United Airlines, the wholly-owned subsidiary of United Continental Holdings, Inc. (UAL), and online travel company Orbitz (OWW) have filed a lawsuit against Aktarer Zaman, the 22-year old founder of the travel site, Skiplagged.com.
The site helps travelers to find cheap flights by utilizing the "hidden city" ticketing strategy. United and Orbitz have claimed $75,000 as lost revenues from Zaman. The companies believe that Zaman’s site, which searches for routes prohibited by carriers, has hurt their business by creating unfair competition. United Airlines has also stated that the utilization of the strategy poses security threats and is unjust as far as high-paying passengers are concerned.
Using the strategy, passengers can get off a plane at their desired destination during a layover at that place, and thus avoid the remaining portion of the otherwise longer flight. Fliers, with the help of Zaman’s site, can save money by purchasing tickets for longer flights with layovers that are often cheaper compared to direct flights of shorter distance.
For example, if a traveler wants to fly to Chicago from New York, he would save money by availing a New York–Los Angeles flight with a layover in Chicago. He would thus get off at Chicago and skip the last leg of the trip.
However, passengers can benefit from the system only if they are traveling without checked bags as checked luggage for flights with layovers are handed over only at the final destination. Moreover, the system is only applicable for one-way tickets. This is because in the event of passengers failing to show up for one leg of a flight, airlines companies cancel the return leg.
Zaman intends to fight the case and is raising funds for the purpose. He states that the website is by no means illegal and he has derived no profit from the site. According to the Bangladesh-born entrepreneur, he has only exposed an inefficiency in airline prices that has been in existence for long. We expect investors to keep a close watch on the fate of Zaman’s site in the coming days.
Zacks Rank
United Continental currently sports a Zacks Rank #1 (Strong Buy). Apart from United Continental, investors interested in the airline sector may consider stocks like Delta Air Lines (DAL) and Ryanair Holdings (RYAAY). Both the stocks carry a Zacks Rank #1.
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