According to the 2016 edition of the International Air Transport Association's 20-Year Air Passenger Forecast, Asia-Pacific will be the biggest driver of air travel demand from 2015 to 2035, with more than half of new passenger traffic coming from the region. Over the forecast period, four out of five of the fastest-growing markets in terms of additional passengers per year will be from Asia.
Malaysia's air passenger traffic is expected to grow to between 105.5 million and 106.7 million passengers – a range of 2.9% to 4.1% growth. In 2017 the Malaysian aviation sector employed 450,000 people and contributed $10.1 billion to the country's gross domestic product. A robust set of laws to safeguard consumers' interests is essential to ensure Malaysia's aviation industry remains competitive in the global market.
The Malaysian Aviation Commission (MAVCOM) Act 2015 came into force on 1 March 2015 and established MAVCOM. MAVCOM serves to promote a commercially viable, consumer-oriented and resilient aviation industry, which supports Malaysia's economic growth. In line with that objective, MAVCOM introduced the MAVCOM Protection Code 2016, which seeks to strike the right balance between protecting passengers and industry competitiveness. The code was made by way of subsidiary legislation pursuant to Section 69(1) of the act and came into force on 1 July 2016.
The 2016 code was amended by the MAVCOM Protection (Amendment) Code 2019, which came into force on 1 June 2019. The amendments
The key amendments include:
- a requirement to fully disclose final airfare prices and a prohibition on post-purchase price increases;
- a requirement to disclose key terms and conditions before a ticket is purchased;
- additional regulations regarding refunds;
- requirements regarding communicating changes to flight status and compensation for route cessation and planned flight rescheduling;
- a requirement to provide wheelchair services to disabled persons; and
- consumer awareness obligations.
Price of airfare
The 2019 code replaces Paragraph 3 of the 2016 code with a provision which covers two aspects of offering airfare – specifically in relation to ads and the information provided before a ticket is purchased.
In respect of ads, airlines must now publish all-inclusive fares consisting of:
- base fares (including all charges payable to the airline);
- government taxes and fees;
- fees and charges prescribed by any written law; and
- fuel surcharge.
For the final airfare, in addition to the items set out above, airlines must also disclose any charges for optional services purchased by a consumer on an opt-in basis before they purchase a ticket (eg, baggage, seats and meals).
Subject to the exceptions stipulated therein, Paragraph 4 of the 2019 code prohibits airlines from increasing the price of an airfare after it has been purchased by a consumer. The 2019 code amends this provision to clarify that the prohibition in Paragraph 4 applies only to the final airfare after it has been purchased by the consumer, not to fares displayed in ads.
These amendments promote greater transparency regarding airfare as they seek to eliminate hidden charges, such as card payment and administrative fees on air tickets.
Disclosure of key terms before purchase
Paragraph 7(1) of the 2016 code imposed an obligation on airlines to "disclose all terms and conditions of the contract of carriage to the consumer" before a ticket is purchased. This requirement has been replaced by an obligation to disclose the following key terms and conditions before a consumer purchases a ticket:
- cancellation fees;
- any refund and rebooking policies;
- policies for passengers who fail to show up at the check-in counter or the boarding gate within the designated period or to board the aircraft at the specified boarding time;
- baggage allowance policies; and
- the validity of the passenger's travel documents.
The 2019 amendment was made to avoid the risk or possibility of the terms and conditions being overlooked by consumers. This was the case prior to the amendment, as airlines merely provided website links to the contract of carriage.
Further, the new Paragraph 7(1A) imposes a positive obligation on airlines to ensure that the key terms and conditions set out in the amended Paragraph 7(1) are communicated to consumers before they purchase a ticket, even where the ticket is purchased from a travel agent. This ensures that airlines can also be held accountable when an agent fails to comply with the disclosure requirement.
Regulation of refunds
Previously, most airlines were charging consumers between RM15.00 and RM300.00 as a processing fee for providing passenger service charge refunds (an amount which could exceed the amount of the service charge itself), while others imposed no fees.
By introducing a new Paragraph 7A into the 2019 code, refunds are now regulated. Among other things, following a request, the new paragraph requires contracting airlines to refund:
- the base fare, including all charges payable to the airline;
- charges for optional services purchased by the consumer;
- government-imposed taxes and fees; and
- fees and charges prescribed under any written law.
In respect of refunds for government-imposed taxes and fees and fees and charges prescribed under any written law, contracting airlines can charge a processing fee of up to 5% of the taxes, fees or charges. However, no such processing fee can be charged if the contracting airline has already charged a processing fee to refund the base fare or charges for optional services.
Further, contracting airlines must remit a refund within 30 days from the date of the claim for the refund. However, if a ticket is purchased from a travel agent or through a travel portal, the refund must be remitted within 30 days of the consumer submitting their claim, in accordance with the terms and conditions agreed between the contracting airline and the travel agent or relevant travel portal (as the case may be).
Any tax that is not refunded to the consumer must be dealt with in accordance with the Unclaimed Moneys Act 1965.
Change in-flight status, route cessation and planned rescheduling
Previously, an airline's obligation to provide information to passengers and the public of any "change in the status of a flight" applied only where there was:
- a flight cancellation;
- a delay of 30 minutes or more to a flight's scheduled operation; or
- a diversion.
It did not previously cover situations where the airline changed the flight to an earlier time or where the flight was cancelled due to route cessation. As such, the substitution of the previous Paragraph 8(3) aims to cover these two situations.
Further, substituting Paragraph 8(1) and inserting the new Paragraph 8(4) means that:
- the operating airline must notify passengers and the public of a route cessation one month before the date of cessation;
- where a planned flight is rescheduled three hours or more before or after its scheduled departure time, notification of such must be made within 12 to 48 hours of the scheduled departure time; and
- where there is a delay of more than 30 minutes but less than three hours, notification of such must be made "as soon as practicable" in a manner determined by MAVCOM.
The new Paragraph 8(5) requires operating airlines to provide passengers with a letter regarding any cancellation or delay of 30 minutes or more of their flight, if so requested.
In addition, the new Paragraph 12A and amendments to the First Schedule of the 2016 code set out compensation and care requirements for passengers in the case of route cessation or flight rescheduling of three hours or more before or after the scheduled departure time. However, an operating airline is exempt from providing compensation and care if it can prove that the route cessation or planned flight rescheduling was caused by extraordinary circumstances which could not be avoided even if all reasonable measures had been taken. In this regard, it would be interesting to see whether airlines would be able to argue that they should be exempt from providing compensation and care to their passengers for the recent network failure at Kuala Lumpur International Airport, which affected key functions at that airport and caused delays and flight cancellations.
As a result of the new Paragraph 9(16A), disabled persons can request wheelchair services free of charge, provided that they have the appropriate documentation (ie, the card issued to disabled persons under the Persons with Disabilities Act 2008). This is in line with the International Air Transport Association's efforts to make air travel more accessible to disabled persons and those with reduced mobility.
The new Paragraph 19(2) extends the obligation of raising consumer awareness to any person who performs aviation services on behalf of aviation service providers. This provision requires an aviation service provider to take all steps to ensure that all of its employees or any person who performs aviation services on its behalf possess adequate knowledge and awareness of the code in order to assist consumers in exercising their rights.
Further, airlines must now publish the rights conferred to consumers under the 2019 code on their websites, regardless of whether the consumer has purchased travel insurance.
In line with MAVCOM's efforts to protect consumers from being unfairly charged by airlines, a financial penalty of RM200,000 each was recently imposed on two airlines for charging credit card, debit card and online banking processing fees separately from their base fares in contravention of the code. Dr Nungsari Ahmad Radhi, executive chair of MAVCOM, said that:
These actions are also intended to move the aviation industry in Malaysia towards an improved level of service, integrity and transparency, in line with MAVCOM's long term objectives for the industry.
The importance of MAVCOM's role in the aviation industry cannot be overstated. Not only have consumers benefited from protection under the code, they have also developed greater awareness of their rights as air travellers. These translate into improvements in the level of service in the Malaysian aviation industry.
The latest amendments under the 2019 code aim to promote greater transparency and fairness in dealings between airlines and passengers, which should allow consumers to enjoy monetary savings and make more informed decisions.
An earlier version of this article was published in Skrine's Legal Insights (Issue 3/2019).
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