'Stricter CAB rules may spell demise of budget airlines'

Posted at 06/05/2012 1:03 PM | Updated as of 06/05/2012 8:52 PM

MANILA, Philippines (UPDATE) - Local airlines will no longer be allowed to overbook domestic flights, as well as impose "no refund" and "no rebooking" conditions on promo fares starting June 15, according to Civil Aeronautics Board (CAB) executive director Carmelo Arcilla.

However, SEAir president Avelino Zapanta warned the CAB's restrictions may cause the "demise" of low-cost airlines.

On ANC's Talk Back with Tina Palma, Arcilla said the CAB issued the resolutions suspending overbooking, as well as non-refundability and non-rebooking of promo fares, in response to a growing number of complaints from budget airline passengers.

"There is a prevalence of complaints and there seems to be a strong public outcry against airlines refusing to carry passengers due to overbooking, as well as issues on non-refundability of low cost fares," he said.

The CAB resolutions will take effect on June 15, but these are only provisional in nature.

"Just to assure that the public would not be shortchanged, pending the study of the CAB (on the issue), the CAB decided to suspend the option of airlines to overbook their flights. Overbooking is a global practice, a means of hedging against no-shows. This is a ticklish issue since it treads on the right of the airline to generate revenues and public interest," Arcilla said.

'Demise of airlines'

Zapanta, who was also on ANC's Talk Back, expressed concern the CAB restrictions will have a negative impact on the operations of low-cost carriers (LCCs), and even the economy as a whole.

"The low-cost carrier model made possible the healthy growth in air traffic for the Philippines and we can see the impact of that on the 6.4%  GDP growth. We're concerned that these restrictions that are being imposed might affect this very robust growth we're enjoying," Zapanta said.

"If the low-cost carriers somehow die along the way because of all of these restrictions and simplicity of the operations become complex because they are required to do all of these things," he said.

Warning this "could spell the demise of low-cost carriers," Zapanta said a standard should be established that would depend on the number of complaints against the total number of passengers.

"If you're talking about 1 complaint in 1,000 passengers, is it something that should worry you or not? There should be standards per airline because some airlines might have a lot of complaints," he said.

'Low-cost shouldn't mean shabby service'

While the CAB is happy with the success of LCCs in the Philippines, Arcilla maintained that they have to protect passengers against "shabby services" from airlines.

"The operation of an airline, whether LCC or legacy, is a public utility and as such, an airline is obligated to provide public service and convenience more than its right to generate revenues and its business interests. While we are happy with the success of LCCs in the Philippines, it is instrumental in the growth of aviation and air traffic in the country, we have to draw the line. Low-cost airline doesn't mean that services can be shabby, services can be unreliable and inadequate," Arcilla said.

Based on initial data from the airlines, Arcilla said there seems to be no prevalance of overbooking.

Overbooking is a global practice, with airlines typically overbooking 10% of seats of each flight.

While SEAir does not practice overbooking, Zapanta defended the practice. "Overbooking follows the normal curve, that's why they have to overbook. The airline is trying to hit 100% of the seat configuration of the aircraft at date of departure. But if they are not allowed to overbook, by departure date, they will hit less than 100% (of the seats)," he said.

Passenger bill of rights

The Department of Transportation and Communications (DOTC), Department of Trade and Industry (DTI) and CAB are currently working to finalize the joint administrative order on the bill of rights of passengers.

"This will be more passenger-centered and will deal with the rebookability and refundability of fares, rationalizing of overbooking, access for persons with disability, offloading of baggage, informing passengers of the status of flights, reason for cancellation and delays," Arcilla said.

Under the proposal, if a flight is cancelled for reasons attributable to the carrier, the passenger shall be given refreshments or meals, hotel accommodation, transportation from the airport to the hotel, free phone calls or e-mails; and first aid, if necessary.

The draft order also requires airlines to have a passenger service counter manned by a representative who is authorized to deal with common passenger problems.

Arcilla admitted he has also experienced having his baggage "offloaded" by an airline.

"I was staring at the baggage carousel, hoping that somehow it will come out and it never did. The airline should immediately furnish a report and inform the party concerned and undertake to deliver it," he said.

There will still be a meeting with airlines, as well as a public hearing, on the proposed passenger bill of rights.

"Our task is to protect the convenience and comfort of passengers. We also recognize the right of airlines to generate income but more importantly its the comfort and convenience of passengers," Arcilla said.