Overbooking in airlines and its legal regulation in Peru

Published byBarreda Moller

Firstly, we must state that overbooking in airlines refers to the sale of more airline tickets than those allowed by the flight capacity, that is, it refers to the sale in excess of an air transport service as against the true capacity of the company rendering said service.

In aviation, the term overbooking is used when an air company has sold more reservations than those corresponding to the true capacity of the airplane, and an excess of clients appears, to which the airline company cannot render the offered air transport service. This practice is an international business strategy according to which sellers expect that some purchasers of airline tickets will cancel the reservation or will not be on time to board the contracted flight. The overbooking practice guarantees that 100% of the available offer of an airplane will be used, giving as result the maximum return on the investment.

As consequence of the internationally covered incident occurred in a United Airlines flight, in which a passenger was violently forced to leave his seat due to overbooking, it has been laid open to discussion if this business practice is legal in Peru and under which parameters this situation could occur.

The answer is that the business practice of overbooking by air companies that operate in our milieu is totally legal but also subject to sanctions previously established by law. We explain:

Overbooking is regulated and allowed by the Civil Aeronautics Law of Peru (Law No. 27261), and internationally is a very frequent and extensively used modality. Nevertheless, it is worth mentioning that not all Peruvian airlines implement this practice, although they have the legal possibility of using this business option.

Overbooking regulation in the Civil Aeronautics Law of Peru (Law No. 27261) is mainly established in Articles 125.4, 125.5, 126.1 paragraph C and 126.2.

Moreover, there is in parallel other legal regulation in our country which also regulates the overbooking of airline tickets; we refer to the applicable legislation on consumer protection, specifically the Code of Protection and Defense of Consumers (Law No. 29571). This law establishes the rights of consumers in our country and clearly regulates the obligations of providers, establishing in Article 19: “The provider is responsible for the suitability and quality of the offered goods and services, for the authenticity of trademarks and legends shown by the offered goods or the mark which supports the service provider, for the lack of coincidence between the advertising of the goods and services and the goods and services as such, as well as for the content and expiration date of the good indicated on the container, as appropriate.”

Moreover, Title V of the cited Code of Protection and Defense of Consumers (Law No. 29571) includes rules relating to civil and administrative liabilities, and also sanctions regarding consumer protection; these rules are totally applicable in cases where overbooking occurs, being prejudicial to the user who is unable to receive the contracted air transport service.

Moreover, it is important to state that Article 107 of the cited Code of Protection and Defense of Consumer (Law No. 29571) establishes who can initiate a sanctioning proceeding regarding consumer protection, in cases where the user of an airline service is affected or prejudiced by the overbooking practice: “Administrative proceedings in cases of alleged infringement to provisions contained in the instant Code can be initiated by the trademark authority’s own initiative (sua sponte), by complaint of the affected consumer or whoever could be potentially affected, or by an association of consumers on behalf of its associates or mandators or in defense of collective or diffuse interests of consumers.”

It is also important to mention that infringements related to the rules of said Code of Protection and Defense of Consumer (Law No. 29571) prescribe after two (02) years counted from the day when the infringement would have occurred or ceased to occur if it were a continued infringement.

In conclusion, as recently recognized by the national authorities of consumer protection, there are two regulations in relation to airline ticket overbooking: civil aeronautics regulation and consumer protection regulation. The first states that airline ticket overbooking is allowed but in return the passenger must receive food, accommodations, money, inter alia, by way of compensation.

On the other hand, consumer protection regulation understands airline ticket overbooking as a non-idoneous service, and therefore, it can be sanctioned in several ways established by law.

Finally, it is necessary to specify that consumers who consider that they have been affected in Peru by overbooking, and wish to receive monetary compensation for breach of contract of the airline company rendering the service, must resort to the Judiciary through an action which is different from the action which is prosecuted before the administrative authorities of the Trademark Office.