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New Airline Compensation for Passengers

New rules on an airline’s obligations to passengers came into effect last month. The rules change the amounts given in compensation, and redefine the circumstances where compensation must be provided.

Most European airlines, reacting to the implementation of new EU rules on passenger compensation, have described the legislation as deeply flawed, and potentially very damaging not only to their business, but also to the relationship with their customers.

According to the new rules, compensation for passengers who are ‘bumped’ from flights that operate normally will be doubled, and this most likely will be extended to flights that are cancelled.

There is also provision for assistance in the case of long delay, including overnight accommodation if necessary. The airlines say this causes them the greatest concern, since the duty to assist passengers will apply to all delayed flights, whatever the cause.  This is in contrast to the flight cancellation provisions of the legislation, which take account of exceptional circumstances outside the control of the airlines.

While no airline would do so willingly, says the Association of European Airlines, occasions are bound to arise where cancelling a flight becomes a more viable option than delaying it.

Involuntary denied boarding compensation now ranges from €250 for flights under 1,500 kilometers to €600 for flights over 3,500 kilometers. Those levels are up from the €150 to €300 range established as part of passenger rights legislation enacted in 1991. Airlines also must either refund affected passengers’ tickets or offer alternate flights and provide meals and overnight accommodations, if necessary.

Similar compensation now is required for flight cancellations when the reason for the cancellation was within the carrier’s control. Passengers experiencing lengthy flight delays also are entitled to meals and overnight accommodation, if necessary. Should the delay exceed five hours, airlines must provide refunds.

The rules cover all airlines-European and non-European, scheduled and charter-operating flights departing from airports within an EU member state, as well as European carriers operating flights arriving within an EU member state.

Several airlines, particularly low-cost operators, welcomed the spirit of the legislation but protested the specifics. EasyJet, for example, called the new rules “a piece of bad law that is unfairly biased against the airline industry and thus damaging.” EasyJet suggested compensation levels should not be uniform, but rather based proportionally on fare paid. “At present EasyJet’s average fare is £42 one way,” the airline said. “Under the new legislation the compensation will start at £172 for a one-way flight.”

Airlines also raised concern about how officials will determine if an airline is liable for specific delays and cancellations. Airlines can be definitively blamed for mechanical-related problems, for example, but are less likely to accept responsibility for delays or cancellations stemming from air traffic control, inclement weather, labor action and other factors.

Separately, the Association of European Airlines recently released its preliminary traffic report for January 2005.

The figures are based on the AEA’s weekly survey of its members’ traffic and capacity trends. This provides an indication of the outcome when the final figures are published at a later date. For the moment, it appears that growth was particularly strong.

In general, the airlines say that although the travel industry is recovering, this is not translating to profit for many airlines due to rising operating expenses, high fuel costs and increased competition among carriers. The airline industry, they say, has become so highly competitive with airlines battling for survival and market share.

American Express says the industry is seeing a strong demand on international routes, but supply isn’t increasing at the same rate. Many airlines trimmed capacity in the last couple of years and are not adding that capacity back into their networks. Capacity reduction coupled with rising fuel costs and a limited number of new airlines entering the international market are all factors placing upward pressure on pricing. It is expected that international fares will increase by as much as 5% in 2005.

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