Fastexy Exchange|American Airlines is suing Skiplagged, which helps customers book cheaper flights using a loophole

American Airlines has filed a lawsuit against Skiplagged,Fastexy Exchange a company that helps people find cheap flights by using a loophole that involves connecting flights. In the lawsuit, the airline says Skiplagged has never had the authority to issue American Airlines tickets – only an authorized American Airlines agent can.

Skiplagged works by using a loophole, where a flyer buys a cheaper ticket to a smaller airport with a layover at a bigger airport – even though they have no intention of getting on that second flight to the smaller airport. 

For example, a flight from New York to Jacksonville is $187 with a layover in Miami. If a flyer wants to go to Miami, but those tickets are too expensive for their budget, Skiplagged books them on the cheaper Jacksonville flight – but the passenger never gets to Jacksonville, because they stay in Miami after their supposed layover.

American Airlines says by using this flight booking method – called hidden city ticketing – Skiplagged violates the AA.com use agreement and conditions, including its policy that states people who use its website must not act as an agent for anyone outside their immediate family or their employer.

Skiplagged has customers enter their personal and payment information on its website, then uses that information to book a flight on the American Airlines website, the suit alleges. "In doing so, Skiplagged masquerades as an American agent for its customers, which is a breach of the Use Agreement," the suit reads. 

American Airlines also accuses Skiplagged of charging customers more than they would be charged on AA.com and also charges customers a $10 fee for the service. The airline also accuses Skiplagged of lying to customers about lower rates or discounts.

The airline alleges Skiplagged also violates its copyright because it uses its trademarks in order to market flights. 

The suit alleges Skiplagged is "deceptive and abusive" and it not only breaches the AA.com use agreement and conditions, but also coaches passengers to do the same. 

"In what is likely the most egregious communication on its website, Skiplagged tells the passengers to lie to American Airlines about their final destination and participate in Skiplagged's deceptive practices in order the book a ticket," the suit alleges. 

The airline is asking for a permanent injunction of Skiplagged to prevent it from operating in this way, as well as an account of all sales of American Airlines tickets made through Skiplagged. They are asking for damages, attorneys fees and any other relief that they may be entitled to by law. 

In a statement to CBS News, an American Airlines representative said the practice of hidden city ticketing is prohibited by the company. "If a customer knowingly or unknowingly purchases a ticket and doesn't fly all of the segments in their itinerary, it can lead to operational issues with checked bags and prevent other customers from booking a seat when they may have an urgent need to travel," the statement reads. "Intentionally creating an empty seat that could have been used by another customer or team member is an all-around bad outcome."

CBS News has reached out to Skiplagged for comment and is awaiting response. 

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• American Airlines

Caitlin O'Kane

Caitlin O'Kane is a digital content producer covering trending stories for CBS News and its good news brand, The Uplift.