Are airlines treating passengers of disrupted flights fairly?

Courtesy Reuters

IF you were travelling on Singapore Airlines (SIA) out of London and your flight is delayed or cancelled, you may be compensated up to €600 according to European Union (EU) regulations. However, if it is an outbound flight from Singapore, what compensation a passenger may receive, if any, will depend on the policy of the airline.

This is because EU regulations do not apply to non-EU carriers arriving at an airport in member countries although it covers all departing flights of both EU and non-EU carriers.

The regulations have recently been extended to include connections even if these are operated outside the EU by non-EU airlines. The ruling states that “an operating air carrier that has performed the first flight cannot take refuge behind a claim that the performance of a subsequent flight operated by another air carrier was imperfect.” It is therefore obliged to offer passengers alternative transport for the disrupted flight, in addition to monetary compensation.

Over in Canada, the Air Passenger Protection Regulations introduced by the Canada Transportation Agency require airlines affected by flight disruptions to meet certain obligations which will apply to all flights to, from and within Canada, including connecting flights. Passengers whose flights are delayed or cancelled will be compensated up to C$1,000 depending on the size of the airline and length of the disruption. Non-compliance carries a fine of up to C$25,000.

Countries elsewhere do not generally legislate on mandatory fiduciary compensation of a stipulated amount for flight disruptions. In the United States, airlines are obliged to compensate passengers who are bumped off a flight due to an overbooking situation (as in the EU and Canada), but there are no federal regulations requiring them to do the same thing for passengers whose flights are delayed or cancelled.

Consumer rights groups have long been pushing for fairer treatment of travellers under these circumstances. Besides arranging meals and hotel accommodation in the event of a long delay, some airlines hand out in-flight gift vouchers, but most do not make any form of financial payment. In many cases the affected passengers get not much more than an apology while they wait to be put on the next available flight.

The International Civil Aviation Organization (ICAO) recognises the vulnerability of passengers and supports “due attention… (which) could include rerouting, refund, care and/or compensation”, but it stops short of spelling out specifics and making them industry standards. The International Air Transport Association is however concerned that airlines may be adversely affected, advocating “an appropriate balance between protection of consumers and industry competitiveness.”

Affected passengers therefore by and large can only rely on the goodwill of the airlines, whose policies differ across the industry. Many of them have come to realise that to take the matter further on their own – including bringing an airline to court – can be tedious, frustrating and, more often than not, futile. What they need is the support of an authority who can enforce compliance within a legal framework.

Yes, even with mandatory compensation in place in the EU and Canada, there have been complaints that the airlines are not forthcoming in meeting their obligations, citing extraordinary circumstances that do not render them liable or delaying payment indefinitely. Still, in the context of good governance, what the EU and Canada have introduced is a significant step forward in recognition of the uphill challenge passengers face in their battle with the airlines for fair compensation.

Some airport authorities fine airlines for flight delays or operating off-schedule because it disrupts and causes less-than-optimal resource allocation that can be costly to the airport’s operations. By the same argument, passengers of disrupted flights deserve to be fairly compensated. The disruption can be costly in terms of making alternative arrangements, staying in some place longer than planned, and losing opportunities as in failing to make a business deadline. Above all, it causes anguish and distress.

The amounts recommended by the EU and Canada are miniscule compared to the fines of up to US$27,500 per passenger imposed by the US Transportation Department for planes left on the tarmac for more than three hours (or four hours for international flights) without taking off. American Airlines and Southwest Airlines share the honour of holding the record fine of US$1.6 million, the former in 2016 and the latter in 2015.

Non-US airlines that have been penalised by the US Department of Transportation (DOT) include Japan Airlines which was fined US$300,000 for two incidents in 2018 in which passengers were made to wait more than four hours on the tarmac before they could deplane.

All these measures serve the common goal of encouraging airlines to ensure their flights operate as scheduled and hopefully too that they become more conscientious about how they treat their customers. However, the fines imposed by DOT do not directly benefit the passengers who are the very reason why an airline is in business.

An example of how an airline may take the EU regulations seriously is when British Airways, faced with the threat of strike action by its pilots recently, informed its customers as early as two weeks of cancellations of some flights to avoid paying compensation.

However, do not expect similar regulations to be introduced any time soon in other parts of the world. For one thing, consumer rights groups do not appear to be as aggressive, and many countries especially Asia are less prone to industrial action. Besides major Asian carriers known for good customer service are more responsive to feedback and complaints and may already be offering some form of compensation even if they are not as generous.

But as the number rises, there is a greater need to ensure that affected passengers are fairly treated. The powers that be can ensure that. According to aviation data and analytics experts at Cirium, about 3.9 million flights or 10,700 a day were delayed by over 30 minutes or cancelled worldwide in 2018. Take a typical day on 5 August 2019.there were 22,386 delays and 1,107 cancellations globally, of which 29 per cent of the combined total occurred in the United States, 26 per cent in Europe, and 34 per cent in Asia Pacific.

Until then, here’s a poser for SIA and the likes: Will they accord the same level of comnpensation to all passengers even if they are not bound by regulations, for no better reason than simply one in the name of fairness?

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A matter of fair play: Canada and European Union expand protection of air travellers’ rights

Courtesy LaPresse

Flight delays and cancellations may be said to be part and parcel of air travel given that they are happening more often than not.

Take a typical day as 5 August, 2019: According to Cirium, there were 22,386 delays and 1,107 cancellations globally, of which 29 per cent of the combined total occurred in the United States, 26 per cent in Europe, and 34 per cent in Asia Pacific.

But what recourse do affected travellers have in the event that they are inconvenienced?

While the International Civil Aviation Organization (ICAO) recognizes the vulnerability of passengers and supports “due attention… (which) could include rerouting, refund, care and/or compensation”, the agency stops short of spelling out specifically what the entitlements could amount to. Similarly, the International Air Transport Association in voicing support for ICAO’s stand is concerned how the airlines may be adversely affected, seeking “an appropriate balance between protection of consumers and industry competitiveness.”

In the Untied States, for example, there are no federal regulations requiring airlines to compensate passengers when flights are delayed or cancelled, unless they are bumped off a flight due to an overbooking situation. Strictly applied, airlines are not obliged to put you on another airline’s flight.

So too around much of the world, many governments do not legislate on the matter. Different airlines have different policies to handle such situations, but it has always been arguable as to what constitutes fair compensation. And travellers who have been left high and dry are often impotent seeking redress, resigned to the mercy of the airlines.

What air travellers need is an authoritative voice to decide on fair play There is hope however if more regulators will follow in the footsteps of their counterparts in Canada and the European Union which have in recent weeks expanded legislation to protect passengers’ rights.

Canada

The Air Passenger Protection Regulations introduced by the Canada Transportation Agency require airlines affected by flight disruptions to meet certain obligations which will apply to all flights to, from and within Canada, including connecting flights.

Passengers whose flights are delayed or cancelled will be compensated up to C$1,000 (US$756) in accordance with the size of the airline and length of the disruption. Large airlines will pay out more than small airlines: C$400 and C$125 respectively for delays between three and six hours, C$700 and C$250 for delays between six and nine hours, and C$500 and C$1,000 for delays nine hours or more.

Non-complying airlines may be fined up to C$25,000 for non-compliance.

The regulations also cover other obligations such as clear communication and updates, reasonable food catering, the need for ventilation if passengers are stuck on the tarmac, allowing passengers to leave the aircraft if the delays exceed three hours, re-booking and refund. Passengers may be compensated up to C$2,100 for lost luggage and up to C$2,400 if bumped from a flight.

Not surprisingly, the airlines – supported by the International Air Transport Association (IATA) – are saying the rules go too far. Advocates of passenger rights on the other hand say they do not go far enough. But it nevertheless is a step forward.

Europe

The European Union’s regulations have been expanded to include connections even if they are operated by non-EU airlines.

The new regulation states: “In the case of flights with one or more connections that are subject to a single reservation, an operating air carrier that has performed the first flight cannot take refuge behind a claim that the performance of a subsequent flight operated by another air carrier was imperfect.”

The operating carrier will also have to offer passengers alternative transport for the disrupted flight, in addition to compensating them with an amount ranging from US$290 to US$700.

The European Union has been a prominent pusher to protect passengers’ rights. Considering its history of disruptions caused by industrial action by airline and airport staff, this is a welcome move to air travellers.

However, many travellers may be discouraged by the cumbersome claims procedure which may involve a cut by an agency handling the claim on their behalf if they choose to go through a third party, and by the long settlement time of a claim. Still, it is another step forward.

One wonders, if a non-EU airline agrees to abide by the EU regulations for its flights operating into and out of Europe, is there a good chance it would be as amenable to similarly apply fair treatment to its customers outside the region, particularly at its home base?

A good year ahead for airlines

Courtesy AP

Courtesy AP

The International Air Transport Association (Iata) has raised its profit forecast for 2014 to US$19.9 billion from the earlier prediction of US$18 billion. Encouraged by falling fuel prices and recovery of the world economy, Iata director-general Tony Tyler said “the industry outlook is improving.” The association representing some 250 airlines expects a record US$25 billion profit for the global airline industry next year.

It is a long year ahead, but the industry is more certain now about its prospects as airlines are reporting higher profits. Oil prices continue to slide. In fact, airlines are yet to enjoy the full impact of the falling fuel prices. Of course, there is the usual caveat of political unrest and conflicts that can turn the tables.

Is there good news for passengers as well? According to Iata’s prediction, average return fares will be 5.1 per cent lower next year. Keep your fingers crossed, as no airline has yet to boast openly about taking the lead to lower the fuel surcharge.

The state of the airline industry

Courtesy IATA

Courtesy IATA

IN his keynote address at the recent AGM of the International Air Transport Association (IATA) held in Doha, IATA director-general Tony Tyler said: “Our financial performance does not yet match the value that we deliver.”

No one will deny the importance of the airline business in global connectivity that is so necessary for economic growth, a point that Mr Tyler made sure is not taken for granted especially by the powers that be regulating the industry from outside the business, and on which must therefore be premised the criticality of ensuring that “airlines must be profitable, safe and secure businesses.”

The sentiment is understandable in light of what the industry has been through since the global economic meltdown in 2009 and the continuing struggle to regain past glory. But, as Mr Tyler recognized, airlines operate in a highly competitive environment. The new elasticity in demand and reduced brand consciousness as influenced by the cost of flying are not helping. There is really not much you can do about the global economy dragging its feet, or about the volatility of the fuel price which has been blamed all too often for many an airline’s poor performances, so Mr Tyler turned to the regulators with this message: “Airline efforts to improve performance further need a counterpart in governments.” More specifically, he said: “Airlines themselves remain burdened with high taxes and weak profitability.”

This brings us back to his earlier comment about what he considered to be “a mismatch between the value that the industry contributes to economies and the rewards that generates for those who risk their capital to finance the industry.”

So, if the airline industry were to collapse, who is to blame? You can be sure that governments are equally concerned about pushing the industry to the brink, and while they may be selective about whom to rescue, they would generally rally to facilitate one that flies the flag however independent and autonomous it claims to be. But governments have a wider agenda which in no surprising way may be more political than commercial, which understandably are more regional than local, and which consequently become more complex and faceted by comparison. Noteworthy is how an increasing number of governments have in recent years relented in allowing increased foreign investment in local airlines.

Taking the cue from Mr Tyler’s statement, one might ask: Are there one tax too many (apart from the quantum)? It is not uncommon for airlines to pass on these taxes or some fraction of them to their customers, the rationale being that these are collected on behalf of the governments. In the tussle between the European Union and airlines over a carbon tax that would have been implemented at the beginning of last year but for the global protest, airlines had said that they would pass it on to their customers. To the discerning air traveller, he shall not be misled by the misrepresented fare advertised by many an airline, and increasingly regulators in the United States and the European Union are taking the carriers to task for misleading advertising. Carriers that had been fined include Ryanair and Southwest Airlines.

Squeezed between the regulators and the operators, consumers are not necessarily the winner but for the saving grace in the competition and the application of the law of supply and demand. India offers a classic example of how the competition may work in the favour of consumers. AirAsia India, the first airline with foreign investment and new kid in the arena, has promised to become the “lowest-cost” airline in India, and a fresh round of price warfare is expected. It is known that many operators have come and gone, and too many of the existing operators continue to incur losses, yet the huge potential of a growing market of air travellers continues to lure would be investors. It may be the law of the jungle where only the fittest will survive, and AirAsia believes it has the discipline to keep the fares low and its costs “razor-thin”.

Mr Tyler too advocated the need for improved efficiency, as evident in the use of more fuel-efficient equipment and through consolidation and airline partnerships. Nevertheless, this raises the question: How efficient are today’s airlines?

Yet all is not gloom and doom, even as IATA has cut its profit forecast for this year to US$18 billion from US$18.7 billion made in March, over concerns of China’s economic growth and a recurring slowdown in world trade. Still it is a vast improvement, compared to US$10.6 billion last year and US$6.1 billion in 2012. Overall passenger growth is expected to remain strong in 2014, reaching 3.3 billion, up 5.9 per cent on 2013 although the premium component of that growth continues to stagger. According to IATA, for the first time, the global load factor looks set to average above 80 per cent for 2014.

Region-wise, North America is likely to be the star performer as IATA raised its profit projection to US$8.6 billion, which is US$300 million higher than the previous forecast. All the other regions will see downward estimates with the exception of Africa, which remains unchanged. Still, the prospects look bright for the industry overall.

There is another piece of good news: fuel prices have been quite stable for now, although the situation continues to be threatened by geopolitical conflicts in Europe and the Middle East.

And, believe it or not, yet another piece of good news but for the consumer: Mr Tyler said air fares are expected to fall 3.5 per cent “in real terms”. Now whom do we thank for that?

This article was first published in Aspire Aviation.

Chinese carriers’ results attest to industry volatility

Courtesy Wikipedia Commons

Courtesy Wikipedia Commons

MORE dismal results from other Asian carriers only attest to the continuing volatility of the airline industry, and this is reflected in a region said to be the beacon of the business that analysts had predicted to be finally heading back into far healthier numbers.

China’s three major state-owned airlines – Air China, China Eastern Airlines and China Southern Airlines – posted big decline in annual profits because of the weak global economy, higher jet fuel prices and smaller foreign currency gains. Profit plunged by half for China Southern and by a third for Air China and China Eastern.

The results for 2013 may yet show an improvement on the poorer performance reported for 2012, so it is still a wee bit too early to expect the International Air Transport Association (Iata) to revert to downgrading its forecasts as it did ever so often in the past three years. The signs for now though are not all that encouraging.

Grim future for airlines: Is consolidation the answer?

ACCORDING to Qantas CEO Alan Joyce, the airline industry faces an overcrowding problem. At the recent International Air Transport Association (Iata) summit in Beijing, he said: “The number of airlines in the industry is too many. It’s too fragmented, and consolidation is a good thing.”

Mr Joyce is re-championing an old strategy that more than 20 years ago was predicted to inevitably see the number of competitors reduced to a few mega airlines. One suspects that Qantas, struggling with a money-losing international operation, is crying foul over the competition posed by better-geared airlines that also provide superior customer service such as Emirates and Singapore Airlines (SIA),

Not foreseen then was the impending flourish of budget carriers, which became more than just a temporary nuisance but a threat to the more established airlines like Qantas. Qantas would meet with more competition when Scoot, a new budget subsidiary of SIA, commences services between Singapore and Sydney.

The recent spate of new mergers, particularly of giants like British Airways/Iberia, Air France/KLM, Continental/United and Delta/Northwest, seems to suggest a return to a strategy that was a bitter pill for SIA to swallow when it bought stakes in Virgin Atlantic in 1999 and Air New Zealand in 2000. The Virgin stake was a not-so-glamorous-after-all marriage which SIA has for some time now indicated interest in dissolution if it could find a suitable buyer. The Air NZ marriage turned out to be a fiasco, and was subsequently dissolved at a loss. That perhaps explains a more cautionary approach that SIA seems to be adopting today, preferring a less binding collaborative relationship such as the commercial arrangement  inked with Virgin Australia.

Consolidation is expected to come with the merits of sharing costs and risks, and the hope of confining, reducing or eliminating competition. In the present climate, cost is likely to be the primary driver in this direction. The LATAM merger, made up of Chile’s LAN and Brazil’s TAM, is expected to save US$700 million in operating costs over four years.

Unity is strength, but a good marriage demands more than just an exchange of vows, particularly when it crosses culture and geography, when it is held together by unequal strengths, and when both parties uphold different management ideologies. Qantas itself went through that rough patch with British Airways, which outbid SIA for a 25-per-cent stake in the Australian flag carrier in 1993, then ending the partnership in 2004. In 2008, rumours resurfaced of a possible Qantas-BA merger that never did materialize.

Yet as circumstances change, with the global economy continuing to languish and fuel prices remaining volatile, joining forces and leveraging on each other’s advantages in whatever form may provide the stabilizer in stormy weather.

China optimistic about its aviation future

Courtesy travelchinaguide.com

CHINA is optimistic about its aviation future even as the International Air Transport Association (Iata) for the third consecutive year slashed its annual profit forecast by at least half. This year’s profits are expected to fall from last year’s US$7.9 billion to US$3.0 billion. Iata chief Tony Tyler said: “The industry’s profitability is balancing on a knife edge.”

But China has reasons to smile. After all, Asia is the industry’s star player and China its main driver. Last year Chinese carriers contributed to half of the industry’s global profits. Going forward, China has announced plans for 70 new airports in the next three years and expansion of 100 existing airports – an unprecedented move on such a scale by any country.

Chinese carriers too are poised for expansion and growth, both domestically and internationally. Li Jiaxiang, director of the Civil Aviation Administration of China, said the country would add more than 300 aircraft a year from now until 2015. Air China for one, which has a fleet of 250 aircraft, will expand its fleet to 700 in five years.

Foreign carriers eyeing the Chinese pie too have reasons to smile. Qantas is launching Jetstar Hong Kong in a joint venture with China Eastern Airlines, and has not given up on an Asia-based premium airline to cater to China’s growing nouveau riche. Air Canada becomes the latest foreign airline to express interest in a budget carrier connecting North America and China and other Asian destinations, noting how Chinese carriers have also increased their presence in Canada.

It looks like 2012, which coincides with the propitious Year of the Dragon of the Lunar calendar, belongs to China, whose optimism provides a valuable lesson for the rest of the aviation world: the engine of growth must be sustained. Waiting helplessly for some more airlines to join busted European airlines Spanair and Malev may well turn out to be a self-fulfilling prophecy.

So said one of the speakers, Qatar Airways chief executive Akbar al-Baker, at the Iata summit:: “When we meet again next year there will be far fewer of you sitting there.”