Canadian Association of Airline Passengers

Cartoon by Rick Cousins, Deep River

Speaking Notes Before the Committee October 27, 1999

SPEAKING NOTES BEFORE THE SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS

BY: Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
a Member Organization of the Canadian Association of Airline Passengers (CAAP)
The Canadian Association of Airline Passengers (CAAP) is an informal coalition of organizations who represent ordinary Canadians concerned with the delivery of important public services such as airline travel. The constituent organizations of CAAP represent over one million Canadians. CAAP has been able to make representations on the issues associated with the proposed mergers, and the operation of the airline industry in general to the Office of the Prime Minister, the Competition Bureau, the Department of Transport and Members of Parliament.
CAAP has expressed frustration with the context of much of the airline debate to date. While the various corporate and legal machinations of the players associated with the two dominant airlines in Canada has been good media copy, it has not been instructive as far as the needs of the ordinary Canadian airline passenger.
As a starting point, it might be useful to refer to the statutory objectives that are contained in the Canada Transportation Act. The Act provides them in the form of a declaration under section 5:
“It is hereby declared that a safe, economic, efficient and adequate network of viable and effective transportation services accessible to persons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost is essential to serve the transportation needs and shippers and travelers, including persons with disabilities and to maintain the economic well being and growth of Canada and its regions.”
The Act then further notes that:
“Those objectives are most likely to be achieved when all carriers are able to compete both within and among the various modes of transportation.”
The Act goes on to set out conditions under which objectives are presumably going to be achieved through competitive modes of operation. These include matters such as meeting the highest practical safety standards (section 5(a) ), fares and rates and conditions that do not constitute an unfair disadvantage or obstacle to the mobility of persons or interchange of commodities in Canada (section 5(g) )and ensuring that each mode of transportation is economically viable (section 5(h) ).
Unfortunately, before there has been a realistic assessment of how well the Act’s objectives have been met, we have come upon this current crisis, apparently driven by the inability of the ownership of Canadian Airlines to sustain further financial losses. However, even without a comprehensive assessment of the Act, we can state that the death or disappearance of Canadian Airlines is not a isolated cloud in an otherwise sunny sky. There are considerable current decrements that we perceive in safety and quality of service and little evidence that competition from the dominant duopoly has been effective in restraining, much less reducing the basic fare for airline customers.
At the same time, as we are experiencing this mostly made in Canada crisis, there is increasing evidence from the United States (in a market much closer to being workably competitive then ours), that significant consumer problems with quality of service and pricing are legion. If fact, consumer unhappiness led to the introduction in Congress this year of a Bill of Rights for Airline Passengers. The adoption of this Bill was narrowly averted after an intensive and expensive campaign of lobbying by the airlines coupled with their promises to implement their own codes reflecting consumer concerns.
Both to address problems with the status quo, and to avoid being sucked into the vortex of the ONEX/Air Canada battles, CAAP has attempted to draft a similar Bill of Airline Passenger Rights which, in our view, should apply across the board. The first version of this document is before you today and appears on the PIAC website (www.piac.ca/caap.htm).
We note, with some satisfaction, the statements of the Honourable Minister of Transport to the effect that the federal government now recognizes that the current crisis is more than a shareholder fight between corporate heavyweights and that a final result of having one dominant airline will have profound implications. These implications, without remedy, are subversive of the Canada Transportation Act, the Competition Act and normal expectations of Canadian consumers associated with the delivery of important public services.
We are heartened that the public debate has at least pulled the treatment of consumer protection into a perspective that accords with the 20th rather than the 19th century. We also note that the corporate players themselves have made efforts to align their interests with that of the consuming public. Interestingly enough, at the same time, both have been quick to claim the title of champion of maximizing shareholder value, an achievement not always consistent with consumer satisfaction.
We take no sides in this dispute, but will observe that the Air Canada supposition that the operation of three airlines (Air Canada, Canadian and Hamilton Discount Air) under one ownership will provide sufficient protection for consumers, breaks new ground in the field of economic confabulation.
However, we do wish to set out some observations which are pertinent both to the current and future airline market in Canada:

The Canadian and American experience appears to indicate that it is difficult to obtain desirable standards of safety, quality of service and consumer friendly regimes of pricing through the use of market forces alone. Incorporation of the principles of consumer protection set out in CAAP’s Airline Passenger Bill of Rights into the licensing conditions of all carriers is required.
The experience with competition to date has been only sporadically successful in ensuring lower fares for consumers. The basic fare market on popular routes in the duopoly system has seemed impervious to competitive rivalry, particularly after the demise of Greyhound and Vista. It is important that the passenger be protected from non-cost based pricing in those markets where no workable competition exists.
The principal players intend to apply any efficiencies and cost reductions gained by a merger to the benefit of their shareholders. These gains must be shared with consumers.
The need for consumer protection does not evaporate because of the possibility of competitive entry or in the presence of a market player competing in several niches. A merged airline would have over 90% of the Canadian domestic market. It would be able to enforce any price increase without significant loss of market share. If there is competition in several market segments, prices will likely be reduced in those segments financed by fare increases in the non-competitive market segments. You will thus have to have a regulatory framework to ensure reasonable pricing.
There is an increased need for vigilance with respect to ensuring barrier free entry of potential market participants. In addition, as is recognized by the Minister, a more pro-active approach to predatory pricing is called for.
Any price restraints must be coupled with service quality indicators which would ensure that in a situation of market dominance or monopoly, the dominant carrier does not reduce service to meet the price restraints and line shareholder pockets.
Realistic service commitments to small communities must be maintained by any dominant carrier.
The regulatory process presumably administered by the Canadian Transportation Agency must be transparent and accessible by important public and consumer interests.
Section 66 of the Transportation Act is inadequate as a basis for consumer protection. As the Competition Bureau has pointed out, it only operates with respect to basic fares. In addition, it contemplates disposition of single episodic complaints rather than imposition of a structure to ensure regulatory fairness.

We note the willingness of the Minister of Transport to engage in a dialogue to establish the appropriate policy framework fro airlines into the 21st century. We see the need for a framework that is firm enough to ensure basic standards of safety and consumer protection, open enough to encourage competitive entry and choice, and flexible enough to fill in the gaps that market forces cannot address.
One thing that is absolutely clear. A laissez-faire approach will not work now or in the foreseeable future. A strategy of unregulated monopoly today, competition tomorrow, will deny forever the benefits that airline customers should of had yesterday.

Remarks to the Ad Hoc Committee on Air Transportation (1999)

Remarks of Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
to the Ad Hoc Committee on Air Transportation

The Canadian Association of Airline Passengers is an ad hoc coalition of consumer and public interest organizations which has been assembled both to respond to the current merger discussions and to advance the interest of airline passengers in the operation of airline services in the future. The coalition was formed in part, because the public discussion was focusing on issues other than the concerns of ordinary airline passengers. These included the size of the ONEX offer, the job security of airline employees, the golden handshake for executives and the various legal and procedural maneuvering associated with the various merger proposals. This story has been unfortunately covered like a hockey game with Canadian consumers largely relegated to the role of spectators and the Competition Bureau referee banished to the penalty box while the opposing teams slug it out.
Some important points should be made:
1. The market for airline services exists independently of the two competing entities Air Canada and Canadian Airlines. These are not the Wright Brothers who have just discovered flight. These are companies driven by the interests of their shareholders to maximize return on their investment. It is up to public policymakers to devise the rules for the market that force the financial interests of these companies to align with the public and consumer interests.
To return to the hockey analogy, this is not a case where one team is to be cheered over the other. From the consumer standpoint, we must ask how will any new arrangements benefit consumers. Bad government policy making usually eventuates from the assumption that a particular business or company should be the focus of a policy, rather than ensuring the provision of a level playing field or appropriate industry wide regulation.
2. The commencement of the current crisis has left most non-insiders confused. How can the longstanding dismal financial performance of Canadian Airlines merit the extraordinary treatment provided by the Minister of Transport with the consent of the Minister of Industry under section 47 of the Canadian Transportation Act. If the financial health of a competitor warrants government intervention to suspend the operation of as fundamental a set of principles as the the Competition Act when does consumer dissatisfaction with pricing, quality of service, and safety merit comparably drastic government intervention.
3. Let us also make one thing perfectly clear: We are not seeing a proposal to migrate from a workably competitive airline market to an unregulated monopoly but rather the demise of a duopoly that provided intermittently successful competitive substitutes. While both major players responded with gusto and deep discounts when their market shares where threatened new market entrants such as Greyhound and Vista Air, pricing on high traffic routes such as Ottawa to Toronto has steadily increased almost 50% since the demise of those former market entrants. There is much anecdotal evidence suggesting an unacceptable level of market power possessed by the current players.
4. Longstanding safety and health concerns remain unaddressed without the market cachet or the government interest to bring them forward. Some of the organizational participants here today are better able to address these issues which should have particular resonance regardless of the outcome of the proposed merger.
Accordingly, we have set out in this initial effort entitled Airline Passenger Bill of Rights, some terms which we think are essential and should be part of the conditions of service of any airline. This document which is based upon, in part, the US Congressional model, and sets out minimum terms which most passengers would agree with as constituting standards of services which should be adhered to by airlines. Many of these standards must be government mandated as market forces may be either too slow or ineffective to allow implementation of important public concerns.
Returning to central theme. There are some pertinent analogies to be made with respect to the banking industry. Last year, the proposed mergers of the major banks obscured the central issues from the consumer standpoint: namely the need for enhanced minimum consumer protections and mandated accessibility to banking services. While the proposed bank mergers were likely to be unhelpful for competition in the long run, their disposition without implementation of consumer protection would not have represented any consumer triumph.
In this case, we have substantial consumer concerns that have not been addressed, on top of a contemplated cratering of the entire airline competition policy. To make matters worse, we have the temporary decoupling of the Competition Commissioner from the merger process.
We don’t need another solution brokered to secure shareholder investment. We need an environment where, yes investors can make a fair return but consumers are protected either through real competition or realistic effective regulation. I am far from certain we are now going down the right road.

CAAP Members and Links

Cartoon by Rick Cousins, Deep River

CAAP Members

Option Consommateurs
1-514-598-7288
contacts: Jacques St. Amant: st-amant@option-consommateurs.org
Louise Rozon; rozon@option-consommateurs.org
Transport 2000
1-819-827-0157
contact: Harry Gow: hwgow@uottawa.ca
Public Interest Advocacy Centre
1-613-562-4002 ext. 26
contact: Michael Janigan: mjanigan@piac.ca
Manitoba Society of Seniors
1-204-985-8540
contact: Byron Williams; bywil@legalaid.mb.ca
Air Passenger Safety Group
1-613-829-0602
contacts: Michael Murphy; fmmurphy@cadmus.ca
James Lyon; jtlyon@sympatico.ca
Canadian Federation of Students
1-613-232-7394
contact: Angela Regnier: dchair@cfs-fcee.ca
Rural Dignity of Canada
1-418-645-2715
contact: Cynthia Patterson; ruraldignity@globetrotter.qc.ca
Ontario Society of Senior Citizens’ Organizations
1-416-785-8570
contact: Morris Jesion: ocsco@web.net
Consumers Association of Canada Saskatchewan
1-306-242-4909
contact: Annemarie Buchmann-Gerber: office.cacsk@sasktel.net

Other Sites of Interest

Maritime Marlin Travel’s Page About Airline Choice

Airline Passenger Bill of Rights

Canadian Association of Airline Passengers (CAAP) Airline Passenger Bill of Rights

General Principle: Airline passengers flying in or out of Canadian airports or on flights operated by air carriers based in Canada are entitled to a safe flight, with a high quality of service at affordable, predictable prices on a year round basis.
Specific Principles:

1) Public Participation

The current operation of Canadian airports, air carriers and the air navigation system requires increased public oversight and fair, enforceable rules to protect passengers rights. There are numerous outstanding issues relating to safety, pricing, and service which must be resolved in the public’s interest. Proposed changes in the status quo of the airports or air carrier industry have the potential for adverse effect on passengers, communities, employees and the general public interest. In addition to the application of consumer rights as part of normal industry operation, any pending or future mergers or restructuring in Canadian airports, air carriers, air navigation system or aviation regulatory authority should be subjected to a publicly open, mandatory test of public and passenger interests. These matters should be heard by a competent and impartial party, such as the CTA, TSB or Civil Aviation Tribunal.
As part of a public process, the Minister of Transport should require any party proposing change, to state in their proposal how passenger interests will be accommodated in both a transition period, and the longer term.
The Minister of Transport should establish a public involvement process with respect to the development of safety policy and regulations that affect the safety of passengers. This process, whether integrated with or independent of the current Canadian Aviation Regulatory Advisory Council (CARAC) should offer bona fide members for travel and accommodation expenses plus a reasonable per diem.
Regulation and policy through the CTA or Transport Canada should ensure compliance with such undertakings.
Any public process, including the CTA, must include intervenor funding to facilitate representation on behalf of the 18 million passengers in Canada.
Public interests representing passengers should also be given status on the Boards of the major national and regional airports, air carriers and the air navigation system in Canada.

2) Safety

Priority of Public Safety in Decision-Making.
The safety of passengers should always be the foremost consideration in all areas of air carrier, airport, air navigation system and aviation regulatory decision-making;
Air passengers are entitled to the safest trip possible given the current state of knowledge about technology, design, materials, air navigation, meteorology and other considerations;
Commercial considerations such as selling services that are not essential to traveling safety must never take precedence over passenger safety considerations either in the air or on the ground;
While quantitative analyses of risks, costs and benefits are legitimate factors for consideration by managers in the air passenger business, they must not displace the policy stated above.
Normal and Emergency Levels of Services.
Air carriers, airports, air navigation systems and the aviation regulators shall comply with all applicable regulations and avail themselves of the most up-to-date best practices in the world for normal and emergency operations. Federal authorities should conduct a comprehensive, annual evaluation of services related to public safety by federal authorities, and should provide such reports provided to Parliament.
A Culture of Safety.
The Chairman, CEO and President of all companies with safety responsibilities are expected to make public their commitments to operate with a culture based on openness, justice, flexibility and learning, and to be accountable for that culture.
Additional Safety Risks Arising From Mergers, Restructuring.
A special review and verification of safety procedures should be required for any merging or restructuring of air carriers. Such reviews should include assessment of and proposed mitigation measures for transition issues for the airline plus current identified but unresolved safety issues, such as defective aircraft wiring and airport emergency response capability.
Access to Public Safety Information.
Passengers and the public are entitled to complete and timely disclosure of all information on any aspect dealing with safety standards and compliance with safety regulations that could affect passenger safety. This includes the type of aircraft, the aircraft operators, owner operation and the country of registration.
Air carriers, airports and regulatory authorities should provide passengers with information on request and should publish monthly statistics and records, including on a well-identified Internet website, within 45 days of the end of each month the following information:

The level of activity (e.g. number of passengers and departures);
The level of safety (e.g. number of fatal and non-fatal accidents);
A list of incidents over the last five years and the resolution of each, including a contact number;
The results of the last two government safety inspections and audits and their resolution by the air carrier and/or airport;
The safety and compliance records of air carriers and airports over the last 5 years.

Accidents.
In the event of an accident taking place at an airport, passengers are entitled to rescue and fire-fighting services that are equal to or better than international standards and recommended practices, to shelter and first aid, to prompt first and secondary medical aid, to counseling, to consideration of their loss of earning, and standing at any subsequent investigation by the Transportation Safety Board, including reasonable expenses and compensation.
In the event that the traveler is killed in an air carrier or airport accident, the family of the deceased passenger should be compensated immediately and generously in order to carry on at an equivalent standard of living and to seek any additional compensation. Any immediate compensation must not serve as a barrier to any subsequent compensatory or punitive settlements.
The Minister of Transport should publicly account, including via the official Transport Canada website, for post accident recommendations of the Transportation Safety Board, including the status of any action taken or the reasons why safety action has not been taken.

3) Service quality

Full Passenger Information Disclosure.
Passengers are entitled to complete, timely and full disclosure of all information that is material to their flight, including information on: Routing, connections, fares, accommodation, facilities, and baggage rules;
The passenger is entitled to be informed of changes in respect of reservations contracted with the carrier, and is to be informed in advance of overbooking or commercial practices that could annul the reservation or materially affect the passengers’ plans. Where delay is inevitable, he/she is entitled to complete information as to the reasons and, reasonable accommodation (hotel overnight) until the carrier can accept the passenger on board. Where an air carrier fails to comply with these rules, monetary penalties should be assessed through regulation, in addition to being available to consumers through civil law.
Onboard Quality.
The passenger is entitled to comfortable seating and adequate space on board the flight with which to make an emergency evacuation, including protection against the excessive carry-on baggage of other passengers.
Information on seat pitch and width should be provided to passengers on request and every effort will be made to find seating adequate to the passengers height, girth, etc.
The passenger is entitled to the satisfaction, in hygienic and humane conditions, of basic human needs; including breathing fresh air, availability of fresh drinking water, elimination in clean, accessible and sufficiently numerous toilet facilities.
General Service Standards.
The passenger is entitled to courteous service with full explanations of safety regulations and answers to questions in his or her Official Language.
Timely information on delays or safety problems should be given in full, with understandable vocabulary.
The passenger is entitled to careful handling of baggage and on time delivery of same at the proper destination in good condition with all property intact.
Where problems delay or misdirect baggage the passenger is entitled to full explanation, diligent search, fast forwarding (within 24 hours), and full reimbursement of damage or loss.
The passenger is entitled to protection by airport and air carrier personnel against harassment, excessive noise, and obstreperous behaviour and, specifically, against the results of excessive drinking by other passengers of drugs and of alcoholic beverages, and in particular those latter furnished on board by the airport or air carrier’s employees.
Discrimination against disabled passengers should be prohibited. Disabled persons should be afforded the same rights as other passengers. Disabled passengers should be seated to accommodate the safe evacuation of the aircraft by them and other passengers in emergency situations. Airports and air carriers should furnish reasonable accommodation for disabled persons including an extra seat where necessitated by a person’s condition for accommodation of the person, his or her prostheses, or a person accompanying him or her.
Passengers should be able to easily contact sales and reservations staff on a 24 hour per day basis. There should be a maximum waiting time of 10 minutes on an airlines’ 1-800 number. Staff should be available at airports in situations where flights are being delayed and/or cancelled.
The airlines’ complaint service should include a designated staff person at each airport to handle customer complaints. The designated person’s name, phone number, and e-mail address should be made available at ticket counters and gates. Complaint forms that can be mailed in should also be available. The airline should be required to answer every complaint within 30 days. An Ombudsperson should be appointed to mediate customer disputes with an airline. The Ombudsperson should be independent, appointed by the government and, should issue quarterly reports.
The airport and air carrier should provide a complaint service, and should publish monthly, including on the Internet, within 45 days of the end of each month the number of complaints received by letter and e-mail messages on the following topics;

Flight problems (total) and on subcategories: missed connection; diversion; cancellation; delay leaving gate; delay after leaving gate but before takeoff; delay after landing but before deplaning; arrival delay;
Over sales;
Reservations, ticketing, boarding;
Fares;
Refunds;
Baggage;
Customer service;
Disability discrimination;
Other discrimination (including by race, colour, national origin, official language;
Advertising;
Pricing including fares;
Credit;
Tours;
Frequent flyer program;
Smoking;
Safety -related observations.

Regulations should be introduced with set fines, payable to passengers, for breech of any service standards.

4) Pricing

The passenger is entitled to pricing of basic and discounted fares in accordance with a competitive market for the travel being purchased.
In the event that a competitive market does not exist for the travel being purchased, the passenger is entitled to a fare set in accordance with a regulatory scheme that sets just and reasonable fares and conditions which apply to basic and discounted fares. (ie. seat sales, advance and weekend stayover booking)
In the absence of exceptional circumstances, changes in basic fares should not be made without reasonable notice.
Where travel fares are set by market forces, the federal government has the obligation to ensure that anti-competitive conduct such as abuse of dominant position, collusion and price fixing does not affect the price of travel.
Key barriers to market entry must be swiftly removed and predatory pricing prevented.
Where fares are set the setting of fares in accordance with regulation, it should be done in an open, accessible, transparent, public process by the regulator.
Where the required levels of service to rural, remote or small communities cannot be maintained in a competitive or regulated market without:

(i) fare increases greater than the country wide average
(ii) restrictions on availability of discount fares that differ from service elsewhere in Canada
The Canadian Transportation Agency shall initiate a public process to prevent the occurrence of the same, and may establish a contribution regime as part of licensing requirements to assist, where warranted, in the provision of fair, reasonable and affordable service for all air travel consumers across Canada.

5) Regulation

The Canadian Transportation Agency (CTA) should mandate through new regulations the passenger rights, oversight procedures and redress mechanisms listed above. Public participation should be required as part of the CTA’s monitoring, review and regulatory activities.
Amended November, 1999

Summary of Bill of Rights

Canadian Association of Airline Passengers (CAAP Airline Passenger Bill of Rights

Summary

Specific Principles:

1) Public Participation.

The current operation of Canadian airports, air carriers, and the air navigation system requires increased public oversight and fair, enforceable rules to protect passenger rights. There are numerous outstanding issues relating to safety, pricing and service quality which must be resolved in the public’s interest.

There should be a public process for the development of safety policies and regulations.
For public processes, intervenor funding must be provided to facilitate organizations which represent the 18 million passengers in Canada.
Public interests should be given status on the Boards of major and regional airports, carriers and the air navigation system in Canada.

2) Safety.

Priority of Public Safety in Decision Making.

The safety of passengers will have priority in all areas of air carrier, airport, air navigation system and aviation regulatory decision making.

Normal and Emergency Levels of Service.

All parties making up the Canadian aviation system must comply with all applicable regulations. A review by federal authorities, with reporting to Parliament, should be conducted annually.

A Culture of Safety.

All airline companies and senior managers to publicly commit, and be accountable to an open and fair culture of safety

Additional Risks Arising From Mergers, Restructuring.

A public review and verification of safety procedures should be required for any merging or restructuring air carriers.

Access to Public Safety Information.

Passengers are entitled to complete and timely disclosure of all information dealing with safety standards and compliance with safety regulations.

Accidents.

In the event of an accident, passengers are entitled to rescue and fire-fighting services that are equal to, or better than, international standards, as well as shelter, first aid and other assistance, including compensation.

3. Service Quality.

Full Passenger Information Disclosure.

Passengers are entitled to complete, timely and full disclosure of all information that is material to their flight.

Onboard Quality.

Passengers are entitled to comfortable seating, adequate space for emergency evacuation, and hygienic and humane conditions, including breathing fresh air, fresh drinking water, and clean and accessible toilet facilities.

General Service Standards.

General service standards include: courteous service; explanation of safety regulations; timely information on flight delays/problems; careful handling of baggage; protection by abuse/harassment by other passengers; no discrimination based on disability; prompt service by company representatives; consumer complaint representatives and process.

4. Pricing.

Fair Pricing Rules.

Passengers are entitled to protection against unwarranted and/or sudden price increases in regular fares, as well as price fixing and anti-competitive collusion. Regulation should be used to set prices in markets where market dominance or monopoly conditions exist.

Affordable and Reasonable Fares in Rural and Remote Regions.

Fares in these areas should be established as a percentage of average rates in urban Canada. Fare increases should not be greater than the country-wide average. Rates should be set through a public process. Under monopoly conditions, a contribution regime should be established to ensure that service is not degraded and pricing remains affordable.

5. Regulation.

The Canadian Transportation Agency should mandate through new regulations the passenger rights, oversight procedures and redress mechanisms listed in this Consumer Protection Bill of Rights. Public participation must be a part of the CTA’s monitoring, review and regulatory activities.

A new regulatory framework should:

Establish a Consumer Protection Bill of Rights;
Require an annual, comprehensive evaluation of services related to public safety, with full reporting to Parliament on an annual basis;
Require public ‘culture of safety’ reporting by carriers;
Require special reviews and verification of safety procedures for mergers or other industry restructuring, including measures to address unresolved safety issues;
Require assistance, support and compensation for passengers in emergencies;
Provide for public accountability for post-accident recommendations and follow-up.
Assess monetary penalties for failure to meet service quality and general service standards;
Establish an Ombudsperson to mediate passenger and carrier disputes;
Institute pricing and service regulation for those markets where required, e.g., rural and remote markets;
Require a public interest statement from carriers, and a public process, to address how passenger’s interests may be affected in structural changes in the industry;
Be applied by the CTA or Transport Canada.