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IATA advocates against regulation of airline practice of overbooking

The International Air Transport Association (IATA) is imploring the Canadian government to stay away from regulating the practice of “overbooking.”

The aviation industry group described the practice as a key driver of profitability for airlines and aids in keeping airfares low.

“There is absolutely no need to regulate overbooking,” said IATA’s Director General and CEO, Alexandre de Juniac.

“This is the airlines’ position based on a long, long experience. The need for airlines to overbook in managing their seats, their revenues, is key. Otherwise they would be obliged to increase fares,” he added.

The federal government’s wide-reaching transportation legislation, Bill C-49, seeks to specify what rights air travellers hold and guarantee that people who buy flight tickets may not be forced off the flight due to overbooking. The legislation already passed the first reading in Senate.

While the Transport Ministry has assigned the Canadian Transportation Agency with the duty of indicating the regulations within the passenger bill of rights, Transport Minister Marc Garneau said the new regulations will tackle denied boarding, especially in cases of overbooking.

“I have been clear that regulations would include provisions whose intent would be that any denied boarding due to overbooking is done voluntarily and that under no circumstance (should) someone be involuntary removed from an aircraft after they have boarded,” said Garneau during a transportation committee meeting that tackled Bill C-49.

“As Canadians, we expect that air carriers that serve our country treat their passengers with the respect that they deserve and that they live up to their commitments,” he continued.

De Juniac explained that the practice of overbooking is a significant tool in an airline’s operations as it allows them to fill their planes with the maximum number of passengers and push profitability. He added that because of better technology and algorithms, overbooking “almost never happens now.”

“In terms of preserving passenger rights and treating them well, market forces are a very strong incentive,” de Juniac said, stressing how United Airlines stock plunged after a video that showed a passenger being dragged off one of their flights went viral. The day after the video was seen all over the world, United Continental Holdings stock dropped 4%, eradicating almost $1 billion of the company’s market value.

An IATA policy document on overbooking said the practice is essential to help offer consumers competitive fares.

“Banning the practice of overbooking will reduce already-thin margins, and could reduce connectivity in turn,” IATA said.

In submissions to the Transport Committee looking at Bill C-49, the Chief Executive of Flight Claim Canada, an organization that assists travellers file claims over airline issues, claimed the government should develop denied boarding to cover overbooking.

“It would also be appropriate to follow the lead of the European legislation in establishing a separate procedure when an airline has overbooked,” Flight Claim CEO Jacob Charbonneau penned.

Europe’s flight compensation rules offer recompense for overbooking, as well as for flight cancellations and long delays. But de Juniac said the European legislation goes a tad too far and should not be the norm for Canada.

“They are trying to reinvent the wheel. It goes too far in terms of refunding passengers for delays, even when you are not responsible for the reasons for the delay. It’s too much of a heavy burden on the shoulders of the airlines,” de Juniac stated.

“We have to find the right balance between passenger protection and airline protection,” de Juniac said. “If you put the balance on the wrong side, it will create problems.”

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