December 9, 2022

The Catholic Transcript

Complete News World

Do airlines overpay and hurt passengers?  - 01/24/2022

Do airlines overpay and hurt passengers? – 01/24/2022

I have always been interested in understanding the rationality of companies’ business strategies and business models before making any criticisms in the areas of regulation, competition and consumer protection. More than that, I try to understand the market environment in which it is listed before criticizing it.

And I do this because often what appears to be a “crime” in the administrative sphere can be justified in terms of economic efficiency, which ends up having a positive effect on certain groups of consumers. Examples include certain cases of price discrimination and bulk sales (eg groups in the telephone industry).

In particular, my interest tends to be greater in sectors such as the airline industry, whose pricing strategies are not trivial and where the operating environment contains a myriad of variables to manage, such as, for example, climate issues and time mismatches between An investment decision to increase the effective supply and demand in the market.

Along these lines, it is known that the epidemic has caused a sharp drop in demand in this market, and for a longer period than in other sectors. As a result, the managers of these companies had to manage two important aspects among others.

The first was to determine which routes would continue to be maintained and how often, because flying empty passenger planes would be certain of significant operational losses.

The second, as a consequence of the first, is how to adjust the offer overnight, without permanently returning the aircraft to their respective suppliers (companies). Leasing); There was an expectation to return to aviation as soon as possible, even while avoiding unemployment.

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Of course, there is always room for adaptation. In this case, many airlines have sought to renegotiate with suppliers and focus their efforts on moving more cargo. But even this did not prevent the huge losses that were observed at the most dangerous moments of the epidemic.

In this context, the National Civil Aviation Agency (ANAC) and Congress itself have understood the severe crisis that the sector has been through and have made some rules more flexible.

The first is to exempt companies from guaranteeing accommodation or food for passengers in the event of flight delays or rescheduling due to problems arising from closing borders or airports as determined by the authorities, as well as reducing the time prior to notifying passengers. From no change for 24 hours (previously 72 hours).

The second is to create a “penalty allowance” for companies, giving greater tolerance for delays and cancellations slots (Landing and take-off rights) at coordinated airports (with high demand and supply constraints). Thus, the regularity index is calculated to preserve the right of use slots By airlines “softened”.

In the same direction, Law 14.034 / 2020, extending to 12 months the deadline for airline ticket reimbursement due to consumer cancellation of the flight between March 19, 2020 and December 31, 2021, according to the cash update. The calculated value is based on INPC. In this case, the concern was the corporate cash flow.

It is clear that all these actions have caused great inconvenience to us consumers. In fact, research on the Consumer.gov website shows that most air transportation complaints in 2021 were filed due to difficulty or delay in receiving a refund (25.91%) and flight cancellations (11.09%), problems directly related to the approved procedures. .

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But the question throughout the pandemic has been the choice between the lesser of two evils. Allowing rules to be relaxed, accepting new rules in place, or doing more harm to businesses, at the risk of bankruptcy and not helping the consumer even more?

Essentially, the big challenge for ANAC and consumer protection agencies is understanding how to calibrate their decisions. And then I’m concerned about what basically happened in the second half of last year, when the market started to reheat and companies kept, though, canceling flights, rescheduling appointments and even appointments.

For the consumer, ongoing cancellations and flight changes often involve redefining their leisure travel or professional commitments, which may involve insignificant costs, such as those related to changes to hotel reservations or meeting times (if applicable).

In some cases, commitment may be unavoidable. In these cases, consumers end up being forced to buy new tickets from other companies, sometimes at a higher price than they initially paid. In any case, at least, there may be a transaction cost related to new searches for days and times for flights and hotels.

In this sense, the ideal would be for this type of business behavior to be restricted to only necessary moments, at the height of the epidemic, when demand drops significantly and the ability to deliver flights is affected by a decrease in the number of flights. The employees who make up the crew. On board the ship affected by the disease.

Understanding the moment of the pandemic and the problems plaguing this sector is essential. But avoiding potential violations, especially those involving unjustified transfer of risk from the company to the consumer, is also the task of government agencies.

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And what it all indicates is that ANAC and the National Consumer Protection Agency (Senacon) have sought to contact the companies to explain the facts and problems they have encountered, in the line of a more responsive (collaborative) regulation. It remains to be seen what the outcome of these talks will be in the coming months.