Gov’t blinks, allows overbooking, no-refund rules

MANILA, Philippines (UPDATED) – The government doused cold water on its plans to disallow airlines to bump off passengers from overbooked flights and refund tickets when flights are delayed or cancelled.

On Wednesday, June 20, the Civil Aeronautics Board (CAB) issued an order suspending its previous orders meant to address growing passenger complaints about practices by local airlines, especially the budget carriers.

In a statement, the CAB basically said that, instead of pushing with its original plans to temporarily address the complaints while the planned Passenger Bill of Rights is in the works, current focus will just be on ironing out the bill.

It said public hearings will be conducted to give all stakeholders a chance to participate in crafting the bill.

“In view of the fact that the Board and the Department of Trade and Industry are in the process of conducting public hearings on the Passenger Bill of Rights and the approval of such will affect Resolution numbers 28 and 29, the effectivity of Resolution Nos. 28 and 29 is hereby deferred until such time that the bill shall have been subjected to public hearings and approved,” the two-page resolution, issued yesterday, read.

“Actually, there is a Passenger Bill of Rights being prepared. The public hearing is next week. The CAB Resolutions are only provisional in nature, pending the bill. As such the Board has decided to defer the implementation of the resolutions,” said CAB executive director Carmelo Arcilla in a text message.
 
CAB secretary Eldric Paul Peredo explained further that “The Board opted to treat its modifications as proposals to be considered in the Passenger Bill of Rights. Since [Transportation] Secretary Mar [Roxas] is fast tracking the bill of rights, the CAB deferred to it to avoid confusion and piecemeal regulation.”

The CAB issued Resolution no. 44, which suspends the its previous orders–Resolution No. 28 disallows overbooking, an industry practice, while Resolution No. 29 orders airiness to refund or rebook tickets of passengers of budget domestic flights.

Both previous Resolutions 28 and 29 did not take effect as scheduled on June 15 after airlines filed a motion to reconsider these, citing the impact on their financial models. The budget carriers stressed they may need to increase fares as a result.

The CAB also denied these motions by the airlines through Resolution No. 44. CAB is the economic regulator for the airline industry.

The transportation department had previously hailed these popular orders as an effort to improve passenger service–a feat that had never been made in the past  decades.

Bill of Passenger Rights

The number of passenger complaints have been rising. In 2011, the total reached 83, higher than the 77 recorded in 2010, according to the transportation department.  

Aside from ticket refunds, cancelled and delayed flights, and lost baggages, other persistent complaints were unfair practices or negligence of personnel, misleading advertisements, denied boarding and double charging of credit cards.

These have resulted in congressional hearings, prompting the CAB to conduct a review of passenger guidelines and issue Resolutions No. 28 and 29 to amend an existing regulation.

Amendments to Economic Regulation (ER) No.7 require the immediate implementation of the following:

• temporary suspension of overbooking, and the non-rebookability and non-refundability conditions attached to any ticket
• compensation for denied boarding, delayed and cancelled flights
• full refund and higher compensation for bumped off passengers: P3,000 from P150 for domestic flights, and P5,000 for international flights.  

In a press conference on Thursday, May 24, Transportation Secretary Mar Roxas said further improvements will be enshrined in a proposed Passenger Bill of Rights.

“There was already a lost economic opportunity which can’t be compensated by just refunding the full amount of the ticket. What if the passenger had to take an exam or had to seal a deal or attend a funeral of a relative? The airline can’t just give a refund or another ticket because the passenger simply can’t attend the funeral on another day. There was already a lost opportunity,” Roxas had said.

Budget airlines

The liberalization of the airline industry has spawned a number of local airlines in the recent decade. Philippines, being an archipelago, has been an ideal market.

Budget airlines has been cited as key reason for the hefty growth rates in the number of passengers taking flights instead of ships, ferries, and buses.

In 2011, almost 19 million passengers flew to their local destinations, a feat attributed mainly to the promotional fares offered by budget carriers.

Budget carriers offer no-frills service and offer tickets that are typically priced lower than that of legacy airlines. – Rappler.com