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September’s Aviation Intelligence Reporter discusses how some issues can still bring the airline industry together, despite their many rivalries and disagreements. Time to add to that list the issue of passenger compensation.
June saw the publication of the European Commission’s latest interpretive guidelines for Regulation 261/2004. More commonly, this is known as the legislation that entitles air passengers to compensation and assistance in the event of a delayed or cancelled flight. It was followed shortly after by the response of the collective will of Europe’s airlines.
Despite the clarifications provided, IATA remains scathing of the regulation. IATA, like its other airline association colleagues, believes that many of the rules are unnecessarily harsh for airlines. So we are stuck, as ever, in a war of words.
As is well publicised, air passengers are entitled to a refund, refreshments and overnight accommodation in the event that their flight is significantly delayed or cancelled. They may also be entitled to financial compensation if the delay exceeds three hours, or if the flight is unexpectedly cancelled (provided that the cause of this delay or cancellation in within the control of the airline – a definition that, thanks to the European Court of Justice (ECJ) has a broad interpretation). This is the bit that really annoys the airlines.
In some cases, the amount of compensation a traveller can receive is more than the cost of the original airfare. A passenger on a short-haul flight that is delayed more than three hours for reasons the ECJ considers are within the airline’s control can receive €250 in compensation. Longer journeys trigger compensation of between €400 and €600.
In this respect, we have some sympathy for the airlines. Not that they are without fault. Submissions full of hyperbole do nothing to help the airlines’ case, nor do attempts to wriggle out of paying out passenger compensation whenever possible and a lack of constructive suggestions. But there is not denying that the Commission’s regulations are flawed.
One thing that stands out is that the way the compensation is determined for air travellers differs completely from those of passengers travelling by rail, ship and bus or coach. In these cases, the compensation the passenger may receive is based on 50% of the cost of their ticket.
This begs the question, why is it different for air travellers? The answer, we suspect, lies within the airlines themselves and their frankly dismal historic treatment of passengers. Airlines’ conditions of carriage being a case in point. These have done nothing to persuade politicians not to come down hard when it came to deciding on passenger protection. Airlines are also partly to blame by failing to address the issues head on when confronted by their regulator, under pressure by politicians to Do Something in response to some outrage or another. This is a particularly acute issue if the outrage happens within close range of an election.
The situation is not helped by the ECJ. Some of its rulings relating to the regulations defy belief, and are constantly, to the maximum extent possible, pro the consumers. Did the airlines seat their Honours beside young children one too many times, or fail to load their vegetarian specials? There is no other logical reasoning that can follow many of their judgements.
But, in order to help the airlines, let’s approach this from a pragmatic view.
First, the airlines do have a fair point that compensation should not exceed the original cost of the ticket. There is no fundamental reason why air travel should be treated different from transport by rail, water or road.
Second, in the liberalised European aviation market, passengers have a choice of airline. Not satisfied with the on-time performance of a particular airline? Fly with another one. The benefit of liberalisation is not only that passengers have choice, but also that airlines have strong incentives to provide the service their passengers demand. It also calls for transparent and quality data on on-time performance so that consumers can make an informed choice.
Some protection is still required to protect passengers (as it is in most industries, where consumer protection law exists). But there is no need to be unnecessarily harsh to airlines. That is, unless you think there is an issue with competition in the airline industry.
Third, insurance markets exist for those who place a high value on the disruption that might be caused by a delay or cancellation. From an economic view, this is an efficient solution as it has the added benefit of better reflecting the cost to individuals of the delay or cancellation, rather than issuing a fixed amount for every passenger regardless of how much they are affected. Again, that is not to say that some sort of consumer protection should not exist, but that the somewhat arbitrary compensation figures should be reconsidered.
A change in the legislation is unlikely any time soon. Starting a conversation about the necessary changes could quickly become tricky. For an airline, to publicly criticise this aspect of the regulations would be to give the impression that you don’t care about your customers. Unless you’re Ryanair – or at least the Ryanair of old – that is generally not the image airlines want to portray. Meanwhile, politicians similarly are hesitant to change regulations that are designed to benefit their electorate, regardless of how soon an election is.
