Budget airlines may hike fares because of CAB booking rules

By Lenie Lectura, BusinessMirror

Posted at Jun 01 2012 08:31 AM | Updated as of Jun 01 2012 04:31 PM

MANILA, Philippines - Low-cost carriers (LCCs) may have to charge higher air fares if the Civil Aeronautics Board (CAB) will implement its suspension orders on overbooking practices and the non-refundable and non-rebookable conditions on domestic flights.

AirAsia Inc. Chief Executive Officer Marianne Hontiveros said the viability of the LCCs will be jeopardized if they will be compelled to refund and re-book domestic airline tickets regardless if it’s the passenger or the airline that was at fault.

“We can’t operate under those circumstances. Where is the passenger responsibility there? They buy ticket from us and we reserve a seat for the passenger but the latter failed to wake up on time and still get a refund or have the flight rebooked,” said Hontiveros.

CAB Resolution 29 (BM3-05-11-2012) suspends the non-refundable and non-rebookable conditions of low-cost fares for domestic flights. Even if the passenger does not show up for the flight, the passenger’s fare will not be forfeited and will be considered as having voluntarily cancelled his flight, and is entitled to rebook or to a refund.

“This is very dangerous for us. We’re going to have to factor that in our fares,” added Hontiveros.

AirAsia and other airlines, she added, were surprised to learn the other day that the twin orders of the CAB will be implemented on June 15.

“We attended a TWG [technical working group] meeting in the Congress and some carriers didn’t even realize that those orders were actually published already and will take effect 15 days after publication. We aired our side. That’s why we were surprised to find out that these will actually be implemented,” added Hontiveros.

CAB Resolution 28 (BM3-05-11-2012), meanwhile, suspends provisions on overbooking contained in section 3, Economic Regulation 7, as amended, until further notice.

Violators will be charged with a P5,000 fine, multiplied by the number of passengers bumped off or denied boarding, as separate and distinct from the compensation due to passengers who are not able to board or are denied boarding because of lack of space presumably due to overbooking.

South East Asian Airlines (Seair) President Avelino Zapanta, likewise, opposed the CAB orders.

“The airlines are seeking reconsideration. These are costly for the LCCs. They’d be forced to up the fares and be no different from legacy airlines. Higher fares will affect the industry growth as flying will once again be for the affluent only,” he said.

Seair and AirAsia said the LCCs have given the public a choice between full fare-full service and low fare-low service. “The restrictions will kill the LCC model designed for the ordinary Juan dela Cruz,” said Zapanta.

They, however, are both hopeful that the CAB will amend its orders. “We put in our position papers sufficient ways to protect the consumers without killing the LCC model. If it’s the fault of the airlines as to why the passenger failed to board the plane on time then let them penalized us. Consumers need to be educated as well,” said Hontiveros.

CAB Executive Director Carmelo Arcilla said in a text message that the CAB resolutions are still open for possible revisions. “The resolution is only a provisional remedy adopted by the board to protect passengers from prevalent forfeiture of fares. The entire resolution, especially this provision, will be reviewed and the final action shall be taken on the basis f the facts that we are collating and legal study that we are undertaking.”