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Airlines hit back at CAB, threaten higher fares

Local airlines say the orders of the government to suspend overbooking and their issuance of non-refundable tickets will kill their low-cost-carrierr business model, forcing them to increase airfares

MANILA, Philippines – Without overbooking and tickets that are non-refundable and non-rebookable, local airlines said higher airfares await.

This was the threat of budget carriers upon learning that the Civil Aeronautics Board (CAB) is set to implement orders suspending industry practices effective June 15.

Local carriers Air Asia Philippines and South East Asian Airlines (SEAir) were vocal in contesting the two recent orders of CAB. Previously, country’s largest player, Cebu Pacific Air and Philippine Airlines (PAL) stressed that “there is a need to strike a balance between consumer welfare and industry growth.”

AirAsia Inc. chief executive officer Marianne Hontiveros said the viability of the budget airline model will be jeopardized if carriers will be compelled to refund and re-book domestic airline tickets–regardless if it’s the passenger or the airline that was at fault.
“We can’t operate under those circumstances. Where is the passenger responsibility there? They buy ticket from us and we reserve a seat for the passenger but the latter failed to wake up on time and still get a refund or have the flight rebook,” said Hontiveros.

“This is very dangerous for us. We’re going to have to factor that in our fares,” added Hontiveros.

SEAir president Avelino Zapanta also opposed the CAB orders. “These are costly for the LCCs (low cost carriers)…The restrictions will kill the LCC model designed for the ordinary Juan dela Cruz.”  

He also echoed how higher airfares could be the result of the orders. “They’d (airlines) be forced to up the fares and be no different from legacy airlines. Higher fare will affect the industry growth as flying will once again be for the affluent only,” he said.

The two airline executives said they and other LCCs will seek reconsideration of the CAB orders temporarily suspending a contentious provision in airline tickets that do not provide for rebooking, as well as refund for flights are delayed or cancelled.

Hontiveros said AirAsia and other airlines were surprised to learn on Wednesday, May 30, that the twin orders of the CAB will be implemented in 15 days.

“We attended a TWG (technical working group) meeting at the Congress yesterday (May 29) and some carriers didn’t even realize that those orders were actually published already and will take effect 15 days after publication. We aired our side that’s why we were surprised to find out that these will actually be implemented,” added Hontiveros.

“We put in our position papers sufficient ways to protect the consumers without killing the LCC model. If it’s the fault of the airlines as to why the passenger failed to board the plane on time then let them penalized us. Consumers need to be educated as well,” said Hontiveros.
For the CAB’s part, executive director Carmelo Arcilla said, in a text message, that the CAB resolutions are still open for possible revisions.

“The resolution is only a provisional remedy adopted by the board to protect passengers from prevalent forfeiture of fares. The entire resolution, especially this provision, will be reviewed and the final action shall be taken on the basis f the facts that we are collating and legal study that we are undertaking.”

Consumer complaints

For the first time in 40 years, the CAB issued orders that aimed to improve airline industry practices.

As the industry grew exponentially–largely fueled by the investments of budget carriers–consumer complaints also spiked.

On May 29, the CAB issued the following resolutions:

The airlines are concerned since–even if the passenger does not show up for the flight–the passenger’s fare will not be forfeited and he will be considered as having voluntarily cancelled his flight, and is entitled to rebook or to a refund.

Why are flights overbooked?

The practice of selling more tickets than available seats in a flight is an intentional business strategy among transportation and communication companies.

This strategy allows airlines, trains and cruise ships to ensure that all of its seats will result in a maximum return on investment since it reduces the chance that a plane takes off with empty seats.

The number of oversold tickets in a flight is based on previous years’ passenger statistics of how many travelers have cancelled at the last minute for the route. A certain percentage of passengers are expected to be “no-shows” since they change their travel plans but do not cancel their reservations. Usually, businessmen cancel at the last minute when their meetings take more time than planned.

More often than not, airlines still make more money, even if they have to compensate bumped off passengers with cash or free tickets, than if they sell tickets only based on the plane’s capacity.

However, several Filipino airline passengers who have been bumped off take to social media, like Facebook or Twitter, to vent the inconvenience they experienced. – Rappler.com

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