In order to understand why hidden city fares happen, you must first understand the primary rule of airline ticket pricing: Airlines price tickets based on COMPETITION, not distance flown. Hidden city flights occur all over the country and indeed the world, and you can use hidden city ticketing almost anywhere an airline operates a "hub and spoke" route network.Here’s a good example to help you wrap your mind around this concept.
Several years ago before Northwest was gobbled up by Delta, Northwest had a small hub in Memphis. They flew two round trips per day between Memphis and Nashville, and they were the only airline to do that. The only other way to fly between the two cities was to fly via Dallas on American, or through Atlanta on Delta, or connect in Houston on Continental. So Northwest basically controlled the Memphis-Nashville market. And since they did, they charged outrageous fares for the flights. A short-notice flight between the two cities then usually cost well over $500 ONE-WAY. And keep in mind that this is a VERY short flight (about 200 miles).
At the same time, a last-minute flight from Nashville all the way to Los Angeles (nearly 1800 miles) only cost $350 one-way.
Why would a 200-mile trip cost so much more than a trip of nearly 1800 miles? Because between Los Angeles and Nashville, Northwest had competition from 5 other airlines. It’s simple Business Economics 101: Competition = low prices, and Monopolies = high prices. And the distance flown really means NOTHING to the airlines in calculating their fares.
So let’s look at another example, for a trip from Los Angeles to Minneapolis. A couple years ago Delta was the only airline flying non-stop between the two cities. They havd no competition for non-stop flights, so they can set their fares at whatever price they think people will pay. In this example, in early 2013, the fare was $695.00 for a short-notice, one-way flight. People who have to fly fast and have money to burn are paying this fare.
Delta DOES have some competition on that route…there are at least 4 other airlines that offer flights between L.A. and Minneapolis, but they all require connections in their respective hub cities. So the trip takes at least 2 hours more, and there’s the hassle that naturally comes with having to change planes (unfamiliar airports, potential lost luggage, possible flight delays in a strange city, etc.). So those four airlines basically compete with each other for the connecting-flight business, and their fares are all in the general area of $350.
BUT…There’s actually LOTS of competition for flights from (as an example) Los Angeles to Columbus, Ohio. Because there are no non-stops between the two cities, EVERY airline is trying to get as much business from that market as they can, and because airlines no longer offer any differences in service (it’s ALL bad or at least sparse) the only tool they have to offer is a low fare. And more competition equals lower fares.
You might be asking “Why Columbus?” Well, why not? Airlines are continually challenging their competitors in different cities large and small all over the country. If United says “We think we can get enough new business out of Columbus that we can justify adding an additional daily flight, if only we lower are fares to make us more attractive than the competition”, then they lower their fares. Of course, as soon as they do this, the other airlines all match United’s fares (within days…sometimes within hours!). And this creates opportunities for hidden city fares.
Sometimes the airlines simply “fare bomb” the competition in a particular market by drastically dropping their fares for only a day or so. They hope to get as much business as possible during a short period, then return their fares to “normal” before their competition catches up with them. This is one of the reasons why hidden city fare routings come and go and change on a daily basis.
Another opportunity for hidden city fares comes from a childish airline game I call “hub poaching”. At this moment (mid-December 2012), Delta has drastically reduced fares for flights to and from USAirway’s Charlotte hub. US retaliated by dumping their fares to and from one of Delta’s hubs. Or maybe US started it and Delta is the one retaliating…I’m not sure, but it’s fairly obvious what’s going on, and it’s a silly net-zero game that every airline plays all the time. This hub poaching can produce some amazingly cheap hidden city fares, but they generally only last a short time…maybe a week or so, and sometimes just a few days.
Airlines will also make a pre-emptive attack against a perceived present or future threat of another airline entering a new market. If ‘Airline A” finds out that “Airline B” has been inquiring about beginning service to a market dominated by Airline A, then Airline A may suddenly start offering service in a market dominated by Airline B. Because federal anti-trust regulations prohibit airlines from actually talking to each other about fares and service, this is Airline A’s way of telling Airline B “Stick to your own markets”. Again, very childish, but airline execs apparently aren’t above acting like petulant kids. And in doing so, they open up yet another avenue for finding hidden city fare bargains. And any time an airline actually does start new service (either as their first time in the market, or with an expanded flight schedule, or to a different city), you can be sure they will want to make a lot of noise in that city or market with low “sale” fares. When they do, all the other airlines typically match those low fares, presenting even more hidden city opportunities.
So completely forget the idea that a short flight should cost less than a long flight. The airlines don’t give a hoot whether a flight between a particular pair of cities is long or short, or whether it involves one or two (or more) connecting flights. They set their fares by what they can get away with, considering their competition above all else. And thank goodness they do, because if not, we wouldn’t have the airline’s own crazy fare rules to take advantage of with hidden city fares!