Compensation plans prop up weak airlines,
says travel group. Less is more when it comes to
passenger protection
Deborah Stokes
Weekend Post
Saturday, March 26, 2005
Right off the bat, David Stempler doesn't sound like much of a travellers' rights advocate. Certainly, the president of the Washington-based Air Travelers Association doesn't have comforting words for those looking for consumer protection from the vagaries of the airline business.
"We don't believe in it," says Stempler, an aviation lawyer, lobbyist and frequently quoted aviation expert. "It is bad for the marketplace when there is some artificial aspect that causes people to make purchasing decisions they otherwise might not have."
Predictably, in the wake of Jetsgo's bankruptcy, the calls for more consumer protection in the airline industry are escalating. The Travel Industry Council of Ontario (TICO), a travel-agent watchdog and administrator of Ontario's travel compensation fund, joined travel agents and some consumer groups this week in demanding action from Ottawa. And for good reason. TICO is still making payouts to travellers from the demise of Canada 3000 four years ago, and the compensation fund will take another big hit from the Jetsgo collapse. Meanwhile, airlines are not required to pay into the Ontario fund -- or any compensation fund for that matter.
"While there are very strict rules at the provincial level to govern the practices of travel agents and wholesalers, there are no corresponding rules in place with respect to airlines, which are regulated by the federal government," Michael Pepper, president and CEO of TICO, said in a statement this week. "The result is there is no consumer protection scheme of any kind when it comes to the airlines and that is detrimental to everyone -- consumers and industy, alike."
The passenger protection movement here dovetails with the direction recently taken in Europe. The European Union introduced new rules in February that force airlines to compensate passengers for overbookings, cancellations or flight delays. The rules apply to passengers flying any airline -- European or not -- from any EU airport, and compensation ranges from 250 euros to 600 euros (around $395 to $945) depending on the length of the flight.
But it is Stempler's view that the best protection for airline passengers is less government intervention -- not more.
He says consumer compensation schemes only serve to prop up weak airlines at the expense of healthy ones. For example, travellers may not think twice about booking deeply discounted tickets on a wobbly airline if there is a compensation scheme to refund them if things go wrong.
Moreover, the healthier airlines suffer from having to compete with unrealistic fares. "We really need our carriers to be financially stable. The only thing worse than high fares is no fares," Stempler says.
In the case of Europe, he says the new compensation rules could result in a worrisome side effect. "The risk is, if there is an economic penalty [for a delay or cancellation], an airline may dispatch a flight when it shouldn't have."
As messy as it can sometimes be -- and Jetsgo is a good example of that -- the marketplace is the best place to sort out the airline industry, says Stempler. "It forces airlines to satisfy our needs, rather than the government." Perhaps he does speak for passengers after all.
Not sure how to take that....not good though, I think.
I don't think airlines should pay into a fund that protects passengers, since pax are looking for the cheapest deal out there. If passengers want a little more security when they go flying, they don't be afraid to pay a little more. This low-cost craze that passengers want can have nasty side effects - like when you pay for a dollar fare and then the airline goes bankrupt. You don't want to pay, then you take that chance; you lose, well too bad. A fund that helps protect their "massive" investment just serves to assure people that paying $1 is fine, because the airline will have to pay out if there's a problem.
I completely agree with that article - an airline is not a public utility and should not be treated that way. If Jetsgone reopens, there should not be any guarantee of service beyond a guarantee by the government that any aircraft that gets dispatched is safe. As soon as you purchase a ticket, you become a creditor - you have advanced them some capital and your anticipation is a service in return. Caveat emptor.
If, however, the Liberals wish to set up a company and fly people about because we're in a large country and people need to move about etc. etc. etc. then there would be protection. The fares though, would be so high, either in direct costs or in subsidies (gun control? HRDC? EI surplus? Sponsorship? etc.) that its doubtful any of us who could not otherwise afford a business jet, could afford to fly on it.
I've said this before and I'll say it again (and again and again and again), the pilots are the cheapest part of the operation, even years ago when we were getting a living wage, but we are the only negotiable part of the operation. Aircraft, even old ones, cost HUGE amounts of money to run. Priced a generator, hydraulic pump, or suffered a catastrophic engine failure lately? Not to mention the crippling taxes our scum-sucking government takes. The travelling public needs to pay to fly, or there will not be any flying done. Simple.
Despite all the weird seat-pricing schemes, if it costs X to fly to somewhere, then you must add a profit margin plus ALL THE OTHER COSTS like rent and uniforms and the office overhead and the crew bus etc. and divide that result by the number of seats. That's your fare. If you don't pay it, your risks of getting to or back from where you want to be just got smaller.
The guys who can figure out all the costs and get other ways to cover them besides bums-in-seats, like (ahem) Aeroplan, are the ones who can offer discount seats and will still survive.
$1 fares = Crap. Sewing a button on a uniform costs more.
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Airlines don't pay anything. unless they overbook. then it hurts the locost carriers more. your yvr-lhr tix may cost 799+tx if the airline overbooks, and you have no seat the airline has to pay you, not the govt, not some benevolent agency, the airline. if the airline can't control their load/yield management, they deserve to pay for it, not some meal voucher, an overnight in the hojo and a "150$ VOUCHER FOR THE NEXT TIMEW YOU FLY WITH US" my .02$
