Economic deregulation of the airline industry has brought huge benefits over decades, increasing consumer choice, reducing fares, expanding route networks and encouraging new entrants.
ISTANBUL – The International Air Transport Association (IATA) called for consumer protection regulation to address the responsibility shared by all stakeholders when passengers experience disruptions and released survey data showing most passengers trust airlines to treat them fairly in cases of delays and cancellations.
Whenever there is a delay or a cancellation, where specific passenger rights regulations exist, the burden of care and compensation falls on the airline, regardless of which part of the aviation chain is at fault. IATA therefore urged governments to ensure that responsibility for flight issues is shared more equitably across the air transport system.
“The aim of any passenger rights regulation surely should be to drive better service. So it makes little sense that airlines are singled out to pay compensation for delays and cancellations that have a broad range of root causes, including air traffic control failures, strikes by non-airline workers, and inefficient infrastructure. With more governments introducing or strengthening passenger rights regulations, the situation is no longer sustainable for airlines. And it has little benefit for passengers because it does not encourage all parts of the aviation system to maximize customer service. On top of this, as costs need to be recouped from passengers, they end up funding this system. We urgently need to move to a model of ‘shared accountability’ where all actors in the value chain face the same incentives to drive on-time performance,” said Willie Walsh, IATA’s Director General.
Economic deregulation of the airline industry has brought huge benefits over decades, increasing consumer choice, reducing fares, expanding route networks and encouraging new entrants. Unfortunately, a trend of re-regulation threatens to undo some of these advances. In the area of consumer protection, more than a hundred jurisdictions have developed unique consumer regulations, with at least a dozen more governments looking to join the group or toughen what they already have.
EU 261 needs to be reviewed
The Commission’s own data show that delays have increased since the existing EU 261 Regulation was introduced, even as the cost to airlines—and ultimately passengers—continues to balloon. It has become subject to more than 70 interpretations by the European Court of Justice, each of which serves to take the regulation further than originally envisaged by the authorities. The European Commission, along with the Council and Parliament, needs to revive the Revision of EU261 that was on the table before it was blocked by Member States. Any future discussions should address the proportionality of compensation and the lack of specific responsibilities for key stakeholders, such as airports or air navigation service providers.
Such a review is even more necessary when the EU Regulation is in danger of becoming a global template, with other countries, including Canada, the United States, and Australia, as well as some in Latin America and the Middle East, seeming to consider it a model, without recognizing that EU261 was never intended to address operational disruption and therefore does not apply equally to all actors in the aviation chain.
“In refusing to address the issue of distributing accountability more evenly across the system, EU261 has entrenched the service failings of some actors who have no inducement to improve. A classic example is the more than 20-year lack of progress toward the Single European Sky, which would significantly reduce delays and airspace inefficiency across Europe,” said Walsh.
An opportunity for the United Kingdom
With sensible reform of EU 261 stalled, the United Kingdom has an opportunity to incorporate some of the proposed revisions into the country’s post-Brexit model for passenger rights. Proper reform of ‘UK 261’ provides a gilt-edged opportunity for a genuine ‘Brexit dividend’ which the present pro-Brexit government should not ignore.
Canada is losing its reputation for good regulation
The situation in Canada is particularly disappointing because it has benefitted from a well-balanced regulatory regime up to now. An example is the explicit recognition of the primacy of safety, meaning that safety-related problems are not subject to compensation. Unfortunately, Canadian policymakers seem inclined to remove this important exception. Canada has also announced a “guilty until proven innocent” approach to airlines when there are delays or cancellations. These moves appear to be driven by internal Canadian party politics. Moreover, the government’s regulatory zeal appears to evaporate when it comes to holding government-run entities such as Border Services (CBSA) or Transport Security (CATSA) accountable for their performance.
One potential bright spot is that the National Airlines Council of Canada has put forward a model for shared accountabilities across the aviation value chain, including increased transparency, data reporting and service quality standards, an approach that could well have merit beyond Canada.
The United States—a solution in search of a problem
The US Department of Transportation is proposing to mandate compensation for delayed or cancelled flights when their own Cancellation and Delay Scoreboard shows that the 10 largest US carriers already offer meals or cash vouchers to customers during extended delays, and nine also offer complimentary hotel accommodation for passengers affected by an overnight cancellation. Effectively, the market is already delivering, while at the same time allowing airlines the freedom to compete, innovate and differentiate themselves in terms of their service offerings.
“It’s easy for a politician to regulate a new passenger rights law, it makes them look like they’ve achieved something. But every new unnecessary regulation is an anchor on the cost-efficiency and competitiveness of air transport. It takes a brave regulator to look at the situation and recognize when ‘less is more’. The history of this industry proves that less economic regulation unlocks greater choice and benefits for passengers,” said Walsh.
Passengers don’t agree there is an issue
There is little evidence passengers, outside of a few rare instances, are clamouring for stronger regulation in this area. An IATA/Motif survey of 4,700 travelers across 11 markets asked passengers how they were treated in the case of delays and cancellations. The survey found:
- 96% of travelers surveyed reported they were ‘very’ or ‘somewhat’ satisfied with their overall flight experience
- 73% were confident they would be treated fairly in the event of operational disruptions
- 72% said that in general airlines do a good job of handling delays and cancellations
- 91% agreed with the statement ‘All parties involved in the delay or cancellation (airlines, airports, air traffic control) should play a role in helping the affected passengers’
“The best guarantor of good customer service is consumer choice and competition. Travelers can and do vote with their feet if an airline – or indeed the entire aviation industry – doesn’t come up to scratch. Politicians should trust the public’s instinct and not regulate away the distinctive business models and choices available to travelers today,” said Walsh.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.