On Implementing the Promoting Competition and Improving Antimonopoly Policy Road Map. The draft law provides for two possible types of tariffs – those that incorporate the risks of passengers cancelling their trip and those tariffs without such risks. By expanding the choice of terms and the process for carrying passengers and creating conditions for decreasing the cost of carrying, the draft law thus improves the situation for about 92% of passengers. The situation for those passengers who cancel their trip does not deteriorate either.
The draft law On Amendments to the Clauses 103, 107 and 108 of the Air Code of the Russian Federation hereinafter referred to as the draft law was drawn up in pursuance of the Developing Competition and Improving Antimonopoly Policy road map, and is aimed at decreasing the cost of air travel for passengers by establishing legal conditions for reducing costs and risks, which are taken into account by air carriers when they calculate air travel tariffs.
According to Clause 108 of the Air Code, an aircraft passenger is entitled to cancel his/her flight by notifying the air carrier no later than 24 hours before the departure, unless the carrier has set a discount period, and get a refund. If the travel is cancelled later than the above period, the passenger is entitled to the refund less a commission that cannot exceed 25% of the fare paid.
Therefore, according to Clause 108 now in effect, in the case of a trip cancellation within more than 24 hours prior to departure, the carrier is not liable for compensating the costs of booking and typing carriage documents that the carrier had effectively borne prior to the passenger’s cancellation of the trip, which impedes the air carrier from correctly setting prices for air travel and raises the costs for passengers, as those risks are included in the fare and are paid for by the passenger regardless of whether he cancels his flight.
Additionally, the above clause also stipulates the liability of air carriers to refund the fare in the case of travel cancellation, regardless of the terms of the air carriage contract, which leads to the inclusion of risks related to possible travel cancellations into the tariffs.
As a result, those passengers who do not cancel their trip are forced to book tickets at a higher price only because Russian legislation does not allow the carrier to free the tariffs of the risks related to possible travel cancellation by passengers.
The draft law envisions the possibility of setting two types of tariffs: those that incorporate the risks of possible travel cancellation, and those that do not hold such risks, hereinafter referred to as non-refundable tariffs.
All said, the passenger is offered the option of making for his benefit a contract under a refundable tariff, thus ensuring himself in the case he/she will not take the flight, or booking a ticket under a cheaper non-refundable tariff if the passenger is sure he/she will definitely make the flight.
By expanding opportunities for choosing terms and fares and creating conditions for lowering the cost of air travel for passengers, the draft law improves the situation for about 92% of passengers.
The situation involving individuals who cancel their trip does not deteriorate since tickets can be booked under a refundable or non-refundable tariff (knowing beforehand) and by making a choice in terms of one’s intentions regarding the flight. The passenger can receive a refund for the fare paid when the trip is cancelled. The draft law sets guarantees for a full refund of a non-refundable tariff fare if the cancellation is due to the ill health of the passenger or accompanying family member.
Non-refundable tariffs are a commonly accepted international practice.
Foreign air companies selling their air carriage services in Russia use non-refundable tariffs that allow them to offer cheaper fares and create an outflow of passengers from Russian air companies.
Providing air carriers and passengers with the right to make an air traffic contract under different terms that envision a full refund of the fare or non-refundable tariffs creates conditions for cutting air fares for passengers, for increasing mobility of the population, and providing equal competitive conditions for Russian and foreign air companies.
Giving Russian air carriers the right to set non-refundable tariffs will create conditions for reducing risk levels.
The draft law was reviewed and approved at the meeting of the Russian Government on 20 February 2014.
