Feature: Signs of Confusion
Joined up thinking and harmonization are required to address a complex, confusing patchwork of national, regional and global passenger rights regulations.
With no uniform guidelines, laws and regulations intended to protect air passengers in the event of delays, lost baggage, and other unforeseen impediments to their journey are growing out of control.
More than 50 countries have now put passenger rights legislation in place, including Brazil, India, Pakistan, Venezuela, Thailand, and Turkey. And the majority of these regulations were put in place in the last seven years.
“Airlines want to get passengers to their destination without delay and are highly incentivized to do so,” says Tom Windmuller, IATA Corporate Secretary and Senior Vice President, Member and Government Relations. “But if delays happen governments need to understand that common sense should prevail and market forces should be allowed to do what they do best.”
Some of the new regulations are in direct conflict with one another and the concern is that the situation is only going to get more complicated.
Two new pieces of legislation highlight the trend towards aviation-specific passenger rights regulations around the world. In August 2012, Israel introduced its Aviation Services Law that covers all flights bound for and departing from Israel, irrespective of the airline operating the flight or the city from where it started.
Most recently, in December 2012, the Philippines produced its own Air Passenger Bill of Rights. This applies to Philippine carriers on all domestic and international flights and to foreign carriers for all flights departing from the Philippines.
“The profusion of new passenger rights around the world has created an overlapping web of regulatory responses that cause confusion for airlines and their customers alike,” says Windmuller. He takes as an example a flight that originates in the United States, stops over in Europe, and ends its journey in Israel. “What regulation should an airline apply?” asks Windmuller. “If the delay is in the United States then all three of these jurisdictions could legitimately claim that their laws are applicable.”
Windmuller also has concerns about the unintended consequences of badly conceived laws and regulation. In some cases regulations can have the effect of making the journey more, and not less, stressful for the passenger.
In the United States, airlines were 24% more likely to cancel flights after the tarmac delay rules came into effect. This is because the onerous delay penalties make cancellations a more sensible business decision for airlines. With airlines showing an increasing tendency to cancel flights that become delayed, passengers experience even greater inconvenience. They have to be rebooked onto a later flight (which could be 24 hours later depending on frequency and when space is available) rather than just suffering a delay of a few hours.
Sometimes the new laws are just poorly drafted or incomplete. The new Philippine Air Passenger Bill of Rights is already being attacked by international airlines. “This Bill was originally proposed to address domestic carrier quality problems,” says Steven Crowdey, General Manager for the Philippines, Australia, and Micronesia with Delta Air Lines. He believes that the Bill became flawed in the process of being transformed from its original intention, which was to get domestic carriers to pull up their socks, to being applied to all international airlines.
“It failed to exclude such provisions as the requirement for verbal Tagalog (Filipino language) explanations of a ticket’s restrictions,” says Crowdey. “There are other elements of the Bill that are awkward or perhaps impossible to accurately comply with, such as the need to provide the number of seats available for a given promotional fare offer and the need to submit monthly lists of passengers affected by irregular operations. A better outcome for consumers would be the collection and publication of key metrics for domestic flights. This would have enabled consumers to consider relative operational performance when deciding which carrier to choose and would have pressured carriers to eliminate quality problems.
“Differing bills by country and strict liability type regulations that penalize carriers for events outside their control can raise prices, reduce service or both,” concludes Crowdey.
A double whammy
Poorly drafted laws are not new. IATA has long been public in its criticism of European Union (EU) Regulation 261‑2004, which places the burden on airlines for delays even where the causes of the delay are beyond the airline’s direct control. Airlines have had to foot the bill for snow storms, inadequate infrastructure and even a volcanic eruption.
Recent court cases have not eased the situation. In a judgment in October 2012, the European Court of Justice confirmed the principle that airlines should pay financial compensation for flight delays in excess of three hours even though regulation 261 does not require this. And in January this year, in the McDonagh v Ryanair case, the court said there are no limits—with respect to time or money—on the obligation on airlines to provide care and assistance to passengers. So, Ryanair, which was grounded by the EU during the ash cloud crisis, has been forced to cover hotel and other related costs incurred during the delay, without limits.
An EU Commission revision of Regulation 261 acknowledges that airlines cannot be held indefinitely responsible for assistance in circumstances completely beyond their control. It also accepts that delays come with a high cost on airline operations and that for passengers the impact varies with journey length.
But it also proposes that, in cases of connecting flights, the complete burden for compensation for delays should fall on the operator of the first flight. This will discourage regional operators from offering connecting flights—and where the connecting flight goes outside Europe, it could contravene territorial sovereignty.
Also worrying is the notion that a diversion can count as a cancellation, which has clear safety implications. And the revision further proposes that if a flight is cancelled and no further seats are available on an airline’s own services within 12 hours, then the airline must consider re-routing on other airlines with no limit on cost or class of service.
The revision would not benefit passengers or the industry. Airlines are estimated to be responsible for less than half of all delays in Europe. The EU figure was only 40% when EU Regulation 261 was introduced and there is no reason for that figure to be much different now. In the top three most delay-prone airports in Europe in 2011—Madrid, Lisbon, and Palma de Mallorca—airlines account for 30% or less of delays.
In total, compensation under EU Regulation 261 costs airlines in Europe about $5.2 billion (EUR4 billion) every year. Since those costs are unlikely to be covered by their standard liability insurance, airlines have to budget for this as part of the cost of doing business.
The power of competition
A competitive airline market should effectively be self-regulating, as is the case in countries such as Australia and Singapore. Passengers can and will vote with their wallets and avoid carriers that they believe provide an inferior service. In other words, the plethora of government rules should not be necessary.
“Consumers have choices and this commercial discipline is the most effective protector of consumer rights,” says IATA’s Director General and CEO, Tony Tyler. “Arguably, aviation is already the most regulated consumer-facing industry in the world. Nonetheless many governments have implemented additional consumer protection measures.”
It is unlikely that countries with existing regulation will suddenly revert to the competition approach. To solve the web of confusion created by regulation already out there, IATA is pressing for the adoption of harmonized core principles on consumer protection—and will push to have globally accepted principles formalized by ICAO.
Governments can then develop regulations in line with these principles and the vision is for older regulation to be re-fashioned to ensure consistency. A solution is needed that will at least prevent unintended consequences and acknowledge the global nature of the industry.
A working group operating under the IATA Industry Affairs Committee helped to identify some principles to consider and invited the Sixth Worldwide Air Transport Conference to request ICAO to
- Develop basic principles, or policy guidance, in accordance with the existing international framework on air carrier liability, namely the Warsaw-Hague regime and the Montreal Convention 1999
- Establish a multidisciplinary group with the participation of states and industry to facilitate the aforementioned task.
There are clear foundations for this work. Articles 19, 22, and 29 of the Montreal Convention 1999 define the scope and limits of an air carrier’s liability in case of flight delays and delayed baggage, while the Chicago Convention 1944 has clear guidelines about extra-territorial regulation.
The building blocks are in place. Now governments must find the political will to bring about the necessary change. The IATA Board of Governors has made finding a common approach among governments on passenger rights a priority for the association for 2013.