Airlines warn CTA: New passenger protection regulations could have unintended consequences

New Canadian air passenger protection regulations (APPR) are expected to take effect on July 1, but airline carriers would prefer a delay and significant changes, according to airline executives.

Representatives from Air Canada, Flair Airlines and First Air told an information session hosted by the Air Transport Association of Canada (ATAC) on May 7 that the regulations could lead to unintended consequences if they are implemented as currently proposed.

In light of the new Canadian air passenger protection regulations, Capt Aaron Speer of First Air said compensating passengers for some delays could be crippling, noting that with poor infrastructure in the North, “nobody else can be my back up” if a plane breaks down and parts are needed. First Air Photo
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The regulations are part of Bill C-49, the Transportation Modernization Act of May 2018, which authorized the Canadian Transportation Agency (CTA) to establish a new air passenger rights regime in Canada.

The proposed rules were developed following consultations with airlines, passenger advocacy organizations and the public between late May and late August 2018, and would impose minimum standards for air travel treatment and, in some cases, compensation based on the level of control carriers have over an incident.

“The intent of these regulations is to define air carriers’ obligations to passengers regarding a number of key elements including communications, flight delays, cancellations, denied boarding and tarmac delays, as well as other issues,” said Marcia Jones, the CTA’s chief strategy officer.

CTA received more than 9,000 letters, website responses and written submissions from stakeholders. The result is a “clear and consistent…world leading” regime that would apply broadly to the industry, she said, while “reflecting the operational realities of carriers, and allowing for carrier innovation where appropriate, and aligning with other jurisdiction agreements where appropriate.”

Despite the extensive input, a number of carriers have reservations about the impact the APPR could have.

Northern operators in particular face a number of challenges “that aren’t easy to understand unless you have experienced them,” said Capt Aaron Speer, vice-president of flight operations for First Air.

The Inuit-owned airline provides passenger and cargo services into 23 communities across the Territories from hubs in Montreal, Ottawa, Winnipeg and Edmonton with older fleets of Boeing 737-400 and ATR 42-300 and 500 aircraft that can still operate on the short gravel runways that predominate most of those communities.

“Newer generation aircraft can’t operate on gravel runways without heavy modifications, if you can even get them,” he noted. “And many simply can’t be modified for cost reasons.”

The aircraft can be configured for various combinations of passengers and cargo, and are a vital lifeline for food, health services and other essentials in the North. But compensating passengers for some delays could be crippling, he argued, noting that when a plane breaks down and parts are needed, “nobody else can be my back up.”

Poor infrastructure has been a recurring theme of many government, Senate and Auditors General reports over the past decade. Requiring airlines to provide communication from the aircraft, where cell phone services are limited in most communities or incompatible with cell providers in southern Canada, isn’t an option. Nor is the requirement to provide food and accommodation when many airports have no food services and communities have few hotel beds.

“These rules adversely impact our operations in the north,” said Speer. “We see huge challenges that aren’t anticipated in these regulations and many of the challenges we face aren’t even something we would think about in the south.”

While an outright exemption would be ideal, he said northern operators are “quite prepared to accept other rules that reflect the unique operations in the North.”

Though its circumstances are vastly different, Air Canada also has concerns with the financial impact of the regulations. The carrier last year set a new record of over 50 million passengers, a 70 per cent increase from a decade ago, and now serves over 220 destinations on six continents. It’s modernized its fleet with more fuel-efficient aircraft, and it has grown to 36,000 employees, 6,000 of whom were hired in the past three years.

“You don’t get to where we are with poor customer service,” said Fitti Lourenco, director of Government Affairs.

Air Canada has asked Transport Canada and the CTA to revise the proposed rules to avoid consequences such as higher airfare. Nick Chute/Threshold Images Photo
Air Canada has asked Transport Canada and the CTA to revise the proposed rules to avoid consequences such as higher airfare. Nick Chute/Threshold Images Photo

He cautioned that Air Canada’s own calculation of the increased cost per passenger created by the regulations vastly exceeds a cost-benefit analysis conducted by CTA that concluded airlines would see a rise of about $2.75 per passenger.

“If we are even off by half, we are looking at an impact of approximately $10 to the individual customer per travel segment,” said Lourenco. “In an industry already burdened with high taxes, fees and third-party charges, this is simply a killer.”

The airline has asked Transport Canada and CTA to revisit the proposed rules “to avoid a number of unintended consequences, including higher airfare and possible reduced access to regional markets where margins are already slim.”

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It also wants the regulators to delay implementation to allow airlines to prepare thing such as IT infrastructure that would have to capture such passenger data. Air Canada is already undergoing a transformation to the reservation system, and “we have very little opportunity to make any other changes to our IT infrastructure (until it is complete),” said Lourenco.

Implementation of air passenger protection rights should be rolled in over a similar period as new flight duty times, which were given two years, he said. “This should be given the same amount of time to get it done right.”

Ultra-low-cost carriers (ULCC) like Edmonton-based Flair Airlines also dispute the CTA’s cost per passenger analysis. David Atkins, director of Industry and Regulatory Affairs, noted other carriers in Europe have pegged the increase at closer to $3.75 per passenger that better factors in administration and legal costs brought on by litigation.

But with the government encouraging more competition among airlines, Atkins suggested the bigger issue might be the differentiation between small and large carriers, currently set at one million passengers carried over two consecutive years. While it may sound like a large number, a smaller airline can achieve it with a modest fleet, he said.

“Without a more graduated transition from a small to a large carrier, the financial liabilities of this change could have a significant impact on the viability of airlines,” he said, noting airlines already contend with high airport fees, fluctuating fuel prices, and regulatory changes to flight duty time and fatigue management as well as accessibility to transport for disabilities.

He also questioned whether CTA had looked more closely at jurisdictions like Australia, which has a market similar to Canada, rather than relying on Europe and United States for its model.

Jones acknowledged the concerns about unintended consequences, including the implementation timeline, the feasibility of some obligations, especially for northern carriers, and the amount of compensation under various circumstances.

Specifically on the cost per passenger analysis, she said it only covered a baseline of what the industry is providing today and CTA is considering whether adjustments are needed.

“All this feedback is being looked at carefully and is part of the regulatory development process,” she said. “All these points are being carefully considered.”

The final regulations are expected later this spring.

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