Joint Meeting of the Air Matters Committee Technology Working Group

Ref: CR13-131/94134 10 October 2013

Joint Meeting of the Air Matters Committee & Technology Working Group 25 September 2013, Brussels, Novotel Brussels Airport Hotel, 10h30-16h30

FINAL conclusions and recommendations

Participants: - Mr Rolf FORSDAHL, VIRKE - Chairman - Ms Susan PARSONS, ABTA – Interim Chairman as from item 2.5 of the agenda - Mr Marc VAN KERCKHOVEN, FIT - Mr Mladen LEMAIC, UHPA - Mr Lars THYKIER, DRF - Ms Laura FREDERIKSEN, DRF - Ms Heli MÄKI-FRÄNTI, SMAL - Ms Christine BAAL, SNAV - Ms Noeleen LYNCH, ITAA - Mr Massimo CARAVITA, FIAVET - Mr Walter SCHUT, ANVR - Ms Mirka BRYLA, PIT - Mr Tomas OLSSON, SRF - Ms Amisha PATEL, ABTA - Guest - Ms Mihaela CHIRU, ANAT - Mr Michel de Blust, ECTAA Secretariat - Ms Christina Russe, ECTAA Secretariat - Mr Benoit Chantoin, ECTAA Secretariat

1. IATA AFFAIRS

1.1. NDC – New Distribution Capability The Secretariat recalled the origins of NDC: NDC is an attempt to create a multi-carrier ‘direct connect’, bypassing GDSs, preventing travel agents from making attractive offers to customers as they are not able to compare airline offers. NDC started in full secrecy from the travel agency community. Then IATA realised that NDC would not take off without the support of the travel agency community. IATA has started a world road show to convince travel agents and regulators that Resolution 787, the basis for NDC, is consumer-friendly, enhances consumer choice and will respect competition legislation as well as legislation on personal data protection, the Air Services Regulation and the CRS Code of Conduct. But ECTAA has identified and raised serious concerns that NDC is non-compliant with said EU legislation. The Article 29 Data Protection Party, which brings together the national data protection supervisory bodies, is already looking into the issues raised by ECTAA. ECTAA has also written to the Competition Directorate, but unfortunately the Commission can only act ex-post rather than ex-ante as regards competition infringements i.e. the Commission can only intervene once NDC is up and running. ECTAA is keeping the Competition

1 Directorate updated. ECTAA has also discussed NDC with DG MOVE, as NDC would fall under the scope of the CRS Code of Conduct. ECTAA is closely liaising with the three GDSs. On the US side, Resolution 787 has been notified to the US Department of Transportation (DoT), as IATA requires clearance from the DoT, which it has not yet received. There is a strong lobby against NDC, including the Open Travel Alliance (OTA), which includes ASTA, consumer organisations, TMCs, etc. IATA is currently struggling to find travel agents to participate in the pilot schemes. Even a number of IATA Member airlines are uncomfortable with NDC, as it will require a lot of IT investment and the benefits are not that clear for airlines. It may create a divide among airlines: those that have the financial capacity to invest in NDC, leaving all others out of the system. The Danish delegate informed that this matter is also dealt with by the World Travel Agents Association Alliance, WTAAA. There is some interest from New Zealand travel agents in participating in the NDC pilot scheme but the situation is different in New Zealand, where Air New Zealand is dominant. The Danish delegate stressed that one of the main characteristics of NDC is the visualisation of the products on offer, enabling airlines not only to market their products based on price but other attributes, such as seat size, ancillaries, etc. It was noted that GDSs are close to delivering a multi-airline direct connect type of service, which could sit alongside the classic GDS. The Secretariat informed that some Members of the European Parliament have expressed concerns about the practice of airlines / travel agents of IP tracking, where the latter identify customers by their IP address and artificially increase the price when the customer checks an offer again, thereby inciting him to book for fear that the price will increase further. This is behavioural pricing. In that context, MEPs may also be interested to learn about NDC, where products are also tailored to the consumption and behaviour patterns of the customers. The delegates of the joint AMC/TWG recommended: - Members should continue raising NDC with their national carriers, but also national authorities on personal data protection, and MEPs; - ECTAA & WTAAA to issue a statement before the IATA World Passenger Symposium at end October, so that IATA can’t say that they have the support of the travel agency community; - ECTAA Secretariat to draft a short note on NDC that Members can use in their communication; - ECTAA to continue monitoring NDC.

1.2. PAConf and PAPGJC October 2013 The Secretariat thanked the UK delegate for her review of the PAConf/36 agenda 1st transmittal. The delegates went through the most important items:  R2 – Annual reviews and consequences of non-compliance Proposal to reduce the time the agent has to comply with appropriate conditions specified by IATA when it has determined the agent no longer meets the applicable financial criteria from between 30 and 60 days to a maximum of 30 days. The AMC/TWG considered that: - The 30 days is too short a period as, in the current market, it is taking longer to obtain financial guarantees. If agents do not obtain a financial guarantee they will be suspended. Request the maintenance of the current 30-60 days; - Need for flexibility for mistakes as weekly remittance increases the risk of mistakes; - The current procedure for dealing with small mistakes is inadequate, as it can have enormous consequences for the agent, especially the agent has already made a small mistake in the past.

2 - In case IATA makes a mistake in putting an agent in default, there is no excuse from IATA to the airlines. Reinstalling agents often leads to different (more tight) procedures of airlines. IATA can put agents in default but for reinstalling the agent it requires the consent of airlines - In case of a proven mistake of the bank, the airlines are not informed about the reason for reinstalling the travel agent. Many airlines get the idea that there is something wrong with that agent. The delegates of the joint AMC/TWG recommended that ECTAA should raise this with Mr. Popovich or another IATA representative.  R3 – Airlines’ web sales financial securities Proposal to create parity of settlement in case of an agency default between airlines own web sales ticketed by them on behalf of agents are paid through BSP with core BSP sales. The delegates considered that IATA is trying to avoid bilateral guarantees. The delegates of the joint AMC/TWG recommended rejecting this proposal at PAPGJC level.  R4 – Interpretation and hierarchy of sources Proposal to introduce a hierarchy whereby national law would take precedence in any TAC cases followed by the PSAA, contractual documents between the agent and IATA, PAConf resolutions, local criteria, other rules including the BSP Manual. The delegates considered that national law will always supersede IATA Resolutions; however the problem lies in the ranking proposed by IATA, as the PAConf Resolutions take precedence over the agreement on local financial criteria. For example, it would give priority to the guidance in Resolution 800f over the criteria agreed specifically for a particular market which has been approved by PAConf. The delegates of the joint AMC/TWG recommended rejecting this proposal at PAPGJC level.  R5 – amendments to Resolution 820e Proposal requiring the TAC to provide IATA with copies of each request for review with supporting documentation. IATA has further recommended that the TAC be obliged to offer the opportunity for a scheduling conference by telephone or other means to reach an agreement between the parties, set the procedure to be followed and a timetable. The delegates of the joint AMC/TWG recommended rejecting this proposal at PAPGJC level.  R6 – Local financial criteria Because of differing interpretations, IATA is proposing amendments to Resolutions to ensure consistency of interpretation of local financial criteria which have also been defined. This item is the result of some recent cases notably in Spain. Considered that: - The Secretariat observed that on this agenda there are 12 items proposed by IATA, the aim of which is to address specific issues in a given country by further tightening the rules including increased remittance in three countries (Poland, Romania/Moldova and Spain). In Spain, agents were not notified about a change in the local criteria, and were still applying the old criteria without providing a guarantee. - The Polish delegate asked whether a change of frequency remittance falls within the scope of financial criteria. More specifically, does the rule, according to which if there is no agreement between agents and airlines for 4 consecutive meetings or 24 months then the proposal can go directly to PAConf, also apply to changes to remittance frequency? PIT is still waiting for an answer from IATA. The Chairman noted that IATA is pushing all Europe towards weekly remittance and the rest of world to global financial criteria. - The Chairman noted that items R6 to R9 and R29 are connected – they add further burdens on agents and should be opposed.

3  R7 - Airline bilateral guarantees There is a provision which allows proposals to be put directly to PAConf where an APJC has failed to agree on changes to local criteria after four consecutive meetings or 24 months. This PSG proposal provides for an airline who would otherwise request an individual guarantee from an agent to advise IATA that the local financial criteria require strengthening. The Agency Administrator can call a meeting of the applicable APJC to consider this and, in the interim, authorize the airline to obtain a separate bank guarantee. Considered that: - This is adding further burdens on agents if airlines can impose a bilateral financial guarantee within 30 days. - If agents need to provide a bilateral guarantee for a number of airlines, the agent’s credit lines will be completely absorbed.  R8 – Financial Security Policy IATA is currently reviewing the different financial security types and looking to simplify and improve their approach including by defining the accepted financial security types, revising the criteria by which providers are assessed and defining the minimum critical elements. Defined types of security to be included in Resolution 850p: individual security provided by a bank (bank guarantee, letter of credit) or other party (insurance/surety bond), default insurance programme. Considered that: - This is a further restriction on agents choice of financial institution from which to get a guarantee. The EU Directive on bank & insurance institutions determines which financial institution is suitable to provide credit / guarantee. IATA should not be able to restrict the institutions suitable to provide guarantees. - If this goes through, ECTAA should raise this with DG Competition and DG Internal Market, as these are unacceptable trading restrictions and do not conform to EU legislation. ECTAA Members should raise this with the national enforcement bodies for financial institutions. - Members need to alert their local APJC to inform that agents are opposing this. - Raising it at the PAPGJC will probably be too late, as the PAConf is on the next day and the item is likely to be adopted. - The Polish delegate raised concerns for the Polish market: agents can either provide a bank guarantee or insurance. IATA found an insurance group willing to offer bonds but these are only available to agents with a certain turnover, representing only 20% of the market. The rest of market does not have access to such insurance bonds. In Romania, there are two insurance schemes available on market. IATA said that one supplier is not suitable but agreed that agents with these bonds can let them run on. - The French delegate noted that on the French market there have been 57 agency defaults and only 4 of them had not complied with financial criteria. - The Secretariat noted that it has now found proof that the IATA BSP can be considered as a financial intermediary, and thus needs to comply with the Directive on financial intermediaries. The delegates of the joint AMC/TWG recommended rejecting this proposal. ECTAA to send letter to IATA, Mr. Popovich, with copy to Members.  R14 – ADMs – alignment with BSPLink BSPLink will be mandated as the sole channel for ADM billing and dispute. Airlines will be obliged to publish their ADM policies through a link on BSPLink. Any administrative fees to be included in the applicable ADM. Timelines to be standardised from a minimum of 14 days to a maximum of 15 days for an agent to review an ADM. Considered that: - Delegates supported that the communications with agents be centralized in BSPLink, however, this should not be the sole communication channel; - Airlines should not only publish a change but indicate what the change is; - Changes should not be applied retroactively. There should be a time stamp on the change.

4 The delegates of the joint AMC/TWG recommended rejecting this proposal at PAPGJC level. ECTAA should argue for status quo and oppose the maximum of 15 days.

 R21 – ADMs A change to 818g tightens up on the payment of the annual agency fees and introduces sanctions for non-payment. This proposal is particularly worrying as the IATA management tends to issue notices of irregularity very quickly but at the same time can be very reluctant to waive unjustified notices. Recommended that rather than amending Resolution 818g, the IATA Service Centre should be encouraged to make a friendly call to agents regarding the delay in the payment of the annual fee. Members noted that this would not occur in countries where the annual fee was automatically direct debited in the BSP payment; however, there were still many countries paying by bank transfer and even by cheque.  R30 – Customer contact information This IATA proposal requires agents to provide passenger contact details (mobile phone number and email address) so that airlines may directly contact passengers in event of flight cancellation or schedule changes. Should the passenger exercise the right not provide such details, the agent must indicate in the PNR that the passenger has declined to provide details. Should the agent elect not to provide details, the agent must assume the liability to notify the passenger of any changes. Considered that: - Delegates were concerned about the abuse by airlines of personal data for commercial purposes (contacting passengers with offers, promotions). There need to be sanctions in place to ensure there is no abuse; - The passenger should have the right to communicate with the airline though the travel agent and thus only provide the agent’s contact details in the PNR; - In some public sector contracts, TMCs are not allowed to pass on passenger contact details; - Important to ensure that travel agents should not be liable where the passenger has opted not to provide his contact details;  R32 – Instructions to agents in event of airline suspension Following discussion in the PAPGJC, ECTAA has proposed amendments to Resolutions 866 and 850. PAConf had previously agreed that, effective 1 January 2013, when agents were requested to settle outstanding monies directly with a suspended airline, account should not be taken of outstanding refunds. IATA considered that this should not be done as monies were held in trust for the airlines. Yet agent representatives and some airline representatives considered that refunds reported before an airline was suspended should be deducted from the BSP billing. This was not accurately reported to PAConf, thus ECTAA has resubmitted wording that refunds actually or potentially owing to the suspended airline should be taken into account. Recommended to raise this matter again. Having gone through all agenda items, the Chairman noted that the 2nd agenda transmittal will follow shortly. It will include the TAC reports.

To conclude, the delegates of the joint AMC/TWG made the following recommendations: - ECTAA to raise the above issues (see boxes above) with IATA level, where relevant, with the Commission; - Members to raise at national level; - ECTAA to support the TAC views.

5 1.3. BSP remittance frequency The Chairman noted that airlines are pushing for more frequent remittance to improve their cash flow, including the three proposals already on the PAConf agenda. The AMC discussed a potential alleviation of Resolution 890 which prohibited use of the agent’s own credit cards. An impediment to this was the potential free tickets which could be gained by the agent and implications in the event of airline bankruptcy. It was noted that there was greater use of credit cards in some countries; in Scandinavia “virtual” cards were in use. Members were invited to inform the Secretariat when there are further discussions on more frequent remittance at local level.

1.4. New Generation ISS project The Secretariat reported that IATA is looking at reforming the current IATA Passenger Agency Programme and the settlement system. Formal consultations will be starting this year. The aim is to move towards a customer centric system, with both airlines and agents as their customers. They are looking at accelerating the cash flow, reducing uncollected money, attracting more airlines and agents, as they have lost between 4-5% of accredited agents in Europe each year. They are thinking about creating different agent categories, depending on their needs. They had similar plans 10 years ago, which failed. They proposed a Resolution for network agents, but there is no interest. As regards accelerating cash flow, it is most likely that they are targeting daily remittance by 2015. They will try to sell daily remittance against little or no financial criteria and bonding requirements. However, that does not exist in any other industry. It will be impossible to request immediate payment from customers, in particular in B2B transactions. There is also talk about better risk management, accreditation according to market conditions, etc. IATA is seeking the views of the agency community, including ECTAA, GEBTA and WTAAA. There is one slightly positive aspect: IATA has admitted they are concerned about the increasing frequency of airline bankruptcies and impact on BSP – as airlines are picking up the shortfall when an airline goes bankrupt. It was recalled that IATA and ECTAA/GEBTA had worked together on the Passenger Protection Plan to introduce a neutral fund covering airline and agency defaults. However, that project was defeated by a group of airlines in PAConf. The delegates of the joint AMC/TWG recommended continuing dialogue with IATA, giving our points of view as required.

2. EUROPEAN AFFAIRS

2.1. Air Passenger Rights The Secretariat briefly recalled the latest developments as regards the Regulation proposal revising regulation 261/2004 and 2027/97 regarding luggage handling. The TRAN and IMCO Committees of the European Parliament have presented their draft report and draft opinion respectively. Some amendments of ECTAA have been successfully incorporated into the EP draft report, though 3 issues are not yet addressed, notably: - Delay compensation: maintenance of trigger points 5/9/12 hours but with the same distances applied to cancellation; - Extraordinary circumstances (‘EC’): ‘EC’ defence for all flights where there is a causal link between the flight and the ‘EC’ & inclusion in annex I of the list of ‘EC’ agreed by the NEBs and published by the Commission in July; - Hotel cap in ‘EC’: reduce the amount of 100€ to 80€ per pax/night for a max of 2 nights, irrespective of whether pax is a PRM or not. No obligation to provide care where disruption is due to weather conditions and natural disasters, as in other modes of transport. The Secretariat asked whether ECTAA should maintain this position on the trigger points in view of the EP draft report and opinion, which tend to go in the other direction.

6 The UK delegate informed that after consulting their tour operators, ECTAA should maintain the minimum of 5 hours for the time being. The Chairman noted that the list of ‘EC’ determined by the NEBs is a useful tool, but the list is not exhaustive. He further noted that the questions raised are more relevant for tour operators and should thus be tackled by the Tour Operator Committee. The delegates of the joint AMC/TWG recommended following the feedback from the delegates of the Tour Operators Committee and the Legal Committee, which have been invited to provide the Secretariat with further comments.

2.2. Airline insolvency The delegates of the joint AMC/TWG took note that the Commission will not be taking any legislative measures to protect passengers against airline insolvencies. The EP has introduced an amendment proposal to offer passengers repatriation or refund in case of airline failure in the frame of the APR legislation proposal. As regards the Malev bankruptcy proceedings, the Secretariat reported that IATA is waiting for the latest appeal decision. In August IATA noted that if they lose in appeal, they will in all likelihood hand over the money to the Liquidator to avoid legal issues. The French delegate recalled that, in the Air Liberté case, they managed to obtain a judicial order from the French court to deposit the monies collected by IATA accredited agents into a specific escrow account in the hands of IATA, for the purpose of reimbursing agents the monies for tickets issued but not yet flown. The BSP refunded money to the agents. The Danish delegate asked whether the Hungarian Liquidator has ‘competence’ only for the Hungarian BSP or also for other countries’ BSPs? This probably depends on the applicable law. The French court determined that the French BSP was under French jurisdiction. The Dutch delegate informed that in the Dutch Caribbean bankruptcy in 2002, agents were required to transmit monies to the BSP even though the airline was already declared bankrupt. ANVR went to court but lost the case. The court held that IATA is entitled to pass the monies on.

The delegates of the joint AMC/TWG made the following recommendations: - Members to check the IATA instructions to agents 18 months ago and see what IATA undertook to do in return for remitting the money to the BSP. - Members to check what is the applicable law regarding the money held by their national/regional BSP and the money withheld by IATA in a trust account when an airline goes into bankruptcy. Is it the applicable law of the country where customer is established, where the travel agent is established or where the bankrupt airline is established? What does the applicable law say in terms of money to be refunded in a bankruptcy proceeding? - The French delegate was invited to send a copy of the French judicial order to determine which applicable law was used to derive this decision. - ECTAA to check international convention on applicable law and IATA’s liability.

2.3. European Commission Fitness Check on Aviation Legislation The delegates of the joint AMC/TWG took note of the results of the fitness check. Specific aspects on fare transparency were discussed under other items of the agenda.

2.4. EU Consumer Sweep on OTAs The Secretariat presented briefly the on-going sweep conducted by the National Enforcement Bodies (NEBs) in all Member States. An "EU - sweep" is a joint EU enforcement action to check for compliance with the Regulation on Air Services (EC) No 1008/2008 and the Unfair Commercial Practices Directive 2005/29/EC.

7 The NEB investigated on three key practices: • Clear Pricing: Prices must include all non-optional taxes, fees, charges and surcharges. The price should be displayed, in a clear and intelligible manner, with the breakdown of the different charges and fees. It should include any administrative or booking fees. • Availability: Any conditions attached to the offer, particularly limitations on availability, should be clearly indicated. • Fair Contract Terms: general Contract Terms must be clearly indicated, easily accessible and in an intelligible language. Any optional elements should be proposed on an opt-in basis. The SRF delegate indicated that this sweep has been conducted in Sweden in July and some of its members had already received notifications of non-compliance of their websites with the Swedish consumer legislation. One of the biggest problems was that the airlines’ conditions of carriage were not always available, could be extremely difficult to access, especially as the travel agent has to keep the links to the websites of the air carriers up-to-date. Another problem is the fact that the conditions of each ticket (is the ticket refundable, is there any catering, what are the baggage allowances, etc.) are not easily accessible for the travel agent due to how the information is loaded by the air carriers into the GDS systems. Furthermore, the terms are seldom translated into the language of the country. The Chairman informed the AMC that they were also starting a dialogue with the NEB in Norway. The ABTA delegate said their members were being contacted by the NEB in the UK with members trying to link to the airlines’ websites. The ANVR delegate pointed out that consumers were not really interested in the breakdown of the price (though it is a requirement under EU legislation) and the availability of the conditions of carriage was not a problem in the Netherlands since they are centralised on the website of the ANVR. The SRF delegates reminded that such breakdown was important in the event of a refund. The Chairman recalled that there should not be different rules between airlines and others when selling tickets. The SRF recalled that the additional services provided by airlines are also very hard to display in the GDSs. The delegates of the joint AMC/TWG recommended to put on the agenda of the next PAPGJC/PAConf meeting the following issues: - Availability of condition of carriage in all languages of countries where the airline has sales - Codes for luggage fees, taxes, fees, ancillaries, etc. to be able to break down the fare - Availability of basic information (such as luggage, catering) through the GDS

2.5. Non-discriminatory access to air fares The Dutch delegate reported recurring cases of discrimination against agents: The fares on airline websites and GDSs may be the same but not their availability. This happens mostly on fares for flights operated outside of the carrier’s hub. The Dutch delegate noted that today travel agents have a system in place where they can check the fares in all markets, but this should not be necessary. There are even airlines which issue an ADM where an agent buys a ticket for a client in a country other than his home country to match the webfare of the airline. It was noted that this is not discrimination against travel agents on basis of place of establishment, but discrimination between airline websites and other distribution channels, such as GDSs. The travel agent has the possibility to book the fares on the airline website. Such discrimination is not covered by EU legislation. Big companies can solve this problem by ticketing in an office located in another county and queue the e-ticket back to travel agent. But small agents cannot do this. The delegates of the joint AMC/TWG recommended Members to check and report back to the Secretariat about such discrimination cases. If a large number arise, then ECTAA to act.

8 3. ANY OTHER BUSINESS

3.1. Airline surcharges The Belgian delegate raised two issues in relation to airlines’ surcharges:  International fuel and security surcharge, YQ and YR, are indicated separately from the fare in the tax box. Unlike government taxes, they are non-refundable whenever the fare is non- refundable, even though it’s in the tax box. A major concern for all travel agencies and very hard to explain to customers.  Lufthansa group’s selective application / increases of the fuel surcharge. A recent surcharge increase was not implemented for economy class nor for inter-European flights but only seems to concern long-haul flights. As there had been no recent increase in the fuel prices, the Lufthansa group seem to have disconnected the fuel surcharge from the fuel price raise. The Interim Chairman noted other airlines differentiated on fuel surcharges and that IATA had originally sent instructions to airlines to include all fuel surcharges in the fare. But airlines chose not to include it. ECTAA’s line has always been that if airlines split the fare and show surcharges separately from the fare in the tax box, then the surcharges must be refundable. There are various reasons why airlines display surcharges in the tax box. One is to have a lower base fare when comparing between competing fares; it is easier to change taxes than to change fares through ATPCO; it does not attract any VAT for domestic air transport, etc. The Romanian delegate doubted the legality of the surcharges in the tax box. The delegates of the joint AMC/TWG considered that for agents it was better for airlines to include the surcharges in the fares, as it is easier to communicate to passengers that where a ticket is non- refundable the surcharges cannot be refunded either. The French delegate informed that there is a new French law making the refund of taxes mandatory, without the airline being able to charge an administration fee.

3.2. OTA requirement to provide an IATA guarantee The Swedish delegate informed that OTAs, which fulfills the financial criteria in Sweden, have to provide a financial guarantee in Denmark and other Scandinavian countries. They use the same BSP but different accounts for different currencies. The Interim Chairman said she would look into this in the UK, where OTAs may have the same problem operating in the UK and in Ireland with different currencies.

3.3. PAPGJC representation The Interim Chairman advised that Tony Berry, who is one of the ECTAA representatives on the PAPGJC, has resigned from his position. He will be replaced by another candidate.

4. Next meeting The next AMC/TWG will take place in January or February 2014.