Passenger Rights - Who Pays the Bills
Guilherme Amaral, expert in aviation law, Aidar sBZ Lawyers, Brazil
Air travel, once a luxury, is safer and cheaper than ever before. Something that used to be for the few has become accessible to the many.
This has been achieved by making air travel cheaper. But, like any business, airlines have to turn a profit. The math is simple—revenues must exceed costs. For airlines, airfares are the major component in this equation. If airlines are obliged to offer meals in the case of flight delays, dispatch bags at no additional charge or refund tickets to no-show passengers, ultimately it is the passengers who will foot the bill.
In other words, granting passengers excessive rights counter-intuitively has a negative impact on those very passengers through higher ticket prices.
This can be particularly damaging in emerging aviation markets such as Brazil, as high prices would prevent a significant portion of the population from flying to the detriment of customers and the wider economy. We could return to the days when only the rich could fly.
Brazil recently ruled that airlines must provide passengers with food and beverages in the case of a two hour delay. Following regulations that exist in other parts of the world makes no sense in countries with an obsolete infrastructure, where many operational problems are not the fault of the airlines. In effect, airlines are paying for a problem they have not caused.
And the passenger is paying too. If airlines must provide ‘free’ food to passengers experiencing a delay or guarantee unlimited indemnification for a lost bag, prices will have to increase to account for the corresponding lost revenue and increased costs. And if further optional items become mandated passenger rights, today’s low-margin airline business model would simply be unfeasible.
Passengers are always entitled to a safe flight and to be treated with respect. They must have protection from being denied boarding or other serious inconveniences, but any ‘right’ that is not truly essential becomes an unnecessary cost. This does not mean that passenger rights should not be offered. They allow for competition between airlines and different service levels. It does mean, though, that they should evolve through codes of conduct and not through the law.
The airline industry has been thoroughly taxed and excessively regulated. Since ticket prices may reach a point where flying is not an option for most passengers, especially during the current economic downturn, we could be faced with another worrying step, which is the undesirable prospect of subsidies.
The aviation industry is a cost-sensitive and competitive sector. If costs can be reduced, then air fares may fall proportionately too. And that process is equally important to the airlines and passengers alike.