Fellow, St John’s College, University of Oxford
The enactment of Regulation 261/2004 on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights has been one of the most successful areas of EU action in the field of consumer protection. At the same time, its provisions have shown their potential to impose significant additional cost on operators, thus leading to persistent compliance problems as airlines repeatedly challenge the validity and interpretation of the Regulation. On March 13, 2013 the European Commission finally heeded calls for reform, putting forward a proposal for a new Regulation to amend and extend the existing regime.
There are two broad aims pursued by the Commission’s proposals: the clarification and fine-tuning of the existing Regulation 261/2003, and the introduction of a suite of new passenger rights, underpinned by measures aimed at ensuring the effective application of air carriers’ obligations. The first part of this post sets out the key changes, in particular where the proposals relate to existing provisions as interpreted by the Court.
Clarification is proposed in the following areas:
- Definition of key terms
The definitions in Article 1 of the Regulation are updated and extended, frequently in order to take account of relevant case law. ‘Cancellations’, for example, now explicitly includes flights that have departed but subsequently had to divert or return to the airport of departure, as held by the Court in Case C-83/10 Rodriguez v Air France.
- Information obligation
The current Article 14 obligations do not explicitly include a duty to provide information about the actual delay or cancellation. Under the proposed scheme, such information would have to be provided at the airport, after a duration of no more than 30 minutes.
Compensation for delayed passengers was excluded from the right to financial compensation in the original provisions, but later interpreted into the Regulation in Case C-402/07 Sturgeon on grounds of non-discrimination. The proposed Regulation confirms this ruling and puts delay compensation on a clear legislative footing. Proposed trade-offs include higher time thresholds before delay compensation becomes payable (up from the current 3 hours to 5 hours on intra-EU flights, 9 hours for flights of less than 6,000 km, and 12 hours for longer distances), and a general cap on the provision of airport assistance.
It furthermore introduces an explicit right to disembark after 5 hours of tarmac delay, and in a new Article 6a confirms last month’s ruling in Case C-11/11 Folkerts v Air France [see here for a case comment] that in case of missed connecting flights, delay is to be measured at arrival at the ultimate destination, even if the departing flight was not delayed beyond the limits set out in the Regulation.
A new Article 8 makes explicit passengers’ right to be accommodated on other airlines after a delay of 12 hours. Air carriers are protected against exorbitant last minute prices by limiting the amount another operator can charge for such rebookings to a three-month average price for the relevant route.
- Extraordinary Circumstances
Under Art 5(3) of the Regulation, airlines are exempt from paying compensation if the relevant event was due to ‘extraordinary circumstances’. This provision has been the source of significant litigation, in spite of an early and clear indication by the ECJ in Case C-549/07 Wallentin-Hermann v Alitalia that the defence was to be interpreted narrowly. The proposed clarification is closely modelled on paragraph  of that judgment, suggesting that it should mean ‘circumstances […] not inherent in the normal exercise of the activity of the air carrier concerned, and […] beyond its actual control’. A potentially significant limitation to this would be Art 3(b), under which carriers can only invoke the defence ‘in so far as [the extraordinary circumstances] affect the flight concerned or the previous flight operated by the same aircraft’. A non-exhaustive list of examples set out in Annex 1 includes natural disasters, security risks, ATC restrictions and labour disputes.
While the attempt at clarification is most welcome, it remains questionable whether it will lead to any significant changes in terms of uncertainty, and thus litigation: where, for example, is the line to be drawn with ‘meteorological conditions incompatible with flight safety’?
The Proposed Regulation furthermore introduces the following New Rights:
- Multi-Modal Transport
Through the provisions of Art 2(b), the scope of Regulation 261/2004 would be extended to all modes of transport (including helicopter flights) which can be treated as a ‘connecting flight’.
If a flight is rescheduled less than two weeks before its planned departure, the passenger comes within the full scope of delay and cancellation protection.
- Misspelt Names:
Art 3(b) provides that up to 48 hours before departure, misspelt names have to be amended free of charge, as long as this does not result in a re-routing or change of passenger. This provision is potentially problematic where the ticket in question has to be re-issued, particularly in case of complex multi-carrier itineraries.
Art 3(b) further provides that an airline cannot deny boarding to passengers attempting to use only the return portion of their ticket. This provision is discussed in more detail in the subsequent section.
The Montreal Convention for the Unification of Certain Rules for International Carriage by Air of 1999 regulates compensation for damaged baggage in its Article 17(2)-(4), setting out clear liability limits in its Article 22: damages arising from lost or delayed luggage are capped at 1131 Special Drawing Rights, unless a higher value has been declared by the passenger. Article 2 of the proposed Regulation stipulates that passengers with limited mobility must be allowed to make such high-value declarations in regard of their mobility equipment under Art 22(2) free of charge. It furthermore introduces several procedural changes in terms of providing information about luggage allowances, and facilitating the submission of claims pursuant to the Montreal Convention. There is, finally, the rather curious Article 6e, which stipulates that ‘Musical instruments shall be accepted for carriage within an aircraft cabin’ if their size permits safe stowage.
At first sight, the overall bargain struck in the Commission’s proposals seems reasonably balanced: the increased scope of passenger rights is set against liability caps for air carriers. It should be kept in mind that the proposals are at the beginning of the EU’s legislative process, with discussion in the European Parliament as well as Member State Parliaments likely to lead to significant changes. Three interesting points can nonetheless be noted from an initial reading of the proposals.
Whilst the proposals include some improvements for airlines’ position, notably as regards higher time thresholds and limits on assistance obligations, significant industry resistance is to be expected: the original Regulation was challenged in the ECJ on at least three occasions; it is unlikely that operators’ litigation strategy will change in this aspect. There are at least two possible ways in which such a confrontation may take place – as a ‘traditional’ challenge to the exercise of the Union’s legislative competence, and on the basis of the proposals’ relationship with the Montreal Convention.
As regards the first of these avenues, the legal basis for the proposed Regulation is not contentious – there is clear competence under Article 100(2) TFEU, and the Commission’s arguments on Subsidiarity are convincing. The most likely pressure point, therefore, would be lacking compliance with the principle of proportionality. This argument, however, is unlikely to succeed. The Court has repeatedly held that even the current regime with its unlimited obligation of assistance and care is proportionate given the high importance of its consumer-protective goals. In its impact assessment and the actual design of the proposed reforms, the Commission is astute to reduce the measure’s financial impact on carriers. It accepts, for example, the argument rejected by the Court in its recent decision in Case C-12/11 McDonagh v Ryanair, by limiting carriers’ obligation to provide hotel accommodation to 100 Euro per night and passenger, for a maximum duration of three nights (this exclusion does not apply to passengers with reduced mobility, unaccompanied children, pregnant women and other passenger who have previously informed the airline of their need for assistance). There are further small-scale exclusion for carriers operating small aircraft (80 seats or less) and short flights (less than 250km), and under Article 13 air carriers may seek redress for their losses from responsible third parties.
A second avenue for challenging the Proposals would be to allege incompatibility with the Montreal Convention regime, to which all EU Member States are signatories. The European Union itself acceded to the Convention by Council Decision 2001/539, with the substantive provisions of the Montreal Convention adopted in Regulation 2027/97 as amended by Regulation 889/2002. In Case C-344/04 ex parte IATA and ELFAA, the Court held that Regulation 261/2004 was fully compatible with the Montreal Convention, as ‘the assistance and taking care of passengers envisaged by [the Regulation] in the event of a long delay to a flight constitute […] standardised and immediate compensatory measures, [and are therefore] not among those whose institution is regulated by the Convention.’ . The Commission simply repeats this finding in asserting the compatibility of its current proposals; there is however at least one aspect in which the direct applicability of the ex parte IATA reasoning is questionable.
Article 2 of the proposed Regulation amends Regulation 2027/97 to deal with various aspects of baggage handling, including for example an obligation on carriers to accept baggage irregularity reports as appropriate complaints under Art 31(2) of the Montreal Convention. It is not immediately clear how this is compatible with Article 29 of the Convention (Basis of Claims) which prescribes that ‘[i]n the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention […]’ (emphasis supplied).
From the consumer perspective, the main problem with Regulation 261/2004 today is the inconsistent enforcement of its provisions. While few courts have gone as far as the English Court of Appeal (which had suggested, prior to the ECJ’s decision in McDonagh, that the existence of national enforcement bodies precluded individual claims), Commission statistics paint a sobering picture: less than half of eligible passengers were offered their care entitlements, a fifth of passengers never received a response to their claims, and in a recent Danish survey only 2 – 4% of those entitled to financial compensation had actually been paid.
Will the proposals help to address these problems? Strengthening the role of National Enforcement Bodies (NEBs), such as the Civil Aviation Authority in the United Kingdom, will not necessarily guarantee more effective protection, especially as the enforcement of the Montreal Convention would also be added to their remit. The provision of clear claim channels and tight time limits under a new Article 16a, on the other hand, might have the potential to make a significant difference to passengers.
Ticket Coupon Sequencing
As outlined above, Article 3(b) of the proposed Regulation would prohibit air carriers from denying boarding (or levying a surcharge) to passengers who have not used the outbound segment of their itinerary as originally booked. Whilst the advent of budget airlines has forced established carriers to sell relatively inexpensive one-way tickets on certain intra-European short-haul routes, ticketing rules on most fares do not permit such partial use at present.
The proposed changes significantly benefit passengers, who would no longer have to pay expensive rebooking charges when plans change at the last minute. On the other hand, they might clash with a key source of competitive pressure on ticket prices within the EU, viz differential pricing according to point of departure. A flight from Paris to New York via London, for example, will usually be considerably cheaper than a direct Paris to New York connection, or even the London to New York flight booked on its own. If passengers could rely on Article 3(b) in order to only use certain coupons of a multi-leg itinerary, existing pricing models would have to be completely rethought. The Commission has acknowledged this concern in its guidance documentation, without however explaining precisely how difficult arguments about where the ‘return’ part of a ticket starts should be resolved – for example in case of open-jaw, stopover, or ‘Round The World’ fares.