New CAB rule to hurt budget airlines—Air Asia exec

Air Asia Inc., the country’s newest carrier, said the government would kill the “goose that lays the golden eggs” with a new rule that forces companies to accommodate late passengers or “no-shows.”

The new rule will force airlines to refund tickets or allow the rebooking of seats of passengers who do not show up for their flights at all. The rule, under Civil Aeronautics Board (CAB) Resolution 28, will take effect on June 15.

“Our business works on the premise that seats expire. I am concerned about the rule that, if a passenger arrives late through his own fault or does not check in because he did not wake up on time, a carrier would be obliged to make a refund,” Air Asia CEO Marianne Hontiveros said. “We understand the need to protect the consumer, but please, don’t throw out the baby out with the bath.”

Hontiveros was speaking at the sidelines of the launch of the company’s new online flight booking tool for travel agents, powered by Spanish transportation tech company Amadeus Airline IT Solutions.

“The government will kill the goose that lays the golden eggs,” Hontiveros stressed, pointing out that air travel and tourism in the country grew because of the low fares offered by budget airlines.

She said mandatory refunds, even for errant passengers, went against the low-cost carrier business model that sought to cut unnecessary costs in all areas of operations. Any deviation from this low-margin model would mean higher fares for passengers.

“If we are forced to make refunds, we will have to make allowances for that so we will have to raise our fares,” said Hontiveros, who leads the Philippine unit of Malaysia’s Air Asia Berhad, Southeast Asia’s largest airline group.

The new rule on refunds was one of several regulations passed by the Department of Transportation and Communications, through the CAB, in the past two months.