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Consumer protection could cause higher air fares - Iata

Geneva – Consumers will likely face higher fares as airlines need to pass on the liability posed by more prescriptive and expensive consumer protection regimes, according to Chaitan Jain, assistant director of external affairs at the International Air Transport Association (Iata).

That liability totalled about $4bn for the industry in 2012 and may triple to $12bn by 2017, he said.

Currently there are about 60 countries in the world with some sort of aviation-specific rights regime in force, but the problem is that many of these regimes are not aligned to each other nor to international standards, according to Jain.

It relates to issues like who must compensate a passenger when a flight has been delayed or when baggage gets lost.

“The resulting patchwork creates difficulties for consumers and for airlines,” he said.

“Today international passengers do not really know what they are entitled to and many of the passenger rights regulations have unintended consequences, making it even more difficult for consumers.”

He explained that onerous passenger rights regimes can also mean less choice for passengers as airlines might end up reducing services if they cannot pass on the cost of consumer protection regulations to passengers, or they may simply not be willing to take the risk.

He added that this might also lead to airlines having less room to compete if government regulation forces them to maintain certain service standards, which distort the market place.

“Requiring compensation after a delay of a certain number of hours could have the perverse effect of causing more cancellations and more serious disruption to passengers, instead of protecting them, as airlines then no longer have an incentive to incur the costs of delaying a flight,” said Jain.

“With the patchwork of regimes in place, customer confusion reigns. It defeats the purpose of providing passengers with clear, transparent rights that they can count on.”

He explained that offering protection to consumers is a good thing, but the purpose of many of these regulations appears to be to “defend” passengers from airlines. This results in rules which, in his view, reduce consumer protection and convenience through higher fares, less choice and more confusion.

“We, therefore, need to reframe consumer protection discussions as a partnership between consumers, governments and the industry. It must be aimed to encourage competition, innovation, consumer confidence and enhanced air connectivity and industry competitiveness,” said Jain.

Iata has launched such an initiative in June this year. He also gave Australia as an example of the implementation of a smarter regulation approach to consumer protection.

* Carin Smith was a guest of Iata at its recent global media day.

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