So you think you know about consumer protection?

As a strong suggestion - I believe if you want to understand consumerism and the workings of politics, read the US DoT recommendations on Air Travel. And from the air fare transparency group no less. (Saving the Government money !!!)
http://www.faretransparency.org/wp-content/uploads/2012/11/Advisory_Committee_on_Aviation_and_Consumer_Protection.pdf

The Case For Consumer Protection UK vs Australia

There is a certain amount of cheering going on as a result of the IRISH (that is not a misprint) beating the English at Cricket in the World Cup. The shock defeat was not due to just poor performance by the English - but rather a stunning performance by the minnows from the Emerald Isle. Congrats to the Pink Haired Mr Kevin O'Brien.

Given the relative approaches to cricket and travel from the British Isles to the Antipodes it is interesting to see the difference between the level of consumer protection provided in the Northern Hemisphere and that in the South.

An consultation paper entitled "Consumer protection in the travel and travel related services market" A Consultation paper dated March 2011
was commission by the Canberra Government and found that the regulatory cost of consumer protection and travel licensing in Australia is nine times the value of compensation paid to consumers each year, the independent report into financial protection has found.

In the UK the nature of the Consumer Protection has been in disarray for many years and successive governments have passed the buck. The result has been that the coverage for travel in the UK is poor and essentially the fund covering it is in deep deficit. Yet at the same time a string of Her Majesty's Administrations has taxed and levied costs against the air traveller. The current cost for a family of four to travel between the UK and Australia is close to a thousand pounds of APD - Air Passenger Duty. The latest proposals by HMG have managed to please just about no one.

So a little advice for the Government of Ms Gillard - free, no charge - don't change it. Keen the high level of the cost structure you have in place today. If you do you will be sorry. However there are some good recommendations in the report.

EC Investigates Taxes and Fees. Doesn't Like What It Sees - Likely To Legislate

One thing you can say about the European Commission (EC) when it doesn't like something - it acts pretty quickly. With the powers of judge jury and executioner, the EC has broader powers than those of the usual sovereign state authorities.

The Commission formed a committee to investigate airline fees and taxes. his Project Study group has just released their findings. The 25 page report is clear and concise.

"The investigations that were conducted in relation to this Common Activity involved an examination of 281 flights and contact with 34 airports and 24 airlines. These investigations and contacts form the basis for the conclusions reached in this report."

The conclusion of the report should give a clue as to how the EC will act in the future:

"The practical knowledge gained by the participants during the course of the Common Activity has fostered a new understanding of the airline industry within the respective consumer authorities. As such, the completion of this report represents a starting point for increased consumer protection cooperation across Europe, clearer guidelines for airlines on how to present air fares to consumers and, most importantly, more transparent transactions for consumers purchasing flights."

The study itself surprisingly had small amounts of representation. only 10 of the 29 EU nations were included. Under the direction of Norway's Consumer Ombudsman, the group did not include participation from the two major travel markets of UK or Germany.

The carriers investigated were:
*Aer Arann
*Aer Lingus
*Air Berlin
Aireuropa
*Air France
Austrian Airlines
British Airways
Brussels Airlines
Czech Airlines
Estonian Air
*Iberia
Icelandair
Iceland Express
KLM
Lufthansa
Malmö Aviation
Norwegian
Polish Airlines LOT
Ryanair
SAS
*Skyways
Spanair
Travel Service/Smart Wings
*Vueling
Note those with the * chose not to cooperate.
34 Airports were also evaluated.

Ths study showed that of the Fees and Taxes charged (TFCs in the EC's speak) only 41% were directly levied by a government body or airport. Of the remainder more than half was attributed to Fuel Surcharges. Given that the study was done at the end of 2008 - it is likely that the percentage of TFCs has grown since then and the proportion of non Tax levied charges has also increased.

The Study group found that many of the airlines were not in compliance with EC rules. It specifically states that to be in compliance an airline has to ensure that its charges as represented on the website should be:

To be in accordance with Article 23, government taxes and airport charges must be:

clearly distinguished from other charges and
correspond with the actual amounts levied by airports and governments.

A follow up of the airlines in June and July this year showed that several airlines are still not in compliance. Also a noticeable exception - "Optional services – for example food/beverages, seat reservations, insurance or luggage – have not been scrutinized in this project."

The project study group made a number of direct recommendations. Here are the main two:

"The project group therefore recommends that all air fares should be comprised of the following elements: the basic air fare, airport charges and government taxes which are levied per passenger and the total price. All other unavoidable TFCs should be included in the basic air fare.
Further fees should only be added to the ticket price provided these are genuine optional fees and not mandatory costs all passengers are obliged to pay."

"The project group consequently recommends that passengers travelling in Europe should have a clear legal right to be refunded all airport fees and government charges which are not due. If the ticket for air transport is not used we believe that passengers should be entitled to repayment of all prepaid taxes and charges imposed on passengers by airports and governments and collected by airlines."

I believe that Article 23 regulation will be revised soon to address these issues. This will make the display of information simpler but will impose a set of conditions on airlines that will be hard for their systems to comply. The study while applauding the ability of the consumer to shop (presumably via the Search and OTA sites) did not address how they may also be required to display this information.

So chaps you have been warned. Offer airline products for sale and you will need to be pretty explicit.

Cheers


PS If you want a copy of the study - please ping me.

When Is A Guaranteed Fare Not One? Ask BA

During the past week we have seen what can happen when an iconic brand is severely damaged by a single event - intentional or not.

One of the integral parts of the Air Transportation system is that the contractual relationship between the airline and its customers is firm and hard.

The customer is required to perform and the agent in the middle (should there be one) is required to ensure enforcement of many complex and in quite a few cases seemingly arcane rules.

This is the basis of the passenger airline system. So it comes as a big surprise to find out that the product you buy as a consumer from the airline is not in fact guaranteed.

The case I am specifically pointing to is British Airways and the infamous $40 fare from the US to India. The details are not in dispute - but 2200 people bought the fare. Can you say Viral!!!!

BA canceled the bookings and offered a $300 compensation credit. Then the DOT stepped in. At which point BA upped the ante and provided additionally compensation for the impact of the canceled reservations with hotels cars etc.

if you would like to read BA's statement on the matter (its quite buried below the fold) click here. But do it quickly I doubt it will be there long.

When the DoT stepped in the Secretary was happy to report:"We are pleased to see that British Airways has accepted responsibility for the fares it published," Ray LaHood said.

I think that both BA and the DOT were fundamentally wrong here. BA for the initial mistake and not honouring its fares and the DOT for creating a precedent and effectively a get out of jail free card for any airline who doesn't like the fares they have contracted for. Chaps this is not good at a time when Congress is agitating for a Passenger Bill of Rights - you have collectively undermined the whole basis of the contract between any airline and the general public with the DOT's blessing.

So Go On Be A .... Tiger

EU Ruling on Flight Delays Compensation Makes US Rules Look Decidedly Inadequate.

The decision last week to mandate that any delay of 3 hours or more is the same as a flight cancellation was a victory for consumer protection and an abject lesson for those willing to understand it.

Formally on November 19th, European Court of Justice in Luxembourg decided that passengers who are forced to wait three hours or more will be compensated 600 euros, the same as if their flight had been cancelled.

There is a lot of documentation on this but there are three critical factors that we should pay attention to:

1. The scope of compensation was broadened to cover delays as well as cancellation. Just as an aside here - this may have a negative effect in that if an airline deems that a flight delay is beyond the threshold then the decision to cancel will be taken early and passengers could be left compensated but stranded - just a thought).

2. The delay time has dropped from 5 hours to three hours

3. The definition of what could be compensated - IE the reasons behind the delay was made less precise with the impact that other traditional "reasons" now become "excuses".

All this makes the US scheme even the proposed Bill of Passenger Rights look decidedly weak.

In my humble opinion the US should enact a clear set of rules along with penalties to force compliance by the airlines in the delivery of their product. At the moment the whole contract process is decidedly one-sided. The airlines can decide what they want to do to modify their part of the contract yet the consumer has little or no ability to do so. That to me is unfair.

And no - for once I am not picking on the airlines - I just fundamentally believe that the contract between two parties should be fair and equal. Currently this is not the case based on arcane rules that stem from the propeller era when the product was a lot less reliable. This is no longer the case and the travelling public in the USA deserve a clear set of rules.

And what do you think?

Cheers

Dynamic Packaging Protection - UK Battle

When is a package not a package?

This is at the core of the argument now being hotly debated in the UK. At the centre of the battle is the case of CAA v Travel Republic and Kane Pirie (TR's Managing Director).

The case was brought by the UK's regulatory body the CAA (Civil Aviation Authority) who is the official regulator for a number of things in the UK including Passenger Safety and the bonding of sellers of products (typically Tour Operators) through its ATOL licensing scheme.

The pursuit of Travel Republic is seen as a test case for the CAA in enforcing its recently broader based view that virtually all holiday sales of flights plus accommodation require ATOL cover. Dynamic packaging has been around for a while - some might say it rose to prominence about 5 years ago but the practice of bundling products has been around for years. The CAA and the bonding process in general has been viewed as inadequate especially following the very high profile collapse of the XL group in 2008. So why now and why pursue Travel Republic?

The answer lies in the contested issue of whether regulations cover the sale of "all" travel products. Further with concentration in the intermediary channels - there is a need for the CAA to get tougher. But there is another reason. The CAA's bond pool has been sorely tested by the recent demise of many retailers and wholesalers. Some have indicated that the bond pool may indeed be under water. The CAA has tried in recent years to broaden the pool by offering smaller retailers reduced rate schemes. Of course the real target are the Online Travel Agencies particularly Expedia. So it is a market dynamic issue that pits the traditional wholesalers (now largely concentrated among a few players) vs the OTAs and the consolidators. Also at stake is a possible advantage commercially in how the VAT is treated.

The case was filed in a lower court - Westminster Magistrates and was moved to Stratford before district judge Nicholas Evans - and TR/Pirie were both charged with 20 counts each of breaching the 1995 regulations. it was clear at the time that the case would ultimately end up in a higher court maybe even all the way to Europe's highest court.

Well Round 1 went to Travel Republic on November 11th.

The following day a number of comments were published by the UK's TTG. Check here to read them.

No one really denies Travel Republic has the best intentions at heart despite the stream of vitriol from the Government's QC who compared Pirie personally to Bernie Madoff. However this is a case that will run and run.

Ultimately we can speculate that if TR is successful - then the government will have to mandate a new scheme for consumer protection. However the government seems to have already jumped the gun by raising the APD much higher. While ostensibly a fee related to Aviation uses it is regarded more as a straight revenue tax to help HM Government pay its somewhat large (and growing) total revenue shortfall.

But caveat emptor is always the case. Should the Government win in the ultimate battle - then the face of consumer protection across Europe will change.

Gotta love those lawyers!

Cheers

EC To Review Package Holiday Protection

Bowing to the inevitable or just feeling like grabbing a fist full of nettles? Either way the European Commission is to launch a review of the Package Holiday Directive this autumn. The European commissioner for consumer affairs, Meglena Kuneva, said the legislation is "out of date having been created and implemented in the 1990s."

The core of the issue in Package Holiday protection is that now more than 50% of all holidays are booked dynamically either in total package form or in components often from different vendors.

At the same time the UK's regulatory body the CAA is reviewing protection under its ATOL scheme which last year took a big hit from the collapse of XL Airways and is potentially bankrupt.

If the EC is smart it will acknowledge that the market has changed and implement generic rules that apply to the sale of any travel product component or package no matter how its sold.

As expected the agents and tour operators are in favour, the airlines (particularly the LCCs) and online agents are not.

We will keep an eye on this ongoing issue.

Cheers

EC Gets Tough On Air Ticket Pricing (Update - see at end)

The European Commission is on a mission to force airline tickets to be displayed to the consumer as clearly and as plainly as well as - er - paint. Thus the price offered is the price you pay. A collision course you might say with the airlines and their distributors who are trying to drive ancillary revenue from add-ons. Something that many airlines believe and are now demonstrating is actually saving their behinds.

The EC has a clear position and has enacted legislation to ensure that the conditions are clear and unambiguous. EC Vice President Antonio Tajani (ITALY), in charge of Transport said, "Applying full price transparency is an obligation under the air services regulation. It is a duty for airlines to impose high standards across the industry; it is our responsibility to ensure that all players respect the same rules. This is of first and foremost importance for the consumer who wants to compare prices across airlines and make a real choice."

Thanks to Professor Andrew in Saint Louis for this tip. Today (May 14th) the EC published is second report. There are several links to go to:

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/783&format=HTML&aged=0&language=EN&guiLanguage=en

For the first round of tables go here:
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/287&format=HTML&aged=0&language=EN&guiLanguage=en

So far they are not naming the bad people only the good ones or the ones "not yet in compliance".

Bottom line folks - the US could learn a thing or two about this form of consumer protection. You can be sure the Obama Administration and Jim Oberstar http://oberstar.house.gov/ are all over this one. Will we see a US bill of rights or a charter of the same sort WITH teeth? not likely at this stage.

However it is clear that if the airline play the ancillary revenue obfuscation game - it is inviting re-regulation. Be careful what you wish for!

Cheers

The EC's enforcement page was down when I wrote the first version of this post. Therefore you can now find the enforcement details updated here:

http://ec.europa.eu/consumers/enforcement/sweep/index_en.htm