Air Passenger Protection Regulations - Regulatory Impact Analysis Statement

Executive summary

Issues: Currently, Canada does not have a standardized passenger protection regime for air travel. While the Air Transportation Regulations (ATR) establish the terms and conditions that air carriers operating in Canada must address in their tariffs, air carriers are permitted to establish their own policies in these areas. This approach has not always resulted in transparent, clear, fair, and consistent policies regarding the treatment of passengers. Regulations are required to establish air carrier obligations that achieve these objectives.

Description: The Air Passenger Protection Regulations (APPR) define requirements with respect to clear communication, delayed or cancelled flights, denied boarding, tarmac delays over three hours, the seating of children under the age of 14, damaged or lost baggage, and the transportation of musical instruments. These regulations ensure clearer, more consistent passenger rights by establishing minimum requirements, standards of treatment, and in some situations minimum levels of compensation that all air carriers must provide to passengers. The regulations also address other consumer-related issues such as the transportation of minors and a housekeeping change related to air services price advertising.

Rationale: The Canada Transportation Act (Act), as amended in May 2018, requires the Canadian Transportation Agency (CTA) to create new air passenger protection regulations and sets a framework for these regulations. In order to develop regulations that are robust, fair and balanced, the CTA considered feedback from the public and stakeholders, as well as best practices and lessons learned in other jurisdictions.

Issues

The CTA, in consultation with the Minister of Transport, is defining in regulation air carriers’ requirements to communicate clearly, as well as obligations toward passengers when issues arise, such as delayed or cancelled flights, denied boarding, tarmac delays, and damaged or lost baggage. The regulations also establish requirements regarding the seating of children under the age of 14 and require policies on the transportation of musical instruments. The new regulations ensure clearer, more consistent passenger rights by establishing minimum requirements, standards of treatment, and in some situations minimum levels of compensation that all air carriers must provide to passengers. The regulations also address other consumer-related issues such as the transportation of minors and a housekeeping change related to air services price advertising.

Background

Air travel is an integral part of modern life. While typically it goes to plan, when there is a problem, the experience can be disruptive. It is important that passengers receive key information, are aware of their rights and know where to turn for assistance or recourse.

Currently, air carriers are required to set out their terms and conditions of carriage in documents called tariffs. While there are requirements regarding the topics that must be addressed in these documents, air carriers are permitted to establish their own policies in these areas. The CTA ensures that air carriers have tariffs, apply their tariffs, and, in certain circumstances, determine whether tariff terms are reasonable. Without regulations, this approach has not always resulted in a transparent, clear, fair, and consistent regime.

The CTA’s mandate to create the regulations comes from the amendments to the Act that received royal assent on May 23, 2018 and from a Ministerial Direction that was registered on April 26, 2019.

The parameters for the regulations are as follows:

  1. Clear communication: Require conditions of carriage and information regarding recourse to be made readily available to passengers in language that is simple, clear and concise.
  2. Delays, cancellations and denied boarding: Establish carrier obligations toward passengers based on level of carrier control:
    • Situations within carrier’s control : set minimum standards of treatment and minimum compensation for inconvenience, require completion of passenger itinerary.
    • Situations within carrier’s control but required for safety : set minimum standards of treatment, require completion of passenger itinerary.
    • Situations outside the carrier’s control (e.g. natural phenomena, security events): require completion of passenger itinerary.
  3. Tarmac delay: Set carrier obligations for disembarkation in the case of tarmac delays over three hours, and establish minimum standards of treatment for all tarmac delays.
  4. Lost or damaged baggage: Prescribe minimum compensation for lost or damaged baggage.
  5. Seating of children: Set carrier obligation to facilitate assignment of seats to children under the age of 14 in close proximity to a parent, guardian, or tutor at no additional cost.
  6. Transportation of musical instruments: Require carrier to establish terms and conditions on this subject.

In addition to the obligations set out in the Act, the development of the new regulations provides an opportunity for the CTA to address other consumer-related issues.

The CTA undertook a consultation process to receive input from the public, consumer advocates, the air industry and other interested parties. The consultations began on May 28, 2018, and were completed on August 28, 2018.

Objectives

The objective of this initiative is to create new air passenger protection regulations that

  1. Are world-leading and feature robust, simple, clear, and consistent passenger rights;

  2. Reflect operational realities of carriers and allow for carrier innovation, where appropriate; and

  3. Align with international agreements, and apply best practices from lessons learned from other jurisdictions, where appropriate.

Description

Scope

The Air Passenger Protection Regulations (APPR) apply to all flights to, from and within Canada, including connecting flights. This includes certain charter flights on which one or more seats are for resale to the public, namely charter flights within Canada and flights to and from Canada that are a part of a charter that originated in Canada.

In certain elements of the regulations, there is a distinction made between large and small carriers. For these purposes, large carriers are considered to be carriers that have transported at least two million passengers worldwide in each of the two preceding years. All other carriers are considered to be small. Carriers will have to identify themselves in their tariffs as large or small for the purposes of the APPR. A smaller carrier transporting a passenger on behalf of a large carrier will be subject to the obligations of a large carrier.

The requirements regarding flight disruptions (flight delays, cancellations, tarmac delays and denied boarding) will be the responsibility of the carrier operating the affected flight. The carrier issuing the ticket will be responsible for providing the passenger with the required information on travel documents and platforms it uses to sell tickets. Joint and several liability among carriers will only be applied to the remaining APPR requirements in cases where a carrier is transporting a passenger on behalf of another carrier (e.g., a code-share).

Clear communication

The regulations ensure that passengers are aware of their rights and are kept informed during a flight disruption (delay, cancellation or denial of boarding). Carriers are required to provide passengers with information on key terms and conditions of carriage on all digital platforms they use to sell tickets, and on all itinerary-related documents the carrier issues to the passenger. They must also include a written notice with prescribed text regarding standards of treatment and compensation under the APPR and directing passengers to the carrier or the CTA’s website. Information other than the prescribed text may be provided through hyperlinks. Carriers are also expected to ensure third parties selling tickets on their behalf provide passengers with this information, where feasible. For flights to and from Canada, the carrier must post the written notice described above at certain key locations in the airport.

In the event of a delay, cancellation or denial of boarding, carriers must notify passengers as soon as possible and provide regular status updates (every 30 minutes following the original scheduled departure time until a new takeoff time is confirmed or an alternative travel arrangement is booked). They are also required to advise the passengers of the applicable standards of treatment and compensation in these cases through the method that the passenger indicated that they prefer, as well as through an auditory announcement and, upon request, a visible announcement.

Air carriers must ensure that communication is accessible. All electronic or digital communication must be accessible to persons with disabilities using adaptive technology. If information is provided in physical format, the carrier will have to, upon request, provide it in large print, Braille or digital format.

Delays, cancellations and denied boarding

The Act stipulates that a carrier’s obligations toward passengers are dependent on the level of control the carrier has over the situation, as outlined below.

  • Situations within the carrier’s control: provide minimum standards of treatment, provide minimum compensation for inconvenience, and ensure passengers complete their itinerary to the destination on their ticket.
  • Situations within the carrier’s control but required for safety: provide minimum standards of treatment, and ensure passengers complete their itinerary to the destination on their ticket.
  • Situations outside the carrier’s control: ensure passengers complete their itinerary to the destination on their ticket.

Flight disruption categories

  • Situations within the carrier’s control but required for safety purposes are those legally required to reduce risk to passengers, not including scheduled maintenance required to comply with legal requirements. This category also includes mechanical malfunction (a mechanical problem that reduces the safety of passengers, but not one identified during scheduled maintenance), decisions based on a carrier's Safety Management System and pilot discretion.
  • Situations outside the carrier’s control include war or political instability; illegal acts or sabotage; meteorological conditions or natural disasters that make the safe operation of the aircraft impossible; instructions from air traffic control; a notice to airmen (as defined in the Canadian Aviation Regulations); a security threat; airport operation issues; a medical emergency; a collision with wildlife; a labour disruption at the air carrier or essential service provider such as an airport or an air navigation service provider; a manufacturing defect that reduces the safety of passengers and that was identified by the manufacturer or a competent authority, or an instruction from an official of a state, a law enforcement agency or a person responsible for airport security.
  • Situations within the carrier’s control are those that cannot be shown to fall into the other two categories.

Completion of itinerary, rebooking and refund

Under the Act, for all delays and cancellations, the carrier is required to complete the passenger’s itinerary. More specifically, under these regulations, the carrier must rebook the passenger after a delay of three hours or more and also after a cancellation. The passenger will be entitled to be rebooked on the carrier’s next available flight from the airport indicated on the ticket using a reasonable route.

For delays and cancellations within a carrier’s control, if the next available flight would depart nine hours or more after the original scheduled departure time, large carriers will have to rebook the passenger on another (competing) carrier. If the carrier is unable to rebook the passenger on its own or a competitor's flight leaving the airport on the ticket within 48 hours of the original departure time, it will have to transport the passenger to a nearby airport, where available, and book them on flight from that airport using a reasonable route.

Rebooking must be done under comparable conditions (e.g. same class of service). If the rebooking is made in a lower class of service, the carrier must refund the difference in the cost of the applicable portion of the ticket. If the rebooking is made in a higher level of service, the air carrier cannot request any supplementary payment.

If the offered rebooking does not meet the passenger’s travel needs, the passenger will be entitled to a refund. The passenger will, in addition to a refund, also be entitled to a lump sum payment reflecting the applicable minimum compensation for delays of at least three hours but less than six hours (see “Minimum levels of compensation,” below).

For delays or cancellations outside the carrier’s control, if the carrier’s next available flight would not depart within 48 hours, large carriers will have to rebook the passenger on another (competing) air carrier, including those departing a nearby airport.

Standards of treatment

The APPR establish minimum standards of treatment for all flight delays and cancellations that are either (1) within the carrier’s control, or (2) within the carrier’s control but required for safety purposes, where the passenger has been informed of the delay fewer than 12 hours before departure time.

First, once a departure has been delayed by two hours, air carriers must provide access to a means of communication. They must also provide passengers with food and drink in reasonable quantities taking into account the length of the delay, time of day, and the location of the delay.

If a delay is expected to extend overnight, the air carrier is required to provide, free of charge, hotel or other reasonable accommodation, if needed, and free transportation to and from the accommodation.

Minimum levels of compensation

Under the legislation, compensation for inconvenience must be required for delays and cancellations in situations within the carrier’s control that are not required for safety. More specifically, where a passenger is informed of a delay or cancellation 14 or fewer days before departure, the regulations set the amount payable by the carrier operating the disrupted flight to the passenger based on the length of the delay upon arrival at the passenger’s destination.

Large carriers are subject to the following compensation requirements:

  • 3 or more hours, but less than 6 hours: CAN$400
  • 6 or more hours, but less than 9 hours: CAN$700
  • 9 or more hours: CAN$1,000

This will cover the vast majority of passengers travelling to, from and within Canada, including those being transported by a small carrier on behalf of a large carrier.

Small carriers are subject to the following compensation requirements:

  • 3 or more hours, but less than 6 hours: CAN$125
  • 6 or more hours, but less than 9 hours: CAN$250
  • 9 or more hours: CAN$500

Compensation must be offered in cash or equivalent, but passengers could choose to accept other forms of compensation, which must be of greater value and cannot expire.

Upon receipt of a passenger’s claim for compensation (made within one year of the incident), the air carrier that operated the disrupted flight has 30 days to respond and to pay the compensation owed or explain why compensation is not owed. A carrier may not refuse a passenger's claim based on the passenger's eligibility for compensation under a different passenger rights regime. However, passengers would only be able to receive compensation under these regulations if they have not already received compensation for the same event under a different regime.

Denied boarding

Denied boarding occurs in situations when a passenger is not permitted to occupy a seat on the plane because the number of passengers who checked in by the required time hold a confirmed reservation and valid travel documentation and are present at the boarding gate in time for boarding is greater than the number of seats that may be safely occupied.

If denial of boarding is necessary due to situations within the carrier’s control or within the carrier’s control but required for safety purposes, the carrier must first ask all passengers if any would be willing to give up their seat in exchange for mutually agreed-upon benefits, which must be presented to the passenger in writing.

If a volunteer cannot be found, passengers denied boarding for reasons within the carrier’s control and within the carrier’s control but required for safety purposes are entitled to the same standards of treatment for delays and cancellations in general. They are also entitled to the rebooking and refund requirements immediately (at the passenger’s choice).

If the denial of boarding is within the carrier’s control and not required for safety, carriers must pay compensation to the passenger based on delay at arrival, as follows:

  • Less than 6 hours: CAN$900
  • 6 or more hours, but less than 9 hours: CAN$1,800
  • 9 or more hours: CAN$2,400

The compensation must be issued as soon as is operationally feasible, but no later than within 48 hours after boarding is denied. If the carrier cannot provide compensation before the passenger's new departure time, it must provide written confirmation of the amount owed. The carrier must adjust the amount of compensation accordingly, should the passenger arrives at their destination later than anticipated.

If a denial of boarding is necessary, carriers must establish and follow a priority boarding list (including persons with disabilities and their support person, service animal or emotional support animal; families; anyone previously denied boarding on the same ticket; and unaccompanied minors).

Finally, these regulations prohibit carriers from subjecting passengers already on the aircraft to denial of boarding other than for safety reasons.

Tarmac delays

In addition to the standards of treatment outlined above (which apply to any delay within the carrier’s control or within the carrier’s control but required for safety), the regulations establishes robust standards of treatment in respect of tarmac delays. These include access to working lavatories, proper ventilation, heating and/or cooling; the provision of food and drink in reasonable quantities; the ability to communicate with people outside of the aircraft free of charge; and access to medical assistance, if needed.

The APPR also require that for tarmac delays at Canadian airports, the carrier provide an opportunity for disembarkation after three hours and to give the opportunity for persons with disabilities to disembark first, where operationally feasible.

In order to prioritize the objective of ensuring passengers reach their destination, the regulations allow air carriers the discretion to stay on the tarmac for one additional 45-minute window, should takeoff be imminent and the air carrier be able to continue providing standards of treatment. This will help mitigate the risk of avoidable flight cancellations that could result from a rigid disembarkation rule and, in turn, will minimize further passenger inconvenience.

Lost or damaged baggage

The Montreal Convention sets the maximum liability for damages for baggage lost, damaged or delayed during international travel at 1,131 special drawing rights (approximately CAN$2,100). However, these provisions do not currently apply to domestic travel.

The APPR extend the application of this regime to domestic travel covered in these regulations. In addition, the regulations require the reimbursement of any baggage fees.

Transportation of musical instruments

The APPR require carriers to establish terms and conditions of carriage regarding the transportation of musical instruments in its tariff. The topics that the tariff must address include the acceptance of musical instruments as carry-on and checked baggage in accordance with weight, dimension and safety restrictions, as well as additional fees.

Seating of children under the age of 14 years

The regulations require air carriers to facilitate, at the earliest opportunity, the seating of children under the age of 14 in close proximity to their parent, guardian, or tutor at no extra cost. The proximity requirement depends on the age of the child, as follows:

  • under the age of 5: in a seat directly adjacent to their parent, guardian or tutor
  • aged 5 to 11: in the same row and separated by no more than a seat from their parent, guardian or tutor
  • aged 12 or 13: at least within two rows as the parent, guardian or tutor

Unaccompanied minors

For international travel, Canada is a signatory to the Convention on International Civil Aviation, which is managed and administered by the International Civil Aviation Organization (ICAO). New standards regarding the transportation of unaccompanied minors have been incorporated into the Convention. These standards specify that aircraft operators must establish a program for the transportation of unaccompanied minors, and that they cannot allow minors under the age of 5 to travel without an accompanying adult.

The regulations incorporate into the ATR the new standards regarding the transportation of unaccompanied minors for international travel that Canada, as a signatory to the Convention, is required to adopt. Air carriers will be required to establish a policy for unaccompanied minors and prohibit minors under the age of 5 from travelling without an accompanying person.

Air services price advertising

In 2012, regulatory requirements with respect to air services price advertising (ASPAR) were introduced to help consumers easily determine the total price of advertised air services and the components of the total price, and encourage fair competition among advertisers of air services. The rules state that air price advertising directed at the public must include the total price, inclusive of all taxes, fees and charges that a consumer must pay to obtain the air service, as well as charges for optional services. These regulations move these requirements from the ATR to the APPR to reflect their consumer focus.

Enforcement

Contravention of any of the APPR requirements will be subject to administrate monetary penalties (AMPs). These could reach $5,000 per offence for individuals and $25,000 for corporations, depending on the type of penalty and contravention. The regulations also account for the power given to the CTA (through the May 2018 amendments to the Act) to apply an APPR-related decision (in response to a written complaint about an international flight) to all passengers on that flight. This aligns with the CTA's existing powers related to domestic flights.

Regulatory development

Consultation

The CTA conducted extensive consultations with the public, consumer advocates, the air industry and other interested stakeholders to inform the development of the draft APPR and during the comment period following pre-publication of the regulations.

Consultations – May to August 2018

On May 28, 2018, the CTA launched its public consultations with the public and key stakeholders. The consultation process provided multiple channels for input and resulted in extensive engagement by Canadians and stakeholders. There was a dedicated, air passenger protection website that included a discussion paper, questionnaire and platform to upload comments. There were eight public consultation sessions that took place across Canada — Toronto, Winnipeg, Vancouver, Calgary, Yellowknife, Halifax, Montréal and Ottawa. A survey was conducted in 11 Canadian airports. There were also bilateral consultation meetings with consumer advocacy groups, air carriers and industry associations, officials from other governments, and other experts.

At the conclusion of the consultations, the CTA had received 30 874 website visits; 4 923 completed online questionnaires; 534 comments submitted online; 203 registrants for the in-person/call-in consultations; 930 completed airport surveys; 39 bilateral consultation meetings; and 104 formal written submissions. The input was summarized in a What We Heard report which was published on the CTA's website on October 16, 2018.

There is general consensus among individual travellers that

  • Clear, concise, accurate and regular communication from air carriers is important to ensure that passengers know their rights at various stages of the travel process, particularly when issues arise.
  • Compensation should be fair, reflect losses and inconvenience and deter the practice of overbooking.
  • Tarmac delays beyond three hours should not be permitted, and air carriers should be required to provide necessities such as food, water, lavatories and proper ventilation before three hours have elapsed.
  • Children under 14 should be seated near their parent or guardian at no extra charge; proximity should be age-dependent.
  • Complaints processes should be simple, clear and consistent and there should be penalties for air carrier non-compliance.
  • The regulations should be developed taking into account the accessibility-related needs of persons with disabilities.

Consumer advocates generally agree that:

  • Air carrier obligations should be equivalent to or exceed requirements in other jurisdictions (e.g. EU, United States) and not conflict with the Montreal Convention.
  • Communication of passenger rights must be done in simple, concise and clear language.
  • Compensation should reflect the length of flight delay, with cash as the primary payment form.
  • Non-compliance must be addressed through clear, simple, fair and effective complaint and enforcement mechanisms.

The following are key views and comments generally raised by air carriers and their representatives:

  • Air carriers are only one of many players impacting flights (others include airport authorities, security, customs, air navigation services, extraordinary circumstances). The regulations should reflect this complex system and not solely penalize air carriers for disruptions attributable to others or multiple factors.
  • The proposed regulations should not apply to situations outside of Canadian jurisdiction (e.g. a tarmac delay in an airport outside of Canada) or flights operated by foreign carriers originating outside of Canada and should recognize the exclusivity of the Montreal Convention for international travel.
  • The regime should not hinder the ability of air carriers to innovate, compete and distinguish themselves in the marketplace.
  • Potential unintended consequences of prescriptive regulations, including flow-through costs to passengers, should be considered.
  • Application of the new regime to all types of air carriers would ensure consistency but could reduce the viability of small, low-cost, regional, remote and northern air carriers.
  • Air carriers should be given the opportunity to comment on the regulations themselves, including cost implications. They should also have sufficient lead time to make the necessary adjustments to their IT systems, training, and processes before having to comply with the new regulations.

All input provided was taken into account in the development of the draft regulations, which are meant to provide robust passenger protection, while taking into account the operational realities of air carriers.

Prepublication in Part I of the Canada Gazette (CG1) – December 2018

On December 22, 2018, draft regulations were published CGI, with a 60-day comment period to allow interest persons and stakeholders to submit comments. The CTA received thousands of comments from individuals, 62 written submissions from stakeholders, and met with 20 key stakeholders, including industry and their representatives, and consumer advocates. Key comments on the CG1 proposal include:

1. Implementation

Many air industry stakeholders have indicated that, due to the systems and operational changes required, they would not be able to comply with all of the new requirements by the July 1, 2019 coming-into-force date. Some consumer advocates have also expressed concern that the timeline for implementation is too short and could result in non-compliance.

In light of this feedback, these regulations will be implemented in two stages. Requirements related to communication, tarmac delays, denied boarding, lost and damaged baggage and the transportation of musical instruments provisions (along with applicable AMPs) will come into force on July 15, 2019. The more complex requirements related to seating, delays and cancellations (along with applicable AMPs) will come into effect December 15, 2019.

2. Scope and application
a) Scope

Air industry stakeholders have expressed concerns about the broad scope of the regulation, as established in the legislation – specifically the application of the regulations to flights that did not originate in Canada. They indicate that because this approach does not align with other air passenger protection regimes, it would create confusion by allowing multiple regimes to apply to the same flight and could not be practically implemented.

The regulations apply the scope set out in the legislation approved by Parliament.

b) Joint and several liability

Carriers also indicated that the application of joint and several liability for the regime amongst all carriers on a passenger's itinerary would compound the issues identified regarding scope by making it possible for a carrier to be held responsible for a disruption on a flight it did not operate. Carriers believe this would create a disincentive for commercial arrangements such as interlining, which are meant to help passengers.

Considering the potential unintended consequences of the CGI proposal, the CTA has specified in the regulations that the carrier operating the affected flight is responsible for all obligations related to flight disruptions (delay/cancellation/denial of boarding/tarmac delays). The carrier issuing the ticket will be responsible for providing the passenger with the required information on travel documents and platforms it uses to sell tickets. Explicitly establishing the responsible carrier will ensure that there is clarity for the passenger and that they will receive the treatment and/or compensation owed. Joint and several liability among carriers will only be applied to the remaining APPR requirements in cases where a carrier is transporting a passenger on behalf of another carrier (e.g., a code-share).

c) Northern operations

Northern air carriers submitted that they should be exempted from the regulations due to their unique operations.

The CTA has considered the comments provided and believe that the regulations recognize the unique operating realties of northern and remote air carriers while still ensuring passengers have robust and consistent passenger rights. Instead of limiting the scope of the regulations to mitigate norther carriers' concerns, the regulations establish lower compensation levels and rebooking requirements for small air carriers and flexible requirements concerning food, drink, accommodation and communication that take into account the location of the delay.

3. Two-tier approach
a) Distinction between large and small carrier obligations

Some consumer advocates and air industry stakeholders disagree with establishing different requirements for small and large carriers, arguing that these do not support the objective of consistency and could give certain airlines an unfair advantage over their competition. The CTA has considered these views, but has determined that the two-tier approach is an important feature of the regime that strikes an important balance between establishing robust passenger protection and ensuring small carriers are still able to provide diverse service offerings to passengers (including ultra-low cost travel, and transportation to and from remote, regional and northern areas).

b) Definition

Low cost carriers indicated that setting a one million passenger threshold will not allow new market entrants sufficient time to develop before subjecting them to "large carrier" obligations. After assessing stakeholder comments and industry data, it has been determined that the policy intent to address viability concerns for new market entrants would be best achieved by increasing the threshold in the definition of "large carrier" from 1 million to 2 million passengers in each of the preceding two years.

4. Clarity regarding categorization of flight disruptions

Some stakeholders would like there to be greater specificity and clarity in the regulations as to the situations that would be considered "required for safety purposes" and "outside the carrier's control". As it is not possible or desirable to be completely prescriptive in regulation, CTA will address these comments using a combination of regulatory adjustments and guidance materials for air carriers.

a) Definition of "required for safety purposes"

Many stakeholders believe that the definition of "required for safety purposes" does not provide sufficient certainty as to the type of disruptions that it would cover. The wording of this definition is meant to be broad enough to include any flight disruption that a carrier must incur in order to ensure the safe operation of the aircraft. The CTA will provide further guidance through guidance material.

Air industry stakeholders expressed concern that the definition's focus on legal requirements would exclude safety decisions made by the pilot based on Safety Management Systems (SMS). This was not the intent, and to address this concern, the CTA has clarified the definition for "required for safety purposes" to include SMS and pilot discretion.

b) Manufacturing defects

Stakeholders have questions why, unlike the EU regime, the CG1 proposed regulations did not recognize that safety issues identified by the manufacturer or government authority that ground the aircraft are outside of the carrier's control, as they are not inherent in the normal exercise of the carrier's activity (e.g., manufacturer recall).

In considering the stakeholder comments, the CTA has included "manufacturing defects" and instructions from state officials to the list of situations outside of the carrier's control.

c) Labour disruptions

Air industry stakeholders feel that the regulations should explicitly indicate that labour disruptions within an airline are "outside the carrier's control" to avoid influencing collective bargaining processes. The CTA agrees that it would be appropriate to give clarity in this area and has adjusted the regulations to specify that disruptions resulting from labour disruptions within the carrier or at an essential service provider (e.g., an airport) are considered outside the carrier's control.

d) "Crew Time Out"

Many stakeholders requested that the CTA explicitly state the category of flight disruption a crew time out would fall into. It is not possible to do so in regulation; however, as the root situation that brought about the crew hitting their duty time limit would have to be considered. These could vary greatly – e.g., crew illness, adverse weather event, poor scheduling by the carrier. The CTA will instead offer guidance for carriers on this subject in an interpretation note.

e) Knock-on effects

Many industry stakeholders indicated that that the CG1 regulations do not reflect the impacts a weather delay has on the next flight(s) scheduled to use the delayed aircraft (situations outside of the carrier's control). In particular, northern carriers and industry associations expressed a significant concern regarding impacts on multi-leg journeys that occur frequently in the north. Consumer advocates feel that the regulations should be more explicit regarding the extent to which knock-on effects could be attributed to categories in which no compensation is owed by carriers, viewing this as a potential loophole.

In considering the significant concern regarding knock-on effects, the CTA has added greater clarity in the regulations – recognizing knock-on effects but creating reasonable limits. The APPR indicate that when a flight is disrupted for safety reasons or situations outside the carrier's control, these designations could also be applied to a disruption experienced on a subsequent flight. However, this could only be done if that subsequent disruption is directly attributable to the first one and if the carrier took all reasonable measures to recover its schedule after the original flight disruption.

5. Tarmac delays

The enabling legislation required the CTA to make regulations respecting the carrier’s obligations in the case oftarmac delays over three hours, in addition to standards of treatment for general delays and cancellations. The public and many consumer advocates feel that it is unreasonable not to require certain standards of treatment for passengers during a tarmac delay before the three-hour mark. The feedback received suggests that the enabling legislation may lack clarity on the issue of standards of treatment for passengers during tarmac delays under three hours. The Minister of Transport has addressed this through a Direction to the CTA to apply standards of treatment to all tarmac delays. The CTA welcomed this direction, and has made adjustments to the regulations to implement it. Standards of treatment during tarmac delays include access to means of communication, lavatories, ventilation, heating and cooling, food and drink in reasonable quantities, and medical attention, where needed.

6. Denied boarding
a) Definition

Consumer advocates and members of the public expressed concerns that the definition of denied boarding implies that the onus would be on the passenger to prove that they had been denied boarding by a carrier. They also indicated that this concept should not be limited to instances of overbooking by the airline.

The CTA has determined that no change to the regulations is required. As written, the definition of denied boarding covers any instance when there are more passengers present for boarding than seats available. This could be due to overbooking, issues with seating or aircraft weight requirements, or a carrier switching to a smaller aircraft. The carrier will be expected to follow the requirements for denied boarding and will bear the burden of proof.

b) Removal of passenger on board

Stakeholders expressed confusion as to whether the requirement prohibiting carriers from denying boarding to a passenger already on board would preclude a carrier from exercising obligations to remove a passenger from the plane for safety reasons. This is not the intent and the CTA has clarified in the regulations that the provision does not preclude a carrier from removing a passenger from the aircraft for safety reasons.

c) Volunteers

Consumer advocates and members of the public expressed concern that the CG1 proposal did not provide enough consumer protection in the volunteer negotiation process. The CTA has identified this as a gap that can be addressed by these regulations and has added a requirement that, prior to departure, a carrier must present mutually agreed-upon terms of compensation in writing and the volunteer must willingly accept these in exchange for relinquishing their confirmed reserved space.

7. Compensation for inconvenience
a) Levels

Many air industry stakeholders believe the compensation levels are punitive, and that the levels should reflect the fare paid by the passenger instead of being linked to compensation levels in the EU.

The CTA acknowledges industry concerns related to the cost associated with the minimum compensation levels; however, the intent of these regulations is to establish a world leading passenger protection regime. It is therefore important to ensure that passengers in the Canadian regime are entitled to levels of compensation that are similar to those in other jurisdictions. Basing compensation amounts on the length of delay achieves the objective of compensating passenger inconvenience, as inconvenience does not change depending on the fare a passenger paid or the distance of their flight. Finally, the payment of compensation only being required for situations within the carrier's control means that carriers will be able to avoid this additional cost.

b) Time limits

Consumer advocates have expressed concern with the 120 day time limit for passengers to file a request for compensation with the carrier. They have indicated that it would not allow sufficient time for passengers to consult flight data that will be made public by Transport Canada. In order to account for their comments, the CTA has increased the time limit to one year. Having one year to file a claim allow passengers sufficient time to access necessary flight data while also providing carriers with certainty.

c) Indexation

Some air industry stakeholders are of the view that the CG1 proposal to index compensation amounts to inflation is a punitive measure that does not recognize that air fares are generally stagnant (or decreasing). Instead of automatically indexing the minimum compensation amounts to inflation, the CTA will undertake a review of the APPR, including compensation provisions, after a three year period.

8. Rebooking

Air industry stakeholders were concerned that the APPR requirements to rebook a passenger on the airline's next available flight or, after 9 hours, on the flight of a competitor, would extend to flights out of another airport, or flights using circuitous routes. Carriers expressed concern about the undue burden associated with this, which would particularly affect carriers with low flight frequency.

The CTA acknowledges that the regulations should be clear on this point and should balance the operational needs of carriers with the overall objective of ensuring the passenger reaches their destination as soon as possible after a delay. The final regulations specify that, for the first 48 hours, the rebooking must be on a reasonable route out of the same airport as on the original ticket. If the carrier is unable to rebook the passenger on a flight leaving the same airport within 48 hours of the original departure time, the carrier should offer rebooking out of an airport within reasonable proximity.

9. Communication
a) Communication on travel documents

Air carriers expressed concern that the requirement to provide information regarding standards of treatment, compensation and passenger recourses on travel documents (e.g., tickets and boarding passes) will make those documents unwieldly.

The intention was to permit carriers to provide this detailed information via hyperlink, a fact that the CTA has clarified in the regulations. The combination of standardized notices digital platforms and itinerary related documents and hyperlinks to more detailed information will ensure that passengers have access to all key information when booking a flight.

b) Third party resellers

Carriers indicated that while they support the policy intention of ensuring third party ticket resellers provide passengers with key information, putting the onus of ensuring this on the carrier does not recognize that carriers have little or no control over the practices of third party resellers. They indicate it would not be fair to punish a carrier for the inaction of a third party.

The CTA has taken this into account by requiring carriers to take all reasonable measures to ensure that third-party resellers share information with passengers.

c) Communication on tarmac

Air industry stakeholders indicated the CG1 proposal requiring carriers to provide access to communication during a tarmac delay is too strict, as carriers may be unable to provide means of communication (e.g., wi-fi) during a tarmac delay for safety reasons.

The APPR are not intended to preclude any safety requirements or measures. The CTA has therefore clarified in the regulations that the air carrier must provide access to communication where feasible during a tarmac delay.

10. Seating of children
a) Interpretation

Some stakeholders expressed concern with the wording of the seating of children provision as it could be interpreted as requiring seat selection free of charge for child and parent (e.g., selection of a seat in a particular area of the aircraft). In order to clarify the interpretation the CTA has adjusted the wording to make it clear that carriers are required to facilitate, free of charge, the seating of a parent and child in close proximity. This does not include having to offer seat selection free of charge.

b) Compensation

Consumer advocates expressed that the seating of children requirements are unclear, are too heavily reliant on volunteers to change seats, and/or represent a step backward from airlines' current policies. Some have indicated that there should be compensation required if a carrier cannot seat a child and parent together.

The seating of children provisions align with the legislative framework by requiring airlines to facilitate the seating of children in close proximity to parents. The legislation does not indicate that the regulations should absolutely require carriers to seat children with their parents. Ensuring best efforts is appropriate, given the differing seat selection and assignment processes carriers have. There is also no legislative authority to require compensation related to the seating of children.

11. Musical instruments

The Canadian Federation of Musicians expressed concern that the wording of the provision regarding the transportation of musical instruments could permit a carrier to refuse carriage of musical instruments. Recognizing this gap, the regulations have been adjusted to reinforce that carriers will be required to carry musical instruments as checked or carry-on baggage unless prevented by safety, weight or dimension requirements.

12. Cost-Benefit Analysis (CBA)

Many carriers and industry representatives believe that the CBA does not appropriately capture the cost to carriers associated with the APPR. Specific concerns include:

a) The CBA does not reflect the cumulative costs of multiple new requirements being placed on the air industry at once or the potential impacts of this proposal on industry competitiveness.

  • While it is recognized that there are a number of recent and forthcoming regulatory changes impacting the air industry, the objective of the CBA is to determine the incremental costs to industry as a result of the APPR. It therefore cannot account for all costs to industry related to all government intervention.

b) The CBA understates the cost of IT changes, training, and additional staff to handle claims and complaints.

  • The CBA must only assess incremental costs directly related to the APPR. Carriers have not clearly identified which IT and training costs they feel are understated and if those are directly related to the APPR. Some carriers have pointed to IT costs related to the proposed changes to other proposed regulations and IT projects already underway.
  • It is important that the CBA consider only the portion of training costs related to staff being made familiar with new requirements, and not regular ongoing training cost that a carrier would incur regardless of the regulatory proposal coming into force.
  • Carriers currently address a large volume of complaints and claims related to the passenger experience. The CBA assumed that the additional burden of increased complaint volumes would be offset to a certain degree by having clearer and more consistent obligations, which should make the complaint resolution process less complex.
  • The CTA believes that the costs have been fairly reflected and that the sensitivity analysis appropriately accounts for the level of uncertainty in the calculations.

c) Costs related to compensation are underestimated, as they are based on passenger segments rather than passenger trips.

  • The CTA ensured that its approach to determining the proportion of passengers expected to be owed compensation was balanced and accounted for data restrictions. The CTA believes it erred on the side of overstating this proportion. While it is true the data available to the CTA did not consider connecting passengers, the CBA also included a wider scope for disruptions within a carrier's control than the one in the regulations, which offset this issue.
  • The sensitivity analysis performed on the percentage of passengers that would due compensation allowed for scenarios where up to 34% of all delayed passengers were considered to be delayed based on an event under the carriers control. This is considered to be a conservative estimate.

d) The cost per passenger of $2.75 is underestimated and could be up to 10 times higher

  • This metric is not meant to be an exact estimate of the impact of the APPR on a single ticket. It was included in the CBA to provide a notional idea of the cost per passenger on a per segment basis.
  • Carriers have not provided their own substantiated estimates of incremental costs that are directly related to the requirements of the APPR.

Instrument choice

The Act, as amended in May 2018, provides a framework for the APPR and requires the CTA to develop the specific regulatory provisions within the established parameters, including standards of treatment and minimum compensation levels. Therefore, no other instruments were considered.

The input provided during consultations, and best practices and lessons learned from other jurisdictions were considered in developing the regulations.

Regulatory analysis

Benefits and costs

The cost-benefit analysis (CBA) estimates the incremental net benefit to society of the APPR. The incremental benefit is determined as the difference between the net benefit of the regulation scenario and the baseline scenario. The APPR are estimated to result in present value costs to Canadian carriers and the CTA of $1.424B, present value benefits to Canadian passengers of $1.510B and a net present benefit of $86.10 million, expressed in 2012 Canadian dollars, over a 10-year period following the coming into force of the regulations. On an annualized basis, the cost to carriers represents around $2.73 per passenger segment.

The regulations establish minimum standards for the following:

Table 1: Regulatory Provisions
Provision Compensation Standard of Treatment Establish Process/Policy
Delay Yes (WCC)Footnote 1 Yes Yes
Cancellation Yes (WCC) Yes Yes
Denied boarding Yes (WCC) Yes Yes
Assignment of seats to children under the age of 14 N/A N/A Yes
Tarmac delay Yes (WCC) Yes Yes
Lost and damaged baggage Yes N/A N/A
Musical instruments N/A N/A Yes
Unaccompanied minors N/A N/A Yes
Communication N/A N/A Yes

Affected stakeholders

The following stakeholders will be impacted by the APPR:

  • Air carriers — Costs to Canadian carriers are considered
  • Passengers — Benefits to Canadian passengers are considered
  • Government (CTA)

Baseline scenario

Currently, carriers set out the terms and conditions of carriage in their tariffs. These tariffs form the contract between a passenger and a carrier when a ticket is purchased. A carrier’s tariff will cover its obligations in all types of events including delays, cancellations, tarmac delays, lost or damaged baggage and seating of children, among other things.

Because each carrier is, for the most part, responsible for setting its own tariff, there can often be differences in the treatment of passengers in different types of events. The objective of the APPR is to normalize the minimum standard across all carriers operating in Canada to ensure that the obligations on carriers are clear, concise and easily understood by carriers and passengers.

In order to establish the baseline for this CBA, the tariffs of carriers operating in Canada were analyzed on an issue-by-issue basis. Further, responses to the CTA’s CBA survey to industry were taken into account. It is assumed that in the absence of the APPR, carriers would continue operating according to their current tariffs for the duration of the study period.

As there are hundreds of Canadian carriers in Canada, a sample of carriers was analyzed for this study and was assumed to be representative of the population. The baseline for non-Canadian carriers was assumed to be similar to that of Canadian carriers flying internationally. While this assumption may be wrong in any given instance, it is expected to be realistic on average, as some jurisdictions ensure consumer protection in the form of compensation, while others do not. Furthermore, it is expected that in many instances, Canadians flying into jurisdictions with compensation schemes similar to that of the European Union are often unaware that they are entitled to compensation and would therefore often not claim it. Carriers were categorized into large, medium and small based on the number of employees. Markups were applied to the sample costs of each carrier category in order to arrive at the total cost to industry.

The number of passengers from 2017 was used as the starting point for the baseline. That number is expected to increase at an average annual rate of 3.1% over the 10-year study period. The growth rate is assumed to be the same under both the baseline and the regulation scenarios.

Methodology, data sources and assumptions

Study period

This analysis examines costs and benefits over a 10-year period (2019–2028). A real discount rate of 7% is used to establish the net present value of the regulations for non-compensation provisions. A nominal discount rate of 9% (the real discount rate plus an assumed inflation rate of 2%) is used to establish the net present value of compensation provisions. Values are expressed in 2012 constant dollars.

Number of passengers

The number of passengers for 2017 is estimated using the number of enplaned and deplaned passengers. Footnote 2 The number of domestic enplaned and deplaned passengers is divided by two to arrive at an estimate of the number of passenger segments on domestic flights.

Table 2: Enplaned and deplaned passengers in 2017
Passengers Enplaned and Deplaned Passengers Estimated Number of Passengers
Domestic 88 229 824 44 114 912
International 61 411 848 61 411 848
Total 149 641 672 105 526 760
 

Source: Air passenger traffic at Canadian airports, annual, Statistics Canada, Table: 23-10-0253-01 (formerly CANSIM 401-0044).

Use of U.S. data

Air carriers do not currently report data in Canada for many of the provisions covered by the regulations, such as rates of involuntary denied boarding, delayed or cancelled flights, lost or damaged baggage or tarmac delays. Therefore, for the purpose of this CBA, these values were extrapolated from data reported by U.S. carriers and published by the U.S. Department of Transportation.Footnote 3 In circumstances where carriers provided estimates of their own operations, these estimates were used to adjust the average rates reported by U.S. carriers.

Further, in instances where the United States introduced similar consumer protections, potentially altering carrier behaviour, data prior to the introduction of such protections were considered to inform the baseline scenario, and data post-introduction of such protections were considered to inform the APPR scenario.

Carrier market shares

Market shares are determined on the basis of available seat miles from 2017 using data purchased from Flight Global. As many of the small carriers do not report flight movement records to Flight Global, small carriers are assumed to make up 1% of market shares.

Cost of accommodation

The cost of accommodation for one passenger (2018 CAN$/night) is $145.56. This amount was determined by taking an average of nightly rates from hotels within close proximity to airports across Canada and applying an assumed corporate discount of 15%.

Proportion of passengers accepting accommodation

It is assumed that 55.5% of passengers eligible for accommodation (in both the baseline and APPR scenarios) will not accept accommodation as they would choose to stay at home or with friends or family or share a room with a travel companion.

Cost of food and drink

The value of a meal voucher (2018 CAN$) is assumed to be between $8 (the price of a combo at a fast food establishment found in many Canadian airports) and $25 (the highest level of food voucher reported to be provided by carriers for a single meal), with an expected value of $16.50.

Valuation of passengers’ travel time

In this analysis, the value of time refers to the dollar amount associated with the opportunity cost of the time spent travelling by air. The value of time depends on the passenger’s travel purposes, which are broadly categorized as either for non-business or business purposes. Non-business purposes account for leisure and other personal motives for travelling. Typically, business travellers’ value of time is based on their hourly wage (the median wage is used in this study), whereas non-business travellers’ value of time is based on their revealed and stated preferences.Footnote 4 However, for a matter of simplicity, the methodology prescribed by the “Revised Departmental Guidance on Valuation of Travel Time in Economic Analysis” of the United States Department of Transportation (USDOT) is used to determine the value of time of a Canadian passenger. Based on this methodology, the value of one hour of air travel of a Canadian passenger (VOT) is estimated at $18.49 in 2017 dollars ($17.25 in 2012 Canadian dollars).

Premiums for enhanced quality of passengers’ time

Flight disruptions (e.g. flight delays, cancellations and lost baggage) can be stressful and uncomfortable for passengers.Footnote 5 The APPR will improve passengers’ experience during air travel by imposing obligations on carriers that will reduce stress and discomfort during flight disruptions. Together, reduction in anxiety levels and improved sense of comfort during extended wait periods are fostered by the design of the APPR, which will create benefits to passengers. For instance, awareness of clear procedures in case of flight disruptions will decrease the level of anxiety to passengers, while the obligation to ensure a minimum level of standard of treatment to passengers guarantees a better flight quality experience, increasing comfort.

Similar to the methodology employed by the USDOT’s cost and benefit analysis on the “Final Rule — Enhancing Airline Passenger Protections,” the estimates of decreased anxiety and increased comfort to the passengers are based on a premium applied to the value of passengers’ time.Footnote 6

  • Premium for increased comfort (food and drink) = 0.34
  • Premium for increased comfort (deplaning and hotel accommodation) = 0.66
  • Premium for reduced anxiety = 0.01
Proportion of passengers considered to be Canadian

Based on Statistics Canada data, the percentage of Canadian residents travelling on international flights is 64.91%.Footnote 7 There are currently no data on passenger nationality for domestic flights; therefore, the percentage of passengers considered Canadian residents on domestic flights is assumed to be 82.5%. This is the mid-point between the percentage of Canadians travelling on international flights and 100%.

Claim rates

For the purposes of this CBA, the claim rates of compensation by individuals in various scenarios are assumed to be the following:

Table 3: Claim rates of compensation
Passenger Type Claim Rate
Canadian, baseline 30%
Foreign, baseline 30%
Canadian, APPR 80%
Foreign, APPR 70%
Denied boarding 100%
 

Details of the costs and benefits for each regulatory provision can be found in the full CBA document, which is available from the CTA upon request. The following provides a brief description of the incremental benefits and costs of the regulations.

Altering scheduled flight times

It should be noted that it is possible that carriers could extend their scheduled flying times to reduce the probability of paying compensation on chronically delayed flights. However, this analysis does not take this into account. It is assumed that carriers’ scheduled flight times will remain unaltered in the APPR scenario.

Benefits

Compensation

Currently, passengers are compensated for flight disruption within a carrier’s control either based on criteria described in a carrier’s tariff or at the discretion of a carrier. The APPR establishes minimum levels of compensation, tied to the length of delay to a passenger, to be paid in the event of flight delays, delays to passengers resulting from cancellations and denied boarding. Further, carriers will be required to compensate passengers for lost or damaged baggage on domestic flights, commensurate with the value of lost or damaged baggage, and refund baggage fees.

In both the APPR and baseline scenarios, the benefit of compensation is determined by first estimating the number of Canadian passengers that would be expected to be entitled to compensation and claim compensation under each scenario and then multiplying the number of passengers by the amount of compensation due under each scenario. Summing this compensation yields the total benefit of compensation to Canadian passengers under both the baseline and APPR scenarios. The difference represents the incremental benefit to Canadian passengers of the regulatory provisions.

The present value of the incremental benefits to compensation under the APPR scenario is $1.228 billion, with an annualized benefit of $191 million.

Increased comfort — Food and drink

Currently, passengers are provided with food and drink (or food vouchers for use in an airport) during flight disruptions either based on criteria described in a carrier’s tariff or at the discretion of a carrier. The APPR set a time threshold according to which carriers must provide passengers with food and drink during a flight disruption.

In both the APPR and baseline scenarios, the benefit to passengers of being provided with food and drink is determined by first estimating the number of Canadian passengers who would be delayed under the various passenger delay scenarios for which carriers provide food and drink. Based on the number of passengers estimated to be experiencing delay, the average delay to passengers can be determined for each scenario. The benefit to passengers can then be estimated by multiplying the total number of hours of delay during which passengers would have the benefit of waiting with food and drink by the value of a traveller’s time and the premium for increased comfort (food and drink).

The present value of the incremental benefits to “Increased comfort — Food and drink” under the APPR scenario is $93 million, with an annualized benefit of $13 million.

Increased comfort — Accommodation

Currently, passengers are provided with accommodation during flight disruptions either based on criteria described in a carrier’s tariff or at the discretion of a carrier. The APPR require carriers to provide passengers with accommodation during a flight disruption when the delay is expected to occur overnight.

In both the APPR and baseline scenarios, the benefit to passengers of being provided with accommodation is determined by first estimating the number of Canadian passengers who would be delayed under the various passenger delay scenarios for which carriers would be required to provide accommodation. Based on the passengers estimated to be experiencing delay, the average delay to passengers can be determined for each scenario. The benefit to passengers can then be estimated by multiplying the total number of hours of delay during which passengers would have the benefit of waiting in an accommodation by the value of a traveller’s time and the premium for increased comfort (accommodation).

The present value of the incremental benefits to “Increased comfort — Accommodation” under the APPR scenario is $166 million, with an annualized benefit of $24 million.

Increased comfort — Disembarkation

Currently, passengers are provided with the opportunity to disembark during a tarmac delay based on criteria described in a carrier’s tariff or at the discretion of a carrier. The APPR generally require carriers to return to the gate to disembark after three hours of delay on a tarmac.

In both the APPR and baseline scenarios, the benefit to passengers of deplaning is determined by first estimating the number of Canadian passengers who would be expected to experience tarmac delays greater than three hours. Based on this number, the average delay to passengers can be determined for each scenario. The benefit to passengers can then be estimated by multiplying the total number of hours of delay during which passengers would have the benefit of waiting in an airport, rather than in an airplane, by the value of a traveller’s time and the premium for increased comfort (disembarkation).

The present value of the incremental benefits to “Increased comfort — Disembarkation” under the APPR scenario is $3.97 million, with an annualized benefit of $0.57 million.

Decreased anxiety

Under the APPR scenario carriers will be required to provide updates on causes of disruptions, type of disruption and expected length of disruption. Further, carriers will be required to communicate the recourse available to a passenger in the event of a disruption. Having a clear understanding of what is going on and of what recourse is available is expected to reduce anxiety for passengers experiencing flight disruptions.

Passengers travelling with children would be expected to experience less anxiety since the regulations require the seating of children within close proximity to a parent or guardian, free of charge. Finally, domestic passengers experiencing lost or damaged baggage are expected to experience less anxiety as a result of clear expectations for compensation.

In the APPR scenario, the benefit to passengers of decreased anxiety is determined by first estimating the number of Canadian passengers who would be expected to experience reduced anxiety as a result of the regulations. The average time during which a passenger is expected to experience reduced anxiety is then determined for each scenario. The benefit to passengers can then be estimated by multiplying the total number of hours during which passengers would be expected to experience reduced anxiety by the value of a traveller’s time and the premium for decreased anxiety.

The present value of the incremental benefits to “Decreased anxiety” under the APPR scenario is $15.4 million, with an annualized benefit of $2.2 million.

Time savings

In the case of involuntary denied boarding, the amounts of compensation are designed to help encourage carriers to seek volunteers. This expected reduction in involuntary denied boarding is expected to translate into time savings for Canadian passengers.

The time savings (in hours) to Canadian passengers is determined by multiplying the difference between the number of passengers expected to be involuntarily denied boarding in the baseline and APPR scenarios by the average delay to a passenger involuntarily denied boarding. The benefit is determined by multiplying the total time savings by the value of a passenger’s time.

The present value of the incremental benefits to time savings under the APPR scenario is $1.1 million, with an annualized benefit of $0.162 million.

Non-monetized benefits

Requiring carriers to facilitate the seating of children near their parent or guardian could result in a safety benefit in the event of an evacuation, as parents would not be trying to locate their children when the plane is being evacuated. The APPR also benefit musicians, as carriers will be required to state their policy for carrying musical instruments in their tariffs. This would help provide more certainty to musicians travelling with musical instruments.

Costs

Compensation

The cost to carriers of compensation is determined in the same manner as the benefit of compensation. However, instead of multiplying by the number of Canadian passengers entitled to and expected to claim compensation, the multiplication is done by the total number of passengers travelling with Canadian carriers who are entitled to compensation and who would be expected to claim compensation. The incremental cost is determined as the difference between compensation costs in the baseline and APPR scenarios.

The present value of the incremental costs to compensation under the APPR scenario is $1.220 billion, with an annualized cost of $190 million.

Providing food and drink

The cost to carriers of providing passengers with food and drink in both the APPR and baseline scenarios is determined by multiplying the number of passengers travelling on Canadian carriers who would be entitled to food and drink in the various scenarios by the cost of providing food and drink under each scenario.

The present value of the incremental costs to providing food and drink under the APPR scenario is $78 million, with an annualized cost of $11 million.

Providing accommodation

The cost to carriers of providing passengers with accommodation in both the APPR and baseline scenarios is determined by multiplying the number of passengers travelling on Canadian carriers who would be entitled to accommodation in the various scenarios by the cost of providing accommodation under each scenario.

The present value of the incremental costs of providing accommodation under the APPR scenario is $70 million, with an annualized cost of $10 million.

Tarmac delay — Disembarkation

The only cost estimated in the case of deplaning is the fuel cost. Under both the baseline and APPR scenarios, the estimated number of Canadian carriers’ flights being delayed on the tarmac for more than three hours that would be expected to taxi back to the gate is multiplied by the average fuel cost per minute and the average number of minutes for taxiing back to the gate. Further, only half of international flights are considered, as the majority of tarmac delays occurring in other jurisdictions would be subject to the disembarkation requirements of that jurisdiction.

The present value of the incremental costs of deplaning under the APPR scenario is $111,000, with an annualized cost of $16,000.

Training

The regulations require carriers to invest in developing and offering training to their employees to ensure that the carrier is operating within the requirements of the regulations. The cost of training is expected to be fully assumed in the first year of the coming into force of the regulations.

The cost of developing training programs is estimated by multiplying the number of hours of each employee type involved in the development of the training by the average wage for each employee type. The hours estimated to be required to develop training programs are assumed to be higher for large carriers than for small carriers.

The cost of having the required employees take the training is estimated by multiplying the number of employees in the pilot and co-pilot, other flight personnel, management and administration and other carrier personnel categories employed in Canada by their respective hourly wages and the assumed number of hours required for training.

The present value of the incremental costs of developing and providing training under the APPR scenario is $18.5 million, with an annualized cost of $2.6 million.

Communication

The regulations require carriers to clearly communicate certain information to passengers at the time of reservation and in the event of a flight disruption. The costs to carriers to meet the requirements of the communication aspects of the regulations include upfront implementation costs and ongoing operating costs. Since the ongoing costs of communicating with passengers would be assumed in both the baseline and APPR scenarios, carriers are not expected to require any additional employees to perform communication in the APPR scenario. Ongoing costs are therefore assumed to be negligible and only one-time implementation costs are monetized.

To estimate the costs of implementing the provisions, the IT, legal and business administrative costs are calculated for each communication provision. Since it is assumed that the resources required to estimate costs for large, medium and small carriers are different, costs are estimated for each carrier type. They are then totalled to estimate the one-time implementation costs of the communication provision.

The present value of the incremental costs of communication under the APPR scenario is $24.9 million, with an annualized cost of $3.5 million.

Changes to reservation systems

The provision requiring carriers to seat children within close proximity to a parent or guardian was estimated based on responses from carriers to the CTA’s CBA survey and is expected to result in one-time, upfront costs related to changes to carriers’ reservation systems. Costs were only considered for carriers that do not already guarantee seating within close proximity to a parent or guardian, free of charge.

The present value of the incremental costs of making changes to reservation systems under the APPR scenario is $260,000, with an annualized cost of $37,000.

Administrative costs to industry

The regulations are likely to result in an administrative cost to carriers in issuing compensation, meal vouchers and accommodation, and rebooking passengers in the event of flight disruptions. The APPR also rely on the carrier to make an initial determination of the cause of cancellations and delays. In many cases, there may be multiple causes, which could be the subject of a dispute between passengers and air carriers.

However, these additional costs are expected to be minimal. Currently, carriers offer various forms of compensation in the event of a breach of tariff. The regulations may result in increased volumes of passengers claiming compensation; however, the uniform nature of the compensation requirements are expected to streamline the issuing of compensation for carriers. For the purpose of this CBA, these costs were not monetized.

Cost to Government

The CTA is responsible for the consumer protection of air travellers. It discharges this mandate by facilitating, mediating and adjudicating disputes between air travellers and air carriers. It also has a responsibility for ensuring that carriers’ tariffs are reasonable.

The CTA is also responsible for issuing licences to scheduled and chartered air carriers operating in Canada and for the monitoring and enforcement of the carriers’ obligations and adherence to CTA orders and decisions. The CTA anticipates an initial increase in all of these activities after the coming into force of these regulations.

The present value of the incremental costs to Government of administering the APPR is $9.7 million, with an annualized cost of $1.4 million.

Cost-benefit statement

A. Quantified impacts (2012 price level)

Table 4: Quantified impacts (base year 2018)
Cost-Benefits First Year 2019
($, Millions)
Final Year 2028
($, Millions)
Total Present Value ($, Millions) Annualized Average ($, Millions)
Benefits to Canadians 209.0 264.9 1,509.6 231.1
Costs to Air carriers 238.3 241.3 1,413.8 217.3
Costs to Government of Canada 2.8 0.4 9.7 1.4
Net benefits     86.1 12.4

B. Qualitative benefits

  • Increased certainty for musicians travelling with musical instruments
  • Increased safety in the event of evacuation

Note: Costs and benefits are analyzed over a 10-year period (2019–2028) at a 7% discount rate. Compensation for inconvenience costs and benefits are analysed at a discount rate of 9%.

Sensitivity analysis

Uncertainty has been taken into account in this cost-benefit analysis by assigning probability distributions to several variables. The results of the cost-benefit analysis summarized in Table 2, above, is the middle value calculated using the median of probabilistic inputs. The low and high values were determined by changing one variable at a time to determine the lowest and highest possible combination of outcomes. It should be noted that the lowest/highest possible net benefit is not derived by taking the difference between the lowest/highest possible costs and benefits, as in some cases, the value of an input that generated the lowest/highest cost may not be the same value that generates the lowest/highest benefit.

Finally, it should be noted that the extreme outcomes, determined through this sensitivity analysis would be extremely unlikely to occur as they would require several already unlikely outcomes to occur simultaneously. The probability of all extreme values occurring simultaneously is 0.2 20 = 1.04858E-14.

The percentage of passengers on domestic flights who are Canadian, the percentage of passengers who claim compensation under the APPR scenario, and the value of a traveller’s time have the largest impact on the net present value (NPV). Setting all of these variables to their maximum probable values increases the NPV by $348 million. Setting them all at their minimum probable values decreases the NPV by $302 million.

The table below summarizes the highest, lowest and most likely outcomes, derived through the sensitivity analysis.

Table 5 : Low, middle, and high values based on sensitivity analysis
Cost-Benefit Low
($, Millions)
Middle
($, Millions)
High
($, Millions)
Benefits to Canadian public 987.5 1,509.6 2,254.8
Costs to carriers 928.7 1,413.8 1,957.4
Costs to Government 9.7 9.7 9.7
Total cost to all stakeholders (including Government) 938.7 1,413.8 1,967.1
Net benefit −48.7 86.1 287.7

Note: Values in this table are presented as the present value using a real 7% discount rate. Compensation for inconvenience costs and benefits are analysed at a nominal discount rate of 9%.

Small business lens

Although most of the Canadian commercial air operators do not meet the definition of the small and medium business category when using the gross revenue criteria to determine whether a business is small, the CTA has determined that 378 air carriers are considered small businesses using the criteria of having 100 employees or fewer.

Costs to small businesses are associated directly with compliance with the regulations, including compensation paid to passengers in the event of flight disruption, expenses (e.g. IT systems) assumed to comply with communication provisions, and costs related to developing new training programs and delivering training to all relevant employees on the new processes and provisions.

The estimated annualized increase in total cost is $4,324,986 (in 2012 dollars) for all affected small businesses and the average cost per small business is $11,442 (in 2012 dollars). The estimated present value of total costs and cost per small business over the 10-year period are valued at $30,376,893 (in 2012 dollars) and $80,362(in 2012), respectively.

In the initial option, the APPR requirements would be applied to air carriers equally, regardless of their business size. However, to take into account concerns regarding impacts on the viability of small carriers, the CTA has put forward a flexible option in which small carriers would be subject to lower compensation requirements and would not be required to rebook using competing carriers.

Initial Option

Short description: Apply the APPR to carriers regardless of their business size

Number of small businesses impacted: 378

Table 6: Initial Option Costs and Risks
Costs/Risk considerations Annualized Average ($) Present Value ($)
Compliance costs 4,848,419 34,053,268
Administrative costs 0 0
Total costs (all small businesses) 4,848,419 34,053,268
Total cost per small business 12,827 90,088
Risk considerations N/A N/A

Flexible Option

Short description: Two-tiered approach to compensation and rebooking requirements

Number of small businesses impacted: 378

Table 7: Flexible Option Costs and Risks
Costs/Risk considerations Annualized Average ($) Present Value ($)
Compliance costs 4,324,986 30,376,893
Administrative costs 0 0
Total costs (all small businesses) 4,324,986 30,376,893
Total cost per small business 11,442 80,362
Risk considerations N/A N/A

“One-for-One” Rule

As the regulations do not impose incremental administrative costs on businesses, the “One-for-One” Rule does not apply.

Regulatory cooperation and alignment

The EU has put in place a passenger protection regime including communication requirements, minimum standards of treatment, rebooking and reimbursement, and in some cases minimum compensation for flight disruptions. Current U.S. rules to strengthen air passenger rights address communication with passengers, set standards of treatment and disembarkation requirements during tarmac delays, and establish compensation for denied boarding due to overbooking. These requirements are in addition to those under the Montreal Convention, an international treaty to which the EU, U.S. and Canada are all party.

The CTA considered best practices and lessons learned from these other jurisdictions, while tailoring the regulations to Canadian needs. As a result, the APPR ensure that passengers travelling to, from and within Canada have rights that are comparable to those in other jurisdictions and that unintended consequences experienced in other jurisdictions can be mitigated.

In addition, the requirements related to the transportation of minors are intended to implement in Canadian regulation the new ICAO standards in this area. This is a requirement, as Canada is a signatory to the Convention on International Civil Aviation.

Gender-based analysis plus (GBA+)

The regulations are intended to benefit the travelling public generally. The only targeted regulation relates to the seating of children under 14 years of age next to their parent or guardian at no additional cost. These regulations will result in a positive impact for travelling parents in general and, potentially to a greater extent, for women. Based on information from Statistics Canada, women are four times more likely to be lone parents (1.26 million) than men (0.35 million).

During consultations, some carriers indicated that compliance with the new regulations could involve financial requirements that hamper the viability of smaller airlines and those with already thin financial margins, including ultra-low-cost airlines serving a wide range of travellers and those serving northern and remote areas.

These risks are mitigated in the regulations through the two-tier approach to compensation and rebooking requirements. Requirements related to hotel accommodations, provision of food and communication take into account the operating environments of carriers serving northern and remote communities (where amenities are often limited).

Rationale

The CTA has developed these regulations in alignment with statutory requirements and the framework set out in the Act.

The CTA considered all input received through the consultations and CGI comment period to develop and finalize the regulations. The CTA has also considered best practices and lessons learned from air passenger protection regimes in other jurisdictions, including the European Union (EU) and the United States, as well as the Montreal Convention, an international treaty to which Canada is party (along with the United States and the EU).

Scope and application

The scope of the regulations aligns with Parliament’s intent that the regulations apply to “all flights to, from and within Canada, including connecting flights.” The regime applies as broadly as possible to travellers in Canada to ensure as much consistency as possible.

Identifying the operating carrier as responsible for the requirements related to flight disruptions achieves the objective of ensuring a passenger understands where they can turn for redress without exposing carriers to undue liability or disincentivizing commercial arrangements between carriers.

The scope and application recognizes viability concerns of small carriers and new market entrants. Instead of limiting the scope of the regulations by carving certain carriers out, the regulations set different compensation and rebooking requirements for large and small carriers and creates flexibility within standards of treatment requirements (food, drink, accommodation) that account for unique operating environments. In this way, the regulations strike a balance between establishing robust passenger protections and ensuring Canada’s these small carriers are still able to provide diverse service offerings to passengers, including ultra-low-cost travel, and transportation to and from remote, regional and northern areas.

The CTA will monitor the effects of these regulations on the growth of small and medium-sized carriers and new entrants into the market and reassess if needed.

Clear communication

The regulations reflect the general agreement among the public, consumer advocacy groups, and industry stakeholders that passengers should be given clear information — regarding terms and conditions of carriage and during flight disruptions — in plain language through a range of methods.

The regulations are aimed at maximizing opportunities for passengers to receive key information throughout the travel process by, for example, requiring different methods of communication, and by requiring carriers to ensure information is shared by third parties authorized to sell tickets in the carrier’s name. It is also designed to ensure that the needs of persons with disabilities are met.

The regulations also take into account some operational issues raised by air carriers, such as their limited control of signage at airports and third party resellers, and potential difficulty for front-line staff in immediately determining the precise cause of a delay.

Standards of treatment

The standards of treatment and rebooking requirements are comparable to those established in the EU regime, and generally align with comments provided by the public and consumer advocates. Specifically, requiring standards of treatment to be provided starting two hours after the delay at departure aligns with the EU regime.

Avoiding prescribed dollar values for food and drink requirements reflects the wide range of possible delay circumstances and operational realities of different airport locations. The food and drink requirements are dependent on the time of day, duration of the delay and location to take into account cost variances at different airport locations and limited amenities in some remote areas. Accommodation requirements are similarly linked to the location of the delay.

Completion of itinerary

The requirements related to rebooking and refunds protect the interests of passengers, while taking into account the operational considerations of carriers. Rebooking parameters reflect the aim of ensuring that the passengers arrive at their destination as soon as possible by rebooking them on the carrier’s next possible flight or, in the case of large carriers, rebooked on a competitor flight if the carrier does not have an available flight leaving within nine hours of the original departure time.

Starting the rebooking and refund requirements after a flight delay of three hours allows time for a carrier to recover the flight from the delay before having to rebook, which can be a complex process that diverts resources from delay recovery.

Large carriers are also allowed a reasonable opportunity to make other arrangements for the affected passengers before having to take on the financial implications of last-minute rebooking on a competing carrier or transporting a passenger to another airport. Setting the threshold for rebooking on another carrier at nine hours reflects the lower frequency of certain flights, as well as hours of operation restrictions at some airports.

Exempting small air carriers from the requirement to rebook passengers on other carriers takes into account that many small air carriers have infrequent flights and/or do not have commercial or partnership arrangements with other air carriers.

Minimum compensation levels

The CTA received a range of suggestions regarding the appropriate amount of compensation for delays and cancellations — from $0 to $9,000. The amounts for large carriers are comparable to those established in the EU regime (which range from EUR 250 to EUR 600, or approximately CAN$375 to CAN$900). These amounts also reflect input from public and consumer advocacy groups that compensation amounts should reflect inconvenience. They also reflect the policy intent that the Canadian regime be world leading.

Certain air carriers are of the view that compensation should be linked to the price of the ticket purchased or at least not surpass it. However, the objective of the regulations is to compensate for the inconvenience experienced by the passenger, which does not change depending on the price of a ticket. Basing compensation amounts on the length of delay instead of the individual fare (or flight distance, as is used in the EU) achieves that objective. This is also the clearest and most administratively straightforward option and reflects input received from the public during consultations.

Some stakeholders and members of the public recommended that the same compensation requirements apply to all carriers, regardless of size. However, the two-tier approach takes into account concerns that costs could impact the viability of small carriers, many of which serve remote communities, and ensures that air travel is accessible for Canadians.

The specific time frames for compensation (three or more hours, but less than six hours; six or more hours, but less than nine hours; and nine or more hours) align with the EU regime, in which compensation for delays is required for delays of three hours or more.

The regulations reflect consumer views that it is important to be offered compensation in the form of cash. It also provides the flexibility, supported by both carriers and consumers, to offer other forms of compensation (e.g. travel vouchers, seat upgrades, and points towards loyalty programs). Making cash the primary form of compensation, with passenger discretion to accept other forms of greater, non-expiring compensation, ensures that carriers can tailor compensation to passenger needs, provided passengers are aware of all options.

Denied boarding

During consultations, the public expressed particular concern regarding denied boarding due to factors entirely within carrier control, such as overbooking. While carriers advised against punitive compensation requirements, establishing compensation that is significantly higher than general delay and cancellation compensation — while also leaving carriers with flexibility to negotiate with potential volunteers — is intended to reduce the number of passengers moved to later flights against their will. The APPR will not prevent carriers from innovating in their methods of seeking volunteers (e.g. through an auction). Specifying that negotiated terms are mutually agreed upon and provided in writing to the passengers will protect consumer interests in this process.

The regulations establish requirements for immediate compensation (i.e. starting at a delay of 0 hours) for denied boarding, reflecting the heightened inconvenience associated with being denied boarding against one’s will. Immediate payment for denied boarding aligns with the U.S. regime and reflects the low administrative complexity of processing these payments.

Tarmac delays

The regulations increase passenger comfort during any tarmac delay by requiring that carriers provide a range of necessities recommended by the public and consumer advocates during consultations.

At airports in Canada, carriers will generally return to the gate for disembarkation after three hours — the earliest time permitted by the Act. The timing of disembarkation also draws from international best practices, namely the tarmac delay rules in the United States.

However, in order to mitigate further delay and passenger discomfort, the regulations allow air carriers the discretion to stay on the tarmac for one additional 45-minute window, should takeoff be imminent. While there may be public objections to allowing a plane to stay on the tarmac for longer than three hours, this is intended to account for operational considerations and lessons learned expressed by air carriers, in particular the increase in flight cancellations experienced in the United States following the implementation of a strict disembarkation rule.

Lost or damaged baggage

Under the regime, liability limits (and related processes, timelines and exceptions) established under the Montreal Convention for international travel will also apply to domestic flights, which will ensure consistency for travellers. This approach also recognizes that the regime cannot conflict with the Montreal Convention, which provides an exclusive scheme for international travel, a consideration that was emphasized by stakeholders generally. The regulations also reflects the view expressed by many members of the public that baggage fees should be reimbursed in instances of damage, loss or temporary loss.

Seating of children under the age of 14

Some members of the air industry are of the view that the seating of children free of charge is not an area in which government intervention is needed. However, this is clearly mandated by the legislation. It is important to note, however, that the regulations do not require carriers to offer seat selection free of charge. The airline will be required to facilitate the seating of a child near their parent or guardian at no additional charge.

The regulations reflect public and consumer advocate views that children should be seated near their parent or guardian at no extra charge, and, generally, that proximity should depend on the age of the child. In the CTA’s public survey at airports, 79% of respondents indicated that children under 5 years of age should be seated adjacent to their parent, guardian or tutor. Results also suggest that it would be reasonable to allow for slightly greater separation between older children and their parent, guardian or tutor, with the greatest latitude for children aged 12 to 14.

By basing seating requirements on the age of the child and requiring that air carriers facilitate the seating of children at the earliest opportunity, the regulations recognize the complexity of assigned seating processes while ensuring that carriers take measures at every point to facilitate the seating. Facilitation could be done at the time of booking, at check-in, at the gate, and on the aircraft.

Transportation of musical instruments

Generally, stakeholders support providing clear policies on the transportation of musical instruments. The regulations also reflect musician advocate views that carriers should transport musical instruments as carry-on or checked baggage in accordance with the same safety, dimension and weight policies as other baggage.

Air carriers, however, believe that competition in this area generates the best results. The regulations align with the legislation, which stipulates that regulations must require carriers to establish terms and conditions for the carriage of musical instruments without being prescriptive in terms of the content of the requirements.

Other consumer-related provisions

The provisions relating to the transportation of unaccompanied minors are intended to incorporate into the ATR the new standards regarding the transportation of unaccompanied minors, which Canada is required to adopt, as a signatory to the Convention on International Civil Aviation.

Moving the ASPAR into the APPR is a logical step, given that they are both oriented toward consumers.

Implementation, compliance and enforcement, and service standards

Requirements related to communication, tarmac delays, denied boarding, lost and damaged baggage, and the transportation of musical instruments provisions (along with applicable AMPs) will come into force on July 15, 2019. The more complex requirements related to seating, delays and cancellations (along with applicable AMPs) will come into effect December 15, 2019.

The CTA’s ongoing monitoring of the air industry includes inspections and investigations, and the CTA’s existing air passenger complaints processes and dispute resolution services would apply to the new obligations. Enforcement officers conduct periodic inspections of air carriers to ensure that operating requirements are met, and they would do targeted investigations if they suspect an air carrier is not meeting their operating requirements.

Following an application for air passenger travel dispute resolution under the existing tariff-based regime, timelines are 65 business days for facilitation, 20 business days for mediation (when no extension has been requested), , and 85 business days for adjudication (for complex cases, 65 business days after close of pleadings).

Once the regulations are registered, the CTA will issue guidance and tools for the public and air carriers to help ensure that this new regime is implemented smoothly and that passengers know their rights.

Contact

Caitlin Hurcomb
Manager
Regulatory Affairs Division
Analysis and Outreach Branch
Canadian Transportation Agency
15 Eddy Street, 19th Floor
Gatineau, Quebec K1A 0N9

Telephone: 819-997-6667

Email: Caitlin.Hurcomb@otc-cta.gc.ca

Date modified: