Airlines fight new EU passenger compensation legislation

Saturday, February 19, 2005

Airlines have attacked new EU legislation which will force them to pay greater compensation to customers in the event of overbooking, cancellations and delays.

Consumer groups have praised the new rules, which set the level of compensation between €250 and €600 depending on the circumstances and the length of the flight. "This is some comeback for passengers who have been inconvenienced," James Fremantle, industry affairs adviser for the Air Transport Users Council, told Reuters. Before this legislation came into effect, passengers "bumped" from a flight could claim between €150 and €300.

The new rules apply to all scheduled and chartered flights. Previously only scheduled flight operators were obliged to offer compensation in cases of overbooking— they did not have to extend compensation to travellers affected by flight cancellations. Low cost airlines have criticised the new compensation levels arguing that the compensation paid will exceed the price of the ticket.

The effort by the EU is to discourage airlines from deliberately overbooking flights, a practice which has become routine for most major airlines. Overbooking often leads to "bumping", where passengers who cannot be guaranteed a seat are moved to a later flight. In future when this happens airlines will have to offer compensation. Additionally, if flights are cancelled or delayed by more than two hours all passengers must be compensated. This will be the case except in "extraordinary circumstances", the definition of which may or may not include bad weather, security alerts or strikes.

"It's a preposterous piece of legislation, we among all airlines are fighting this," Ryanair deputy chief executive, Michael Cawley told BBC radio 4's Today programme. It has also been claimed that the advice may mislead customers by having them believe that they may be entitled to compensation if flights are delayed due to bad weather.

Marja Quillinan-Meiland, European Commission spokeswoman has said that there are "grey areas" but added "these are not as big as the airlines are making out." Disputed cases would be heard by national enforcement bodies which would decide if there is a case to answer.

European Regions Airline Association (ERAA) director of air transport Andy Clarke said "we reckon it's going to cost European air passengers – not the airlines, the airlines have no money, it has to be paid by the passengers – 1.5bn euros, that's over £1bn a year loaded onto European passengers. That's basically a transfer of money from passengers whose journeys are not disrupted to passengers whose journeys are disrupted."

These extra costs may also lead to carriers cancelling routes to areas that have been identified as problem destinations.

The European Low-Fares Association (ELFA) is mounting a legal challenge to the laws. ELFA and International Air Transport Association expect a ruling from the European Court of Justice in fall of 2005, until then airlines have said they will comply with the regulations.