Australia’s major airlines are up in arms over a proposed law which would may them pay compensation to passengers for delayed or cancelled flights, claiming the bill would not solve underlying causes and only increase the cost of airfares.
Cash compensation is a core element of the Airline Passenger Protections (Pay on Delay) Bill being introduced to the Australian Senate next week. The legislation would also see the creation of an airline code of conduct.
While Australia already has an Airline Customer Advocate funded by the airlines, this bill – inspired by similar “passenger’s rights” legislation across Europe and North America – seeks to make airlines more accountable.
In Europe, for example, passengers can claim up to $1000 from airlines for significant flight disruptions if the airline was at fault.
The Pay on Delay bill, spearheaded by the Coalition, would allow the Transport Minister to set “carriers’ obligations in relation to flights to and from Australia, and within Australia, including connecting flights,” through consultation with the industry.
The Australian Competition and Consumer Commission and consumer advocacy body Choice have both previously backed calls for a compensation scheme, but airlines are staunchly against the new bill becoming law.
Industry body Airlines for Australia and New Zealand (A4ANZ) – which counts Qantas, Virgin Australia, Regional Express, Jetstar and Air New Zealand among its members – warned against considering “airline compensation schemes as a silver bullet for Australian consumers.”
In a submission in response to the proposed law, A4ANZ chief Dr Alison Roberts claimed that EU261-styler compensation schemes “don’t work to reduce delays” and that airlines “are already commercially and financially incentivised to minimise disruptions.”
In addition, there was a “highly likely risk that the costs of such a scheme will place upward pressure on airfares and impact scheduling, reducing access and choice for Australians.”
The Board of Airline Representatives Australia (BARA), which has 32 members of its books including Qatar Airways and Singapore Airlines, says while it agrees with the bill’s goal of improving awareness and communication, there is “no evidence” that mandatory compensation has resulted in fewer delays or cancellations.
It’s a sentiment echoed by Virgin Australia, which says “automatic, blunt penalty regimes like the European Union’s passenger compensation scheme risk leading to increased fares, but not necessarily improved customer outcomes or operational performance.”
Rex Airlines is also lending its voice to almost unified industry opposition, believing “customer compensation is not a magic bullet,” as it doesn’t take the “unique factors of aviation” into account.
Australian Airports Association chief executive James Goodwin also expressed doubts over the effectiveness of the legislation.
“Customer dissatisfaction with airlines is continuing,” he acknowledged, “but it’s not clear if a compensation scheme will fix it.”
‘Pay on Delay’
At present, airlines including Qantas, Rex Airlines and Virgin Australia all set their own compensation guidelines.
The airlines maintain that legally-binding passenger compensation payments would only serve to increase airfares across the board, and “have done nothing to reduce delays and cancellations, or to deliver better outcomes for consumers” in countries where they are in place.
For added context, an average of 20% of departures across all major carriers – Qantas, Jetstar, Virgin Australia and Rex Airlines – were delayed in May this year.
In its response to a green paper, Qantas warned “the introduction of mandatory compensation would be a backwards step that will do nothing to reduce delays and cancellations, will increase confusion and complaints and materially increase costs, ultimately leading to higher fares and potentially compromising the viability of marginal routes.”
To become law, the Coalition-backed Pay on Delay bill would require the support of cross-bench senators – who are likely to be in favour of the proposal – before it could move to the House of Representatives, where Labor would need to approve the bill in its final form.
EU261 and UK261
Under the equivalent compensation schemes in the UK and Europe, passengers are entitled to between $400 and $1000 for delayed or cancelled flights, based primarily on the distance of their trip and length off the delay, but also allowing for how much notice an airline gives passengers.
Compensation is also required if a delay means a passenger misses a connecting flight on the same reservation. In certain circumstances passengers can also have their airfare fully refunded.
However, allowances would likely be made for factors outside of an airline’s control, such as the impact of weather, with the bill focussing on cases where an airline chooses to cancel or delay flights.
Given passenger compensation schemes are already in place in the European Union, the United Kingdom and Canada, “this issue transcends mere inconvenience,” McKenzie told the Senate. “It’s a matter of fairness, transparency and respect for Australian consumers,” McKenzie told the Senate, who were being “left stranded.”
Additional reporting by David Flynn