Chapter 2Views on the bill
2.1This chapter considers inquiry participants’ views on the provisions of the Airline Passenger Protections (Pay on Delay) Bill 2024 (the bill). Inquiry participants were generally supportive of the need for strong passenger protections in Australia’s aviation industry. However, concerns were raised about whether the bill will be effective in meeting its stated aims and whether it places undue burden on airlines.
2.2The chapter begins by examining some of the evidence received in favour of the bill before turning to views from airlines and their representative groups about how the bill might negatively affect them and the broader aviation industry.
2.3The chapter concludes with the committee’s views and recommendation.
Issues for consumers in the Australian aviation industry
2.4The COVID–19 pandemic heightened a range of issues in Australia’s aviation industry, particularly in relation to passenger protections. One submitter stated that they now ‘feel anxious’ that their travel plans may suddenly change because of disruptions caused by the airline, but that ‘consumers have limited choice’ to book with different carriers due to the airline duopoly in Australia. Another submitter highlighted the ‘painful experiences’ caused by airlines in Australia and how there is no accountability for distress caused to passengers:
Everything is done to avoid responsibility for any of their actions and they simply get away with it as most people just give up trying to talk to them. Other businesses in Australia would be dragged through the coals if they acted in the same manner so why should airlines be allowed to operate the way they do?
2.5Current airline compensation policies were criticised for being too narrow, only focusing on an individual flight, rather than the entire itinerary of a traveller. Mr Robert Woodbridge expressed frustration that an entire trip could be impacted by one cancelled or delayed flight, causing ‘no end of constant rearrangements’. Mr Woodbridge lamented that ‘failures in operations’ have negatively impacted him through the constant rearrangement of ‘connecting flights with other airlines, additional accommodation, car hire…[and] bad stress’.
2.6Although customers have certain rights afforded to them under Australian Consumer Law (ACL) and respective airline policies, Mr Adam Glezer, Owner, Consumer Champion, highlighted that Australia’s passenger protections are lacking in comparison to other countries. Mr Glezer noted that customers have limited options when trying to escalate a complaint and that one of the only options available, the Airline Consumer Advocate (ACA), is ‘funded by the airlines and is therefore not impartial in resolving consumer complaints’. According to Mr Glezer, the ACA ‘does very little more than give Australian consumers a false sense of security’ that they are supported and will get a fair result in disputes with the airlines.
2.7Lack of transparency and access to information on refunds in the case of delays and cancellations was an issue raised by multiple stakeholders. AirHelp, an international online service that helps passengers seek compensation, emphasised that a lack of transparency restricts customers’ understanding of the compensation process and that ‘if passengers don’t know they have rights, they can’t use them’.
2.8Ms Victoria Roy, Chair, Travel Law Special Interest Group, Australian Lawyers Alliance (ALA), made the point that ACL is ‘vague and complex to navigate’. She expressed concern that the Aviation Customer Rights Charter currently in development will run alongside ACL and remain unclear to the average consumer. According to Ms Roy, ‘there's no simple, affordable way in Australia for air passengers to actually enforce the few rights they do have’. She argued that ACL requires service providers to make refunds in a timely manner, but ‘airlines and consumers both have very different views of what reasonable time is’.
2.9Although airlines currently have compensation policies in place, and customers are protected by consumer law, the ability for these mechanisms to protect customers has been limited.
Support for the bill
2.10The committee heard evidence from passengers, consumer advocates and industry groups strongly in favour of increased passenger protections in the aviation industry. Supporters of the bill felt that dedicated regulations which set clear standards of passenger protection would better hold airlines accountable for their performance and result in positive outcomes for affected consumers.
2.11AirHelp was supportive of dedicated regulation that would set clear standards of passenger protection for all carriers operating in Australian airspace. It submitted that ensuring airlines treat their customers with ‘care and dignity’ is of paramount importance and that any regulations should be succinct and simple to understand for passengers who simply want to know what assistance they are entitled to. AirHelp made the following recommendations for obligations that should be made under the proposed carrier rules:
set compensation amounts that rise depending on severity of delay or cancellation;
prohibit the use of flight vouchers as compensation;
place the burden of proof on airlines to show that they were not at fault for a disruption;
offer passengers the option of continuing their journey or receiving a refund; and
allow adequate time to make a claim following a delay or cancellation.
2.12Mr Glezer submitted that the only way to enact change in the aviation industry is to force airlines to act properly. He felt that this bill would provide protection that is currently lacking in the industry:
If deterrents aren’t put in place for the airlines, nothing will change. The lack of competition in the Australian aviation industry makes these protections even more important as consumers have very limited options, even if they’ve been wronged by an airline. Consumer Protection when it comes to Aviation has to be taken seriously. Nothing has happened in this space for way too long and action in this area that affects millions of Australians is well overdue.
2.13Mr Glezer listed two main changes that he believed were needed to protect Australian consumers: the automatic right to a refund for all airline cancellations; and the right to compensation for delayed and cancelled flights when it is within the airline's control. Mr Glezer noted that, living in a geographically large country, ‘Australians rely on airlines to get to destinations’ on time and that ‘significant delays and last-minute cancellations are a great inconvenience and can prove to be very costly’. He supported a compensation scheme similar to the one used in the European Union (EU) and addressed concerns that such a scheme could result in higher fares:
We need a 261-like system; that's what they have over in Europe. The airlines, for example, are saying that it's going to cost a significant amount. What I can tell you…is that Eurocontrol data from 2022 shows that the estimated cost of compensation per passenger across the EU and [United Kingdom] was between 60c and US$1.20. Despite the scare tactics that are used by the airlines, saying that it's going to go up significantly, there's absolutely no evidence that it will lead to a price rise of any note to consumers. Have a look in Europe. The prices are extraordinarily competitive.
2.14Evidence received from the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (the department/DITRDCA) indicated that fares in the EU had risen by $4 to $16 per ticket as a result of the compensation scheme in place there.
2.15The Australian Travel Industry Association (ATIA) commended the bill for focusing on fair and transparent standards in the aviation industry and made it clear that the ‘right frameworks need to be in place to better incentivise airlines to invest’ in customer service across their operations. ATIA was particularly supportive of the simplification of refund rights and the requirement to process refunds in a timely manner. ATIA said that the change would benefit travel agents who currently must navigate the terms and conditions of airlines to provide their customers with refunds on behalf of the airlines. This issue was heightened during the COVID-19 pandemic when airlines deactivated the refund function available in the travel agent booking system, and instead prioritised those refunds that were booked directly through the airline.
2.16Mr Dean Long, Chief Executive Officer, ATIA, explained that this bill, and other measures currently in development in response to the Australian Government’s (the government) Aviation White Paper: Towards 2050 (the aviation white paper), would aid in shifting the burden of delays and cancellations from consumers to airlines:
At the moment, the airlines can create greater profits by maximising fleet usability by cancelling and moving things around. At the moment, the economic loss is occurring with the consumer, the travel agent, the corporate travel management company et cetera. Whoever that might be, they're bearing the cost of that, not the airline. What both bills are looking at, including not only the one we're talking about today—pay-on-delay—but also some of the outcomes of the white paper, are how you build an economic impact for the airlines to try to drive behaviour. It will be a small quantum, but that can be enough, particularly in a highly competitive market, where you can get some better outcomes… I think what we need to have a look at is how we create that economic cost for the airline to offset the idea that we can do this with no economic cost to the bottom line.
2.17The ALA expressed its support for the bill’s aim to establish carrier obligations to ‘hold airlines accountable’. However, it argued that there needs to be greater passenger protections in the form of a Passenger Bill of Rights. ALA emphasised that, in order to properly protect consumers, ‘these rules should be mandatory legislative provisions’, and that any new code of conduct would need to be made mandatory for it to have any real effect.
2.18The Justice and Equity Centre (JEC) argued that protections for passengers with disabilities should be specifically referenced in the bill. JEC made the point that passengers with disabilities often need to make more extensive preparations than other travellers to ensure their needs are met, including by hiring support persons or obtaining advance permissions to carry health equipment. These preparations are hard to make on short notice in the event of a delay or cancellation. Given the particularly difficult circumstances for passengers with disabilities, JEC made the following recommendation:
Subsections 4(2) and 5(2) of the Bill should be amended to specifically include ‘people with disability and their representative organisations’ among stakeholders that must be consulted in the development of the Bill’s proposed carriers obligation rules and aviation industry code of conduct.
2.19JEC concluded that ‘the only way governments can ensure any consumer protection scheme meets the needs of people with disability is by designing those systems with people with disability’ and that consultation alone would not be sufficient. Full co-design of the relevant systems will be required.
2.20The Transport Workers Union’s (TWU) highlighted the poor treatment of employees by the aviation industry during the COVID-19 pandemic, with approximately 13 500 people losing their jobs. Since pandemic restrictions have been lifted, the TWU advised that airlines have been ‘outsourcing’ ground staff roles, like baggage handling, to third parties, and drew a correlation between these changes to the workforce and airlines’ decreased reliability. The TWU emphasised that improved job security in the aviation sector was needed to improve reliability, performance and passenger experience.
Concerns with the bill
2.21Airlines and their representative organisations acknowledged that flight delays and disruptions are a frustrating experience for passengers, and that such occurrences are a challenge across the globe. However, many submitted that the bill will not alleviate these issues and that ‘there is no evidence that prescriptive, aviation-specific regimes deliver improved performance in terms of delays or cancellations’.
2.22Virgin Australia submitted that it believed that ‘ACL is fit-for-purpose as it provides a comprehensive framework for consumers including guaranteed rights and appropriate compensation’. Virgin Australia advised that airlines already provide their own compensation policies in addition to ACL, and that a Passenger Bill of Rights, pay-on-delay scheme or fixed compensation regime of any kind would not meet ‘the intention of the proposed bill’.
2.23Virgin Australia emphasised that airlines face intense competition in Australia and are already incentivised to ensure they meet consumer guarantee obligations. The Association of Asia Pacific Airlines (AAPA) agreed, noting that on-time performance is an advantage in such a competitive marketplace. AAPA argued that a delay in a particular flight could have a downstream effect of further delays in an airline’s network, resulting in increased operational costs and inconvenience to passengers. Airlines, it argued, already strive to avoid this.
2.24Qantas agreed that ACL is sufficient to regulate the aviation industry and made the point that any regulatory mechanisms that force airlines to fly could have unintended safety consequences. While noting that ‘safety will always be our first priority’, Qantas submitted that economic penalties for delays ‘would put undue pressure on critical operational and safety functions and could lead to poor safety practices across the entire aviation industry’. Mr Markus Svensson, Chief Executive Officer, Qantas Domestic, told the committee that Qantas supported the Aviation Industry Ombuds Scheme, but that incentives for airlines to avoid delays and cancellations already exist:
We support the Aviation Industry Ombuds Scheme and the charter, and we're happy to work with the government in developing these ones. When it comes to cancellations, I can't stress the point enough…nobody wants to cancel a flight. It's not good for the customer; it's not good for operations. You can ask the Virgin team. You can ask any of the other airlines you want. Nobody wants to cancel flights. There's absolutely no incentive for us to cancel flights.
2.25The Regional Aviation Association of Australia (RAAA) warned that imposing penalties for delays or cancellations could have adverse effects on services to regional communities. This point was also raised by Rex Airlines, which illustrated how such a scheme could impact regional airlines that run on thin margins:
Rex could not afford to pay customers for delays on regional routes as its margins are too small. The provision of regional air services is challenging for a number of unique reasons. For example, nearly all regional airports do not have licensed aircraft maintenance engineers on site. If an aircraft has a technical issue, Rex must organise engineers from a metropolitan hub, in addition to a recovery flight to get passengers to their final destination. The cost of such disruptions must be absorbed by Rex. Similarly, the airline cannot afford to compensate for hotel accommodation because, in most instances one hotel room costs more than the ticket.
2.26To address this issue, RAAA suggested that ‘any new scheme should consider the type of airline operation and the locations they are operating to’ in order to protect regional services. This could be done by excluding certain airline operators or locations from any proposed scheme.
Issues outside of airline control
2.27The primary reason for opposition to the bill from airlines and their representatives was the potential for airlines to be penalised for factors that are outside of their control. Adverse weather, air traffic control issues, airport infrastructure and passenger management were all raised as considerations for flight delays that are not directly attributable to air carriers.
2.28Qantas argued that the aviation industry is ‘an intricate ecosystem with multiple dependencies’, and that performance depends on the entire ecosystem—including airlines, air traffic control, border agencies, travel agents and airports—working together seamlessly. Without acknowledging the complexity of the industry, Qantas argued, the bill ‘will not achieve its intended outcome as it will do nothing to address systemic issues to further reduce delays or cancellations’.
2.29Airlines for Australia and New Zealand (A4ANZ) explained that the primary cause for flight delays is adverse weather. A4ANZ advised that up to 75 per cent of all flight delays can be attributed to poor weather, particularly in Australia where storms, flooding and cyclones are not uncommon. AAPA agreed, saying that ‘there may be safety reasons for delays, and no air carrier would operate in conditions where safety may be called into question’.
2.30Issues with air traffic control and the performance of Airservices Australia were also cited as reasons for delays that airlines could not influence. Rex Airlines noted that ongoing operational disruptions at Airservices Australia had resulted ‘in a cascading effect of flight delays and cancellations across the country’. Unplanned absences and staff shortages have led to restricted flights and landings.
2.31Virgin Australia reported that the aviation industry’s ability to recover from the COVID-19 pandemic was impeded by a large turnover of experienced personnel in the aviation industry, including pilots and air traffic controllers. The International Air Transport Association (IATA) stated that Airservices Australia, who train and employ air traffic controllers, was responsible for 16.2 per cent of ground delay minutes in December 2023. Disruptions such as these to an airline’s supply chain impact airline performance, with IATA believing that airlines are unfairly blamed rather than examining the wider aviation industry. IATA expressed frustration that, although these issues are outside of an airline’s control, airlines are often regarded as the responsible party for compensating passengers for such events.
2.32To account for the intricate and interconnected nature of the aviation industry, A4ANZ cautioned that that any ombuds scheme in development to protect passengers should be focused on being an aviation ombudsman ‘not just [an] airline ombudsman’. Airlines are a part of a complex aviation industry, and A4ANZ believed that airports, travel agents and other service providers should also be covered by any scheme or code of conduct to ensure shared accountability. Mr Stephen Beckett, General Manager, Government and Industry Affairs, Virgin Australia, concurred, arguing that all levels of the aviation industry need to be included in any prospective solution:
Part of what we're talking about is that there are many participants in the aviation ecosystem that need to be captured, whether we're looking at an ombuds scheme or improving customer rights. One of the things that we did provide to the government about the ombuds scheme was the number of participants left out of the system. Those airports with fewer than a million passengers aren't covered by the scheme. Travel agents aren't covered by the scheme, and we've all seen countless examples of somebody not being able to board a flight, because a travel agent has spelt a middle name wrong or got the details wrong, and that customer being left out of pocket. One of the things we think is that everybody—air services, airlines and airports—needs to be part of the solution.
2.33AAPA suggested that ‘compensation-based regimes are blunt instruments that ignore the fundamental causes of delays and cancellations’ and that it was unfair to burden airlines alone with penalties. A4ANZ also cautioned against overreacting to delays and cancellations, warning that any regulatory response should be proportionate to the scale of the problem, based on evidence of what actually works and focused on outcomes, including reduced disruption, better complaints handling and affordable fares.
Efficacy of international compensation schemes
2.34Supporters of the bill cited the use of compensation schemes in other jurisdictions as examples of how similar regulatory mechanisms could be used in Australia. However, opponents of the bill argued that these international schemes do not achieve their desired outcome and, in some cases, can even make conditions worse for passengers.
2.35A4ANZ noted that, since the introduction of the EU261 compensation regime in use in the EU, customer complaints have increased, and fares have risen to account for possible penalties. Similar increases have been noted elsewhere, including in Canada where the introduction of consumer protection regulations resulted in a large backlog of unresolved compensation complaints. Mr Beckett told the committee that, despite billions of dollars being made payable in penalties, cancellations have also risen in the EU:
With the situation in the EU and Canada, at one time in the EU, we've seen about $9 billion in compensation being made payable to customers. At the same time, we've seen almost a doubling in the number of cancellations. The type of performance that you're looking to improve is connected not to what is paid and what's not paid but to the root causes of delays and cancellations, such as weather, air traffic control, engineering, people being sick et cetera.
2.36A4ANZ expressed its belief that it is ‘highly likely’ that the costs of a compensation scheme would place upward pressure on airfares and impact scheduling, thereby reducing access and choice for consumers. It stated that where it is not possible to pass on the costs to passengers through higher ticket prices—generally due to competitive factors—regulation costs are internalised by airlines and manifest in reduced service. The impact is greater on less-utilised regional routes—a particular concern in the context of the Australian aviation industry.
2.37AAPA argued that there is ‘no evidence that these aviation-specific schemes have successfully reduced the number of flight delays or cancellations in their respective jurisdictions’. It pointed out that the Montreal Convention 1999, to which Australia is a signatory, sets out the obligations and liability limits of airline carriers. Rather than introducing a defined compensation scheme, it instead urged the government to ‘fully align its regulatory initiatives with the principles and guidelines enshrined in such international conventions’.
2.38Virgin Australia expressed its belief that compensation schemes could result in adverse conditions for passengers. It advised that ‘automatic, blunt penalty regimes like the EU’s passenger compensation scheme risk leading to increased fares, but not necessarily improved customer outcomes or operational performance’. Qantas agreed, saying that ‘these schemes do not deliver better outcomes for consumers in terms of reduced delays and cancellations and they increase the cost of travel’. Additionally, Qantas noted that the inflationary effect on ticket prices could have significant implications for low-cost carriers. This would likely have a particularly negative effect on economically marginal routes in Australia’s regional network.
2.39IATA asserted that compensation schemes like those used internationally ‘do not comply with the basic principles or objectives of good policymaking’. In its view, customer protection regulation should be used to create incentives for airlines to operate in the consumer’s interest. Compensation schemes that penalise airlines do not incentivise airlines to reduce delays and cancellations, as carriers already have strong economic incentives to operate on-time.
Current initiatives to protect aviation consumers
2.40The government is already taking action to address the concerns expressed by inquiry participants in favour of increased passenger protections in the aviation industry. In response to the aviation white paper, the government has commenced work to establish an Aviation Industry Ombuds Scheme (ombuds scheme) and an Aviation Customer Rights Charter (the charter).
2.41Mr Steve Weber, Acting Assistant Secretary, Aviation Industry Ombuds Scheme, DITRDCA, advised that the charter would include six overriding principles for the protection of passengers including:
the right to be treated with dignity and respect in an accessible and inclusive environment;
the right to accurate, timely and accessible information and customer service;
the right to prompt and fair remedies and support during and after cancellations, delays and disruptions;
the right to safe and timely baggage handling and fair remedies for damage and delays;
the right to the protection of their personal information; and
the right to provide feedback, make complaints and exercise their rights without retribution.
2.42Mr Weber confirmed that the draft charter would ‘[go] into more detail about what we would expect for each of those rights’.
2.43Mr Benjamin Meagher, Assistant Secretary, Sydney Airport Slots and Consumer Aviation Reforms, DITRDCA, assured the committee that the establishment of the ombuds scheme and the charter would create the regulatory framework for compliance and enforcement of passenger rights. He advised of the scope of the new reforms and relayed that enforcement will be part of the final legislation:
In drafting the legislation, we're looking at how the system can be structured to incentivise compliance; how decisions can be enforced—looking at constitutional powers of the Commonwealth—and implications for different entities; what inquiry and remedy powers would look like; and what appropriate penalties would be for noncompliance with the powers—for example, not cooperating with requests for information or investigating consumer complaints or not meeting the obligations within the charter. We'll look at the government's civil penalties framework for what appropriate penalty rates would be.
2.44Mr Rami Greiss, Executive General Manager, Consumer and Fair Trading Division, Australian Competition and Consumer Commission (ACCC), noted that there is already a right for consumers to seek compensation from companies for failure to comply with the consumer guarantees. However, the issue is that the onus is on the consumer to pursue that compensation. This is particularly difficult to do when facing large corporations, like airlines. Mr Greiss indicated that the ACCC believed an ombuds scheme would ‘provide a framework in which it is easier to understand the mutual obligations both of the consumer, in terms of pursuing those rights, and of the business, in terms of a framework to provide quantified amounts of compensation’.
2.45Ms Jennifer Stace, Acting First Assistant Secretary, Domestic Aviation and Reform, DITRDCA, noted that the legislation would also include additional arrangements that would allow for the compulsory provision of information. Such a measure would allow the government to strengthen reporting and transparency arrangements, including by introducing a requirement for airlines to ‘show cause’ on the reasons for delays and cancellations. Although court action is an option under the draft scheme and charter, ‘the intention is that that's a last point of call and that the independent framework would help resolve disputes’. Ms Stace emphasised that the introduction of the ombuds scheme and charter ‘would set out those obligations and expectations for the industry which don't currently exist’.
Committee view
2.46The committee thanks all organisations and individuals for their engagement with the inquiry. The committee acknowledges the distress and inconvenience that passengers suffer as a result of cancellations and delays to flights.
2.47The Australian Government has long been aware of the issues with consumer protection in the aviation industry and has been proactive in addressing them. The Aviation White Paper chartered a way forward in strengthening Australia’s aviation industry for the future, including in the protection of rights for passengers and consumers.
2.48Key elements of this pathway are the Aviation Industry Ombuds Scheme and Aviation Customer Rights Charter which will strengthen the regulatory framework for compliance and enforcement of passenger rights. These measures will establish a clear and transparent enforcement and complaints handling process that will empower consumers in their dealings with airline carriers.
2.49The committee endorses the principles included in the draft Aviation Customer Rights Charter. The introduction of the charter will see passengers treated with dignity and respect, and provide fair remedies and support during and after cancellations, delays and disruptions.
2.50While the committee acknowledges that this bill seeks to improve customer protections, the committee believes that its provisions duplicate work that the government already has well underway. The obligations provided for in this bill ignore wider issues and factors that affect flights in Australia and could result in negative unintended consequences, particularly for rural and regional Australia. As such, this bill is not the appropriate means for improving Australian aviation.
2.51The committee supports the work currently being undertaken by the government to strengthen passenger protections and believes this is the best approach to maintain healthy consumer-airline relationships into the future.
2.52The committee recommends that the Senate does not pass the bill.
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Senator Glenn Sterle Chair |