Consumers are entitled to receive reimbursements, especially because of bailouts.

At the beginning of the COVID-19 pandemic, a number of EU member states were asking for changes to ticket cancellation policy rules, effectively exempting airlines from refunding their customers. As it stands, airlines have a week to fully refund their customers for cancelled flights. Additional compensation rules apply for long delays and other inconveniences. When consumers book flights, they anticipate these protections to be upheld.

Consumers who have purchased tickets at a precise moment in time did so under existing rules and regulations. The European Union cannot retroactively change these policies — this is a rule of law issue above all else. Consumers should not be forced to pay for the poor bookmaking of airline companies. COVID-19 is undoubtedly a disaster for airline companies, but that doesn’t mean that the obligation to refund consumers should be willed away by the stroke of a pen. It’s also important to point out the incredible hypocrisy on the part of policymakers. 

EU policymakers spent most of 2019 lecturing consumers about flights, and are now rigging the rules of commerce for the benefit of airline companies. It is outrageous that airline companies are getting special treatment when hotel and event bookings are not. Retroactively changing the terms of a contract is a severe blow to consumer trust and consumer protection. This move decimates the consumer trust in existing and incoming protections entirely and puts a question mark of the actual authority of law-makers.

The refund mechanism has since been sped up by many airlines, but mostly because billions in bailouts have been transferred all throughout spring and summer. Some airlines are going to receive additional funds as lockdowns and travel restrictions continue. In that context, airlines also need to be held to their word when it comes to refund policies.

That said, compensation policies aren’t what consumers need. Passengers can expect compensation for their flight cancellation, between €250 and €600 depending on the length of their route. This has been the reason for significant disputes and has proven to make neither companies nor passengers happy.

This compensation scheme is a government-mandated insurance policy, which increases the price of the ticket, despite passengers not wanting generalised insurances. How can I say that with confidence? It suffices to take a look at how many people conclude voluntary travel insurances upon checkout. The result of the compensation scheme has been long court battles, in which passengers rightfully demand the funds that they were promised. The procedures here are too costly for consumers to engage in them themselves, but resorting to large law firms leaves them with only a percentage of their expected compensation. While the policy sounds good in theory, it doesn’t work in practice. Instead, private travel insurances give consumers better leeway to act. 

However, while compensation rules can be controversial (and do not apply in cases of natural disasters), it seems fair and just that passengers are reimbursed for flights they did not get to take. This is not an argument from a David vs. Goliath perspective of the big company vs. the small consumer, but rather from the principle of contract law — i.e. rendering the service.

As I wrote in a letter to airline CEOs back in June:

“We want to be in the air with you as soon as possible, but please do your part and commit to the rule of law and don’t force us to bring you to court. Hundreds of millions of taxpayers across the world are already helping you through government bailouts. We do our part to advocate for fewer levies and taxes paid on airfares and against silly bans of domestic flights, like the ban being discussed in France right now. This will make the sector more competitive and will allow us, consumers, to fly more with you.”

Originally published here.

The war between Canadian consumers and Air Canada drags on, with the airline still refusing to issue refunds for cancelled flights departing from Canada. To make matters worse, Transport Minister Marc Garneau says the Trudeau government will not force airlines to issue refunds.

Getting money back when a business doesn’t provide a service is pretty basic fair play. In an environment in which no one knows when plane travel will be back to normal, a voucher for a future trip is a poor substitute for cash. If you are one of the 14 per cent of Canadians without a job and struggling to pay your bills, a voucher is a real slap in the face, while a refund could go a long way in helping you stay afloat. It’s hard to understand why the government is letting the airline stick it to consumers this way.

If Air Canada is incapable of doing what’s right, that’s just one more reason to rethink how we regulate the domestic airline industry. The easiest way to shake things up would be to change our approach regarding international ownership. As it stands, airlines that fly domestic routes in Canada need to be majority-owned by Canadian citizens, which means international investors cannot account for more than 49 per cent of company ownership. Canada should follow Chile’s lead, eliminating ownership requirements altogether and allowing for international carriers to fly domestic routes.

This would be a huge benefit to consumers, as it would put much-needed downward pressure on travel prices in Canada. Based on aggregate data from international travel booking company Kiwi.com, Canada ranks 65th globally in terms of flight affordability. Our cost per 100 kilometres travelled is 2.1 times higher than in the United States, 2.8 times higher than in New Zealand and 3.6 times higher than in Portugal.

When it comes to air travel, Canadian consumers need more competition. Permitting international carriers to better optimize their routes by including additional Canadian cities would be a great step forward. For example, why shouldn’t British Airways be allowed to sell seats from Vancouver to Toronto while en route to London? Or American Airlines from Halifax to Calgary, while en route to Seattle? Or Air France from Calgary to Montreal, en route to Paris? Why not, indeed? It would save us all a lot of money.

Critics will argue that more competition will decrease Air Canada’s ability to connect our smaller towns and cities. But considering Air Canada has just announced the indefinite suspension of 30 small-market domestic routes, it’s a moot point. Air Canada’s decision shows exactly why now is the time to open the market to more competition.

If international discount carriers think they can make (our domestic) routes profitable, let’s make it legal for them to try

If international discount carriers think they can make those routes profitable, let’s make it legal for them to try. If a Canadian airline wants to attract international investment to expand its ability to fly domestic routes, it should be able to do so without arbitrary ownership limits. Air Canada may not be able to fly those routes and make a profit, but that doesn’t mean other airlines couldn’t. We should let them try.

No doubt some people believe the current turmoil is a reason to re-nationalize Air Canada and bring it back under government control. That is a terrible idea — for taxpayers and travellers alike. Both in Canada and internationally the airline industry has shown itself to be extremely volatile. In the past 20 years alone, the sector was devastated by 9/11, dealt another blow by SARS and didn’t see its stock prices recover to pre-9/11 levels until 2014.

COVID-19 highlights this volatility, as the pandemic has caused airline stock prices to fall at a rate never seen. A nationalized airline would not be immune to those shocks, which would then force taxpayers to foot the bill every time a crisis erupted. For a country with high — and rising — public debt, taking on a hugely risky public investment wouldn’t just be misguided, it would be reckless.

On the consumer side, the idea of a nationalized airline isn’t worth celebrating, either. For decades, the government has consistently failed to deliver the mail on time. Putting it in charge of getting you to your connecting flight is a recipe for widespread travel disaster.

Consumers would have more choice and more routes as a result of eliminating ownership restrictions. When we do travel again, the experience should be as consumer-friendly as possible. More competition is the only way to ensure that.

Originally published here.

The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org