more than 100,000 scheduled flights each day last year, the airline industry is a prime market for entrepreneurs and innovators. Unfortunately, legal troubles face two promising flight-related startups.
The first, Skiplagged, found a way to offer customers cheaper flights by using “hidden city” ticketing.
How does this work? Let’s say you want to fly from Atlanta to Washington, DC. Flights from Atlanta to Washington sometimes cost more than flights from Atlanta to Pittsburgh that happen to stop in Washington.
The Skiplagged website thus lets you book an Atlanta-DC-Pittsburgh flight at a cheaper rate, and you can simply get off at that stop in DC (even though it is not your final ticketed destination).
It sounds impossible, but it’s true. Because of “hub” cities and airlines’ pricing structures, it often makes more sense to charge less for longer trips. There are just a few caveats with Skiplagged’s approach. First, you can’t bring checked bags because they will go on to your final destination. Second, once the airline notices that you are gone, they automatically cancel the rest of your itinerary – so hidden city ticketing would not be useful for round trip tickets.
Perhaps the biggest problem is that airlines hate this. So much so that 22-year-old Aktarer Zaman, Skiplagged’s founder, is currently being sued by United Airlines. The suit alleges that the “hidden city” ticketing practice is “strictly prohibited by most commercial airlines because of logistical and public-safety concerns.”
But Zaman doesn’t see a huge problem with his strategy. “All it does is provide information to consumers that is already publicly accessible,” he told CNBC. Zaman has raised $75,000 so far for legal expenses on a GoFundMe page.
Another flight-related startup facing legal trouble is Flytenow, a company that focuses on local pilots rather than commercial flights. Essentially, Flytenow lets pilots post their own flight plans on the Flytenow website so that customers (called “enthusiasts” on the website) can fly along for a fee.
“There are a lot of people who are really interested in flying and this is the affordable way for them to do it. It makes certain trips a whole lot easier,” co-founder Matt Voska told Northeastern University, where the 20-year-old was studying computer engineering and entrepreneurship before dropping out to focus on Flytenow.
There’s a catch though. According to the website, “Federal Aviation Administration regulations prohibit a pilot from accepting compensation from passengers.”
Flytenow gets around this requirement by claiming that the fees from customers are only enough to help the pilots split the costs of the flight. Additionally, because the company is not an airline or charter service, the flights are not guaranteed. The service functions more as a connection tool – allowing enthusiasts to join a pilot on a “journey” that he or she was already planning to take.
According to the website, “[P]ilots have been sharing expenses with their passengers for decades. It has been common practice for private pilots to post their flights on local airport bulletin boards.” All that changed with Flytenow’s model is the method of communication – using the Internet rather than a paper posting.
This explanation didn’t “fly” with the Federal Aviation Administration (FAA), who effectively shut down the service last September.
Flytenow has since challenged the FAA in court, claiming that the agency is misinterpreting the intent of the rule.
It will remain to be seen whether these aviation-minded entrepreneurs are successful at overcoming their legal challenges.