Good afternoon Ladies and Gentlemen,

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2 Good afternoon Ladies and Gentlemen, This afternoon I would like to explain a major IATA Advocacy initiative which we are calling Smarter Regulation and how that is being applied in the areas of Consumer Protection and Unruly Passengers in particular, although it is an approach that we are also using in other areas such as Environment and Taxation. Let s be clear, our industry is not seeking further regulation we are already one of the most highly regulated industries. We much prefer self-regulation or the application of best practice global standards are the hallmark of aviation. However, our industry depends on regulation in certain areas. Clear and consistent safety regulation for example will enable us to get 3.3 billion passengers safely to their destinations this year. And aviation regulation goes well beyond safety and security: It ensures healthy competition It governs the financial fitness of airlines And protects the rights of our customers 2

3 But while such regulation is often well-intentioned, it doesn t always achieve what it sets out to achieve. And if it is not properly directed at the issue it is trying to address or places a disproportionate burden on the carriers that it is regulating, it can actually do more harm than good. Some governments have already launched smarter regulation or better regulation initiatives with a view to cutting unnecessary burdens on consumers and businesses. We fully support such initiatives and are now actively promoting Smarter Regulation to reduce unnecessary government interference in the commercial and operational activities of airlines. We have even established our own smarter regulation methodology which incorporates best practices gathered from a collection of sources (OECD, individual governments) and which we will use as a benchmark when urging more regulators to get on the smarter regulation bandwagon 3

4 Firstly, let me stress that this initiative is about working collaboratively with regulators, not just telling them what we think they are doing wrong. It is about working as partners to strive for regulation that delivers clearly defined, measurable policy objectives in the least burdensome way. In terms of policy design, this means regulation that is: Consistent: with existing international and domestic regulation (in line with our guiding principle of always seeking a globally harmonized approach where possible) Clear: easy to understand and easy to put into practice Proportional: avoid overkill and make the solution proportional to the problem And targeted at risk In terms of regulatory process, this means: Not proceeding without the objectives being clear Being consultative: talk to people that will be regulated to understand their reality Conduct a proper impact analysis And provide for regulations to be regularly reviewed to ensure that they continue to do what they are meant to do Let me give you a concrete example of proposed regulation that does NOT correspond to these principles: In the US, the Federal Aviation Administration and the Federal Communications Commission are considering removing a prohibition on the use of mobile telephones onboard flights, which was based on concerns about safety and interference with ground networks. However, the Department of Transportation (DOT) says that if this happens, it will propose banning them under its consumer protection authority as an unfair practice. DOT says in explaining its concern that some passengers might find the excessive use of mobile phones during flight annoying. Should that trigger a regulatory response from government? The proposal fails the policy design principle tests: it s not consistent with existing policies; it s not proportional; and it s not targeted at risk. It s not SMART. This issue does not need regulation. Let airlines work out what their customers want and provide it! 4

5 Those that get it right will prosper. And those that get it wrong will have a huge incentive to change. Let the market place work! 4

6 One area where a smarter approach to regulation is sorely needed is consumer protection - a key focus area for IATA. There are now around 60 countries that have consumer protection regimes covering air passengers. Many have extra-territorial elements, which leads to a lack of consistency across jurisdictions, compliance challenges for airlines and more importantly confusion for passengers. Take for example a passenger travelling on an EU- based carrier from the US to Israel via a European hub. If the passenger is denied boarding at the US airport, potentially three consumer rights regimes would apply: the US DOT Consumer Protection Rules, EU Regulation 261 and the Israeli Aviation Services Law. Certain regulations also have significant unintended consequences. For example, governments wanting airlines to compensate passengers after a delay of a certain number of hours could in fact perversely cause more cancellations and more serious disruption to passengers instead of protecting them. This is because airlines have a disincentive to incur the costs of delaying the flight and prefer to cancel it outright an action that is a more stressful and uncertain experience for the passenger. According to the US Government and Accountability Office, flights were 24% more likely to be cancelled before leaving the gate after the US tarmac delay rules were introduced. And passenger rights regimes can have profound cost implications for passengers and businesses. For example, IATA estimates that compliance with EU Regulation costs airlines EUR 4 billion annually. In a business with thin profit margins of just $7.08 per passenger (2015), the cost of complying with multiple consumer protection rules can damage competitiveness and render routes unprofitable, reducing connectivity and its associated benefits on economies and societies. IATA fully recognizes the need for basic protections but we are advocating for governments to take a more harmonized approach. The industry stands ready to partner with governments and that is why we developed a set of core principles on consumer protection that was unanimously adopted by our membership at the 2013 IATA AGM in Cape Town. Governments themselves have recognized the need for greater coordination and harmonization in terms of consumer protection legislation At the ICAO Sixth World Air Transport Conference in 2013, ICAO received support from member states to develop its own high-level principles on consumer protection. IATA supports and 5

7 is participating in this ICAO process. 5

8 Let me give you an overview of the key core principles: Consistency with Montreal Convention 1999: MC99 provides a global framework for air carrier liability in the event of accidents, delays, and lost baggage, and specifies the compensation that should be paid out, and under what circumstances it should be paid out. Unfortunately, a lot of States that have ratified MC99 have introduced passenger rights regimes that actually conflict with the Convention. Regulations should not be extraterritorial: Lack of clarity on the jurisdiction of the various regulations causes conflicts and confusion for passengers and airlines alike. Passengers should have access to information on their rights, the operating carrier, and access to complaint handling procedures No compromise on safety: Safety related issues, such technical issues with an aircraft, should be excluded from conditions which require airlines to compensate passengers under passenger rights regimes. Otherwise an unhealthy incentive could be created to operate the flight to avoid costly penalties Principle of proportionality: Passenger rights regimes should be fair and reasonable in their cost structure and in their application to circumstances within airlines control. Today, compensation in some existing regulations is sometimes many times higher than the entire cost of the ticket paid by the passenger. This doesn t happen in any other industry as far as we know. 6

9 So on Consumer Protection, our overall objective is to move from a patchwork to a harmonized approach, based on the industry core principles. Our advocacy involves four areas of work at both global and local levels. At the global level, it is about two things. Firstly, changing the debate by promoting our principles and pushing for more harmonized approach. Today, the narrative is very much governments having to protect passengers from the airlines, with little attention paid to the unintended consequences. They fail to recognize the strong market forces which act as a powerful incentive for airlines to avoid disappointing passengers. So we need to inject a new perspective in the global conversation and get regulators to think twice before imposing such regulations. This involves (1) working with non-industry supporters who share our perspective and who are ready to participate in this debate along side us, (2) a high-level communications campaign on facts about passenger rights -e.g. what is and isn t under an airline s control, and (3) doing a better job of engaging consumer rights NGOs and ensuring they hear the industry perspective And secondly, contributing to the ICAO process that is working towards a harmonized approach At the local level, our focus is on engaging with governments early in the process to try to significantly improve new regulatory initiatives. Our Area Managers are monitoring closely legislative developments and we are working in partnership with the Regional Associations to amplify our efforts. 7

10 Let me move on now to the issue of Unruly Passengers. Ensuring the safe, secure and efficient operation of commercial flights is the shared goal of governments, airlines and the wider aviation industry. However, unruly passenger incidents on board aircraft have become a significant issue faced by airlines, flight and cabin crew on a daily basis. The behavior of this small minority of unruly passengers also adversely affects the wellbeing of other passengers, causes operational disruption and leads to significant costs for airlines. Let me give you a couple of recent real-life examples: Example 1: On a recent flight from Manchester to Havana there was a serious incident involving a couple flying off on their honeymoon. The couple had such a bad argument that the wife (at her request) was moved to a different seat elsewhere on the plane. When the husband was asked to leave her alone, he began threatening and spitting at the crew, and had to be restrained. The plane then had to be diverted to Bermuda and the husband was off-loaded. This caused significant stress and inconvenience to the other 311 passengers and crew and additional cost to the airline. Example 2: Earlier this month, the Mayor of London (Boris Johnson) got caught up in an incident on a flight from Kuala Lumpur. A passenger became intoxicated and after being refused further alcoholic drinks, became abusive to the crew The crew spent a significant amount of time trying to calm the passenger down, assisted by some fellow passengers (including Mr Johnson) But these attempts were to no avail and resulted in the passenger having to be physically restrained with handcuffs Upon arrival in London the unruly passenger was escorted from the aircraft by police officers and arrested on suspicion of being drunk on board an aircraft and common assault 8

11 170 of our Member airlines have reported unruly incidents to us since We have received over 8,000 reports in 2013 alone. Almost 20% of these incidents were serious enough to require the intervention of police or security services upon landing. One of the main problems is that many unruly passengers rarely face prosecution because of gaps in international aviation law which undermine the deterrent effect. An example of jurisdictional problem: In April 2014, an inebriated passenger tried to enter the cockpit on a flight from Brisbane to Denpasar, Indonesia with 137 passengers and six crew on board. The passenger was restrained and the flight continued to Denpasar where the passenger was arrested on arrival and the airport closed for one hour. But the passenger couldn t be charged under Indonesian law because under the Tokyo Convention, jurisdiction rests with the state of (aircraft) registration, which in this case was Australia. The Indonesian authorities then tried to deport the unruly passenger on a flight with the same airline upon which he had created the problem in the first place. How would you feel having that passenger on board. This growing problem led IATA to develop a dual strategy to tackle the issue: (1) prevention and management of unruly incidents, and (2) ensuring there is a strong deterrent. The strategy was unanimously adopted by our member airlines as a set of core principles on unruly passengers at the 70th AGM in Doha in June. The principles set out a comprehensive, multi stakeholder approach to tackling the issue. 8

12 Our approach is based on two areas: Prevention and management: We are working with our member airlines to make sure they have well developed policies and procedures to ensure that unruly passenger incidents are dealt with in a uniform manner across their networks. To help them, we have developed comprehensive Guidance on Unruly Passenger Prevention and Management developed with expert input. The Guidance provides airlines with the information, best practices and tools necessary to develop or enhance policies and procedures that aim to prevent unruly incidents from happening in the first place and to manage them effectively when they do occur. Wherever possible, we want to avoid unruly incidents from happening during flights by keeping the problem on the ground and our industry partners have an important role to play in helping us. For example, it s important that staff in airport restaurants and bars serve passengers alcohol responsibly to avoid potential problems that have to be dealt with by cabin crew during the flight. Likewise, we are asking ground handlers and other stakeholders to ensure that their staff are trained to recognize some unruly passenger behavior, for example at check-in or security, and to pass any information on to the airline concerned so the passenger can be monitored and an informed decision can be made about whether to accept them for travel. Deterrent: One of the problems we have today is that many unruly passengers do not face punishment because of jurisdictional and other gaps that exist in the Tokyo Convention However, five years of intense work by the industry has had some success. In April 2014 a Diplomatic Conference convened by the International Civil Aviation Organization (ICAO) adopted the Montreal Protocol 2014 (MP14) to amend the Tokyo Convention We welcome this as a positive step forward, as it closes those jurisdictional gaps and also better defines what constitutes an offense in the first place. This should start to act as a much better deterrent against unruly passengers incidents happening in the first place 9

13 22 States must ratify the new Protocol before it comes in to force and we are now engaged in a global campaign to promote the ratification of the new MP14 to governments and regulators. 9

14 So Ladies & Gentlemen, I have shared with you IATA s approach to Smarter Regulation and how we are applying that to the issues of Consumer Protection and Unruly Passengers. I am happy to take any questions. Thank you! 10

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