Surviving Brazil A primer on Brazilian Aviation and
Surviving Brazil A primer on Brazilian Aviation and Consumer Protection Regulations WACRA Chicago - September 16 th, 2013 Marcio Souto Jessica Rossman
Brazil facts
The largest country in Latin American The world's fifth largest country (geographical area and by population) Population: 198 million Official language: Portuguese 6 th world economy 76 International Air Carriers are authorized to operate flights to Brazilian civil aircraft fleet: over 10, 000 units in operations. Brazil has the world’s second largest executive helicopters fleet FIFA Soccer World Cup 2014 Olympic Games 2016
Brief history of Consumer Protection 1700 BC - The earliest known statement of consumer rights is the Hammurabi's Code , including 282 laws regulating relationships in Mesopotamia. Merchants and businessmen had to guarantee the quality of their goods and services by correcting defects at their own expense. The penalty for non compliance would be their own life. 1962 - President JFK (US) delivered a speech to Congress in which he outlined four consumer rights: the right to safety, the right to be informed, the right to choose and the right to be heard.
In 1981, the United Nations Economic and Social Council (ECOSOC) "requested the Secretary-General to continue consultations on consumer protection with a view to elaborating a set of general guidelines for consumer protection, taking particularly into account the needs of the developing countries". In 1983, draft guidelines for consumer protection were submitted to ECOSOC in response to its request. Following extensive discussions and negotiations, the Guidelines were adopted by consensus resolution of the United Nations General Assembly on April 9 th, 1985. They have since been amended by the addition of a new section on sustainable consumption on July 26 th, 1999.
What is Consumer Protection? Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade competition and the free flow of truthful information in the marketplace.
Brazilian Consumer Protection Legislation The Federal Constitution states that the Government shall provide “for the defense of the consumer”. In 1990 the Consumer Defense Code (CDC) came into force, recognizing the vulnerability of the consumer, seeking to restrict abusive practises and establishing general rules for any service and products offered in the Brazilian Market.
Since CDC came into effect, what happened in Brazil to justify a high increase of passenger claims?
Social pyramid becomes a diamond Source: BGN Cetelem/BNP Paribas Group
Impact on Brazil’s domestic aviation market 2002: 33 M air tickets sold 2012: 86 M air tickets sold Growing middle classes access to air travel Traffic at largest 20 airports expected to triple by 2030
WHY BRAZIL AND DEVELOPING COUNTRIES ARE DRAWING ATTENTION? Because they are in a position where a small increase in the gross domestic product per capita income can translate into a substantial increase in air travel per capita per year.
Aviation claims and litigation increase § Many more Brazilians flying: 200 M population over ¾ are classed ABC = passengers § Airlines’ customer care remedies - limited/slow § Public awareness of generous court awards: media, internet and Government incentive for consumer protection improvements § Easy access to justice: small claims courts (JECs) spread all over Brazil (JEC at airports)
Who is considered a consumer and a supplier under the Brazilian CDC?
Consumer is any person or corporate entity which acquires or use a product or service as a final user. Supplier is any person or corporate entity involved in the activities available in the consumer market, including services and products.
Stated goals of CDC • • Transparency Protection against misleading or abusive advertisements Contractual guarentees Effective prevention and reparation for damages, including moral damage • Access to justice and administrative specialized entities • Quality public services • CDC does not exclude any rights given by international conventions ratified by Brazil
Main aspects of the CDC § Supplier liability regardless of the existence of guilt § Reversal of the burden of proof § Collective suppliers liability (all parties involved) § Right of regret within 7 days for sales made outside a physical location § Information shall be clear, direct, precise, comprehensive, and in the Portuguese language regarding the characteristics, qualities, quantity, price and others
CDC exceptions § Consumer’s fault § Third party fault § No exceptions for Act of God or Force Majeure
Legal Conflict – Montreal X CDC Constitution - Article 178. “Transportation by air, water and surface shall be regulated by law and the Treaties signed by the Government shall be observed with respect to international transportation, subject to reciprocity” CDC does not allow any clauses that remove, exonerate, or diminish the supplier’s liability for defects of any nature in the products or services delivered. The rights set forth in CDC do not exclude any others that may come as a result of international treaties or conventions ratified by Brazil.
How Courts address the conflict on passenger litigation? § Courts have ruled that the CDC trumps the limitation of liability governing international treaties; § Courts acknowledge conflict among the CDC, International treaties and the Federal Constitution; § Courts have ruled that Montreal is in force but the limitations are incompatible with the constitution and the CDC prevails as general law.
Samples of excessive damages that have been granted by Brazilian Courts. Source IATA based on two US major carriers Type of Claim Actual Damages Per Passenger Moral Damages Per Passenger Seat Problems None Awarded $630. 00 Samples of excessive damages that have been granted by Brazilian Courts. Source IATA based on two US major carriers Baggage Delay; Flight Cancellation Flight Delay/Lack of Assistance Flight Delay $370. 00 $5, 750. 00 $2, 040. 00 $2, 020. 00 None Awarded $12, 500. 00 Cancelled Flight Due to Air Traffic Controller Strike $150. 00 $5, 500. 00 Flight Cancellation due to weather $520. 00 $5, 500. 00 Luggage arrival delayed 5 days $716. 00 $5, 500. 00
Samples of Irrational Decisions ruled by the CDC § Husband wife on the same flight, but filed separately. LAX to DTW flight diverted due to a medical emergency on board. It was a delay of 50 minutes, sufficient to misconnect DTW-GRU. Ticket Price: BRL 2. 050 Award - BRL 14. 170, 00 per pax. § Claimant scheduled an appointment in ARN at 9: 00 AM. His ATL-AMS (DL 174) flight was scheduled to arrive at 5: 55; he would connect AMS-ARN at 6: 50. DL 174 arrived with an hour delay. Was protected on a flight departing at 10: 15 AM. Ticket Price: US$1, 490 Award BRL 49. 840, 00 for moral and material damages. Claimant is a public prosecutor. § Flight cancellation due to mechanical (GRU-ATL); hotel accommodation provided was far from the airport; unable to extend their trip by one day because there were no seats available on return flight, instead they decided to stay on two days but had to pay expenses out of pocket. Ticket Price: BRL 1. 345 Award: BRL 18. 187, 87 per pax.
Why large awards in Brazil for small claims? § Lower court judges unfamiliar with aviation legislation - accustomed to application of consumer law § CDC has no limitation and reverses burden of proof § Desire to compensate aggrieved consumers (and punish poor service providers) § Quantification of moral damages - discretion of Judge § No binding guidelines/regs on quantum damages
Regulatory The National Civil Aviation Agency (ANAC) is the Brazilian civil aviation authority, created in 2006, part of the Brazilian Secretariat of Civil Aviation. ANAC is responsible for regulating safety and security matters related to civil aircraft and its components, personnel licensing, operations and aerodromes. Any draft of new regulation is subject to a Public Hearing, opportunity that any individual may contribute.
Most relevant ANAC directives in force that impact passenger transportation in the Brazilian Market § 138 – Sales and Ticketing § 141 – Delays, Cancellation and Involuntary Denied Boarding § 196 – Service in person, by telephone and web § 218 – Notice of flight delay and cancellation percentage § 280 - Passengers with special needs to air transportation services (in force since 2014)
ANAC Resolution 138 keys: Stated goal of Resolution: Transparency during the sales process. § The fare quote shall match the fare display § No additional separate charges (including YQ and Q) for Brazil POO § Additional restrictions on ancillary charges and taxes § Requirements for the ticket receipt
ANAC Resolution 141 (BR EU 261) Stated goal of Resolution: Passenger care during: § Flight delay § Cancellation § Involuntary Denied Boarding (IDB) Passengers are entitled to gradually receive care by airlines including meals, communications, accommodation and new flight.
Mandatory Care under Resolution 141 § one hour: communications (Internet, phone calls, etc. ); § two hours: meals (voucher, snacks, water, etc. ); § four hours: accommodation or lodging (if applicable) and transportation; § If you are in your domicile, the airline may only offer transportation to your residence and from there to the airport again. § If a flight delay exceeds 4 hours (or if the airline is already aware that the flight will be delayed for more than 4 hours) or in cases of cancellation or denied boarding, the airline must also offer the passenger other alternatives, such as:
Delays over 4 hours – Passenger options: Airport of origin § Full refund, including airport tax. Additional Care not required. . § New flight to any date, at no cost. Care may be suspended. § Board on the next flight offered by the same airline (reaccomodation on OA is not mandatory) to the same destination, subject to availability. Additional Care requirements apply. Stopover or connection airports § Full refund and return to the airport of origin at no cost. Additional Care requirements apply. § Stay at the location where the interruption occurred and refund the ticket unused portion. Additional Care not required. § Board on the next flight, offered by the same or other airline, to the same destination, subject to availability. Additional Care requirements apply. § Conclude the travel by other means of transportation. Additional Care requirements apply. § New flight at no cost for date and time of passenger convenience. Additional Care not required
Flight Cancellation and Passenger Denied Boarding – Passenger options: Airport of origin § Full refund, including airport tax. Additional Care not required § New flight to any date, at no cost. Care may be suspend. § Board on the next flight, offered by the same or other airline, to the same destination, subject to availability. Additional Care requirements apply. § Conclude the travel by other means of transportation. Additional Care requirements apply. Stopover or connection airports § Full refund and return to the airport of origin at no cost. Additional Care requirements apply. § Stay at the location where the interruption occurred and refund of the unused portion. Assistance may be suspended. § Board on the next flight, offered by the same or other airline, to the same destination, subject to availability. Additional Care requirements apply. § Conclude the travel by other means of transportation. Additional Care requirements apply. § New flight at no cost for date and time of passenger convenience. Additional Care not required.
Involuntary Denied Boarding In event an involuntary denied boarding is unavoidable carrier must ask for volunteers who would agree to board at another flight, by offering compensation (money, credits, miles or others). If a customer accepts the compensation, the airline may require to sign a receipt stating that the settlement was reached and, legally, will not be considered an overbooking or an involuntary denied boarding.
Other specific rules under 141: § Passenger may ask the airline for a written information about the flight delay, cancellation or IDB. § Information requirements (delay cause, reschedule or cancellation and updated departure time). § Care, rerouting and refund mandatory in event of weather or ATC. § For multiple carriers and flights issued on a single ticket, the airline operator that caused the misconnection is liable to accommodate the passenger on another flight and offer care. § Any refund request must be processed immediately upon pax request. § Notices are required to be posted by carrier at airport.
Resolution 196 – Service in person, by telephone and by the internet Stated goal of Resolution: Enable free and continuous access to service channels intended to receive and process customer complaints § Service in person. Valid for carriers transporting over 500 K passenger traffic per year at the same airport § Electronic Complaints § 24/7 toll free telephone number for complaints (Reinforced by a Federal Contact Center Decree). Calls must be recorded. § Resolve customer complaints within 5 business days § Notices are required to be posted at the website and ticket receipts.
35 Resolution 218 Stated goal of Resolution: Publication and information of flight delay and cancellation percentages of regular flights. § All flights to, from and within Brazil § Delays of 30 and 60 minutes or more § Offered personally or by telephone, upon passenger request § Mandatory at web upon availability request § Mandatory notice
Resolution 280 (coming into effect JAN/14) Stated goal of Resolution - Procedures relating to the accessibility of passengers requiring special assistance (PNAE). § § § PNAE means PAX with disabilities, + 60 years, pregnant, nursing mothers, PAX travelling with lap child, handicapped and PAX with limitation in its autonomy. Unlimited PNAEs per flight The carrier must provide a PNAE escort free of charge or offer 80% discount to a travel companion in case of PNAE’s traveling on a stretcher/incubator, mental or intellectual impairment, cannot meet the flight safety instruction or cannot meet physiological needs without assistance. Full assistance to PNAE starting at Check-in to the airport public area upon arrival, including assistance with carry on, transfer between flights, transport to toilets, checked baggage handling and others PNAE advance notice of 72 hrs for escorts and 48 hrs for special assistance Other requeriments
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