The dogfight over airline passenger claims

February 19, 2020 / By mobanmarket

The dogfight over airline passenger claims

Airlines want to change current laws, but claims agencies argue for keeping things as they are.

Imagine your holiday flight gets canceled at 11 p.m. Are you entitled to compensation? Accommodation? A meal?

The EU has rules spelling out when and what airlines have to pay dating back to 2004, but there’s so much dissatisfaction about their clarity that the Commission is under pressure to reform that regulation as early as the end of this year. Brussels proposed a revamp in 2013, but it’s been stalled thanks to a fight between Spain and the U.K. over Gibraltar airport.

In one corner are the airlines. They claim the current passenger rights regime is too harsh and too expensive, as it forces them to pay compensation of €250 for canceled short-haul flights and €600 for long-haul flights for reasons they argue are out of their control.

“If you go to the movies and you are held up for half an hour, no one would sue the theater. But the reality in aviation is that we have ill-fitting legislation,” said Pieter Elbers, CEO of Dutch airline KLM, at a Brussels event in March.

The airlines are opposed by claims agencies — businesses that have sprung up to help passengers get airlines to cough up the cash. They like the current legislation just fine because frustrated passengers feel they have no recourse but to seek outside help in pursuing compensation claims.

A European Court of Auditors (ECA) report published last year found that 50 percent of claims filed at some airlines were handled by claims agencies.

The 2013 reform proposal — which the airlines back — would pay compensation after a five-hour delay, not the three hours under current rules. It would also cap the number of nights and the amount passengers would be compensated in case of cancellations.

The auditors’ report recommended a third option, which is backed by consumer rights groups but opposed by airlines and claims agencies alike. It suggests that the Commission adopt automatic compensation, which would lessen the burden on passengers to seek redress. The Commission has promised to look at the idea.

The debate is heating up ahead of Brexit. With the U.K. out of the EU, the Gibraltar issue stops blocking Council action.

A lobbying battle

This month, the Association of Passenger Rights Advocates (APRA), the lobby group for claims agencies, intensified its campaign against the Commission’s 2013 proposal. It accused Brussels of kowtowing to airlines and not enforcing existing legislation in a deliberate ploy to justify its revision.

“With the overwhelming amount of research and data supporting the current version of [the regulation] … we must question why the EU Commission wants to push forward the change — and where its integrity went,” APRA said in a statement.

But it’s not just the Commission pushing for change. There is a widespread sense that Europe’s aviation industry has changed dramatically since 2004. The regulation’s language is also fuzzy enough that courts have become involved in figuring out when carriers should pay.

The law says that airlines are not obliged to compensate passengers for delays or cancellations in “extraordinary circumstances” outside the airlines’ control.

In many cases, however, European and national courts have had to decide what counts as an extraordinary circumstance and what doesn’t: unannounced strikes (no), technical defects in the airplane (no), bird strikes (yes), and even loose screws (yes).

The current law, airline lobby A4E argues, is “too detailed and prescriptive and, at the same time, too vague on essential points.”

The auditors’ report found that while passenger rights laws are comprehensive enough, consumers often don’t know their rights and airlines don’t tell them. But its call for automatic compensation is being rejected by both airlines and claims agencies. For airlines, it would mean even more payouts. For claims agencies it could destroy their business model.

“The idea is applaudable, but very difficult to implement in reality,” said Christian Nielsen, APRA’s president, in an interview, citing potential privacy and anti-trust issues if booking agencies and airlines begin sharing credit card information to implement the policy.

‘Claims chasers’

Airlines insist that the current system is broken and that claims agencies are part of the problem. Ryanair calls the agencies “claim chasers” who are “deliberately and needlessly dragging consumers through the courts,” and says that they provide “no useful service whatsoever.”

Critics point to the agencies’ aggressive marketing campaigns and high, sometimes hidden, prices. The auditors’ report found that some claims agencies demand up to 50 percent of the compensation passengers are entitled to. And in some cases, the agencies filed claims without the passengers’ knowledge.

In 2017, the Commission put out a notice pointing out “a number of allegations of incorrect practices and misbehavior” — including a lack of transparency regarding pricing, not producing a clear power of attorney, aggressive telemarketing and unlawful data-sharing.

“Every industry has a few bad apples, but this must not blemish an entire sector,” APRA responded, calling the Commission’s notice “rather negative” and “unjust.”

The agencies argue they fulfil a valuable service, not only by getting money for passengers, but also by providing data on airline compensation practices. Under current laws, airlines are not obliged to provide such information.

Consumer rights advocacy group BEUC wants reform. The group did not say whether it supports or opposes the 2013 proposal — it issued a position paper welcoming some of the bill’s proposals and criticizing others — but did say that the status quo is unacceptable.

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“We believe that if the system to protect air passengers worked well, there wouldn’t be any need for claims agencies,” said Patrycja Gautier, BEUC’s legal officer.