Regulation 261/2004 on air passenger rights: the need for reform
Study on the current level of protection of air passenger rights in the EU
The European Commission has published a Study on the current level of protection of air passenger rights in the EU. This Study consists of an in-depth analysis of the main evolutions in air passenger rights since the 2013 EU Commission proposal for the revision of Regulation 261/2004. The findings of the Study reflect the progression of the air travel market and the necessity to clarify the present air passenger rights law, Regulation 261/2004. This Study provides information on different topics, such as the carrier and airfield perspective on air passenger rights, the role played by National Enforcement Bodies (NEB), the development of air passenger rights outside the EU or the impact of airline insolvencies on passengers.
This article will only focus on:
- The quantitative update on the passenger rights situation within the European Union.
- The cost to Airlines
- The role played by claim agencies.
Quantitative update on the air passenger rights situation within the European Union.
Main findings regarding the air passenger rights situation within the European Union:
- Increase of the number of flights disrupted in terms of cancellation and delays over two hours. Between 2011 and 2018, cancellations grew from 1.0% to 1.7% of flights and delays grew from 0.9% to 1.4% of flights. This increase corresponds with increasing levels of ATM delay generated in the Single European Sky.
- Causes of delay across airlines and across the system vary. It is nevertheless important to underline that a small overall reduction in airline attributable delay has been observed.
- Increase in awareness from passengers of their rights. Thirty-eight percent of eligible passengers claimed compensation in 2018 while in 2011 they were up from 8%.
- Large disparity between claims rates in 2018 for cancellations (under 20%) and delays (close to 60%).
A costly Regulation for airlines
Regulation 261/2004 represents a considerable cost for airlines. According to this Study, the costs incurred by airlines through the implementation of Regulation 261/2004 has grown significantly since 2011. ‘The average direct cost per passenger is estimated to have increased at a compound annual growth rate (CAGR) of +13.6% from €1.8 in 2011 to €4.4 in 2018 (…)’.
This cost increase can be explained by:
- ’(…) a combination of increased levels of disruption and increased claim rates for compensation.
- The interpretation by the Court of Justice of the European Union of the concept of extraordinary circumstances and the scope of application of Regulation 261/2004.
- The absence of the right to redress for airlines within Regulation 261/2004. Airlines “(…) are not able to recover costs for care and compensation that they might have incurred from third parties (e.g. from airports, ANSPs, ground handlers and other parties) where these may have contributed to the disruption.”
The consequence of the cost increase is that airlines internalized these costs with an impact on their profitability, or externalized them as an increase in fares.
The Role played by claim agencies
This Study provides information on the role played by claim agencies. Although claim agencies charge fees for their services, the proportion of claims received from claim agencies by airlines is “(…) ranged from between 10% to 50%, with most airlines reporting a proportion between 30% and 40%.”
The Study contains different topics critically highlighted by various stakeholders, including airlines, about the practice of claim agencies, such as their marketing practices, their lack of value-added or their shortage of transparency. Although this Study provides information on claim agencies, it does not reflect the current practice of all claim agencies as only the members of the Association of Passenger Rights Advocates (APRA) have contributed to this Study.
Finally, the lack of regulation on the activities of claim agencies in some EU Member States conducts to legal uncertainties and unfair practices from claim agencies.
For more information, this Study is available on this following link: https://ec.europa.eu/transport/themes/passengers/news/2020-01-13-air-passenger-rights-study_en
The future modification of Regulation 261/2004 should better balance the interests of both airlines and passengers. The compensation mechanism should be review to reduce costs of airlines. Furthermore, no uncertainties should exist concerning the obligation for airlines to compensate, which means an exhaustive and non-ambiguous list of extraordinary circumstances has to be adopted. Finally, a solution to the increasing development of claim agencies should be adopted.