Different rules for different modes
Railway operators won a key battle in their increasingly bitter competition with airlines when they obtained assurances from EU regulators to level the playing field when it comes to compensation for stranded passengers.
The European Commission has launched a revision process for the rail passenger rights regulation last year to that effect. A proposal to revise the regulation could be tabled in late 2016, starting off a process that would normally take two years to complete, according to an EU official with knowledge of the issue.
Rules on passenger compensation are different for each transport mode. This is something all industry stakeholders accept because they understand that missing a long-distance flight to the other side of the planet does not have the same consequence as missing an intercity train.
For instance, rail passengers are entitled to compensation after a delay of one hour, compared to three hours in air transport and two hours for coaches. In rail, compensation ranges between 25 and 50% of the ticket price, a percentage similar to coach transport (50%). This does not apply in air transport, however, where there are fixed rate compensation amounts depending on the length of the flight.
But the way those rules are enforced can vary considerably between member states, according to the European Commission.
- Rail: Few countries currently comply with an EU regulation on rail passenger rights. “Extensive” exemptions were granted for local or national rail services, leading to confusion for travellers, the Commission said in a report, published in March 2015.
- Air: Airlines, for their part, often fail to comply with an EU regulation offering right to compensation in case of denied boarding, long delays, cancellations or mishandled baggage.
- Coaches and boats: Rules there have only been introduced recently, so there is little evidence available to assess whether they are being effective or not, the Commission indicated.
Airlines ‘not applying the law”
With different rules in place for each transport mode, policymakers’ attention has focused on ensuring passengers who are entitled to compensation are actually able to claim it.
And as it turns out, railways tend to comply better with their obligations than airlines.
“In the event of an incident, many railway undertakings pro-actively invite passengers to lodge a complaint,” the Commission says. This is in sharp contrast with air carriers, “who only compensate passengers who individually take the initiative to lodge a complaint, without encouraging them,” it adds.
Only about 2% of eligible passengers are successful in obtaining compensation, according to refund.me, an international service provider that helps passengers enforce their claims.
Moreover, rules applicable to airlines and railways are inconsistent when it comes to compensation claims. Indeed, the burden of proof lies with the customer in case of airline delay, yet with the rail operator in case of rail delay.
The difficulties for claiming compensation from airlines directly is illustrated by the rise of online intermediaries such as refund.me. Dozens of similar services have sprouted across Europe, like Flightright, EuClaim or Fairplane.
In fact, air carriers often simply refuse to compensate passengers or invoke extraordinary circumstances for delaying or cancelling flights without proving the cause, according to a 2015 report by the European Consumer Centres Network (ECC-Net), a network of national consumer information points offering free advice and assistance to citizens.
In its report, the pan-European consumer organisation looked at more than 6,000 consumer complaints to determine whether or not air travellers received the compensation they are entitled to in case of cancellation or delay.
Its conclusions were damning. "The main problem is that some airlines are not applying the law as they do not agree with it,” the ECC-Net said in the report. “It is surprising to encounter an industry where several traders openly decide to not apply the law or the case-law from the EU court."
A report from the UK Civil Aviation Authority (CAA) was equally critical, stating: “A small number of airlines are letting their passengers down by failing to consistently pay compensation and also applying a two year limit to claims.” The CAA has now started legal action to ensure the rules are enforced.
Lack of consumer information is also widespread. Some of the airlines “still do not inform consumers about their rights, and many consumers therefore do not request the compensations they are entitled to," the ECC-Net said.
“As such, we have to conclude that there is a ‘rational disinterest’ of consumers to enforce their legitimate claims because the possible return of investing in a court proceeding is virtually zero,” said Philipp Kadelbach from Flightright.
A key sticking point in the debate over passenger compensation is the notion of cancellation due to unforeseen events – or ‘force majeure’.
‘Force majeure’ applies in cases where extraordinary circumstances prevent a transport undertaking from fulfilling their part of the contract—leaving passengers stranded.
The notion covers events such as riots or wildcat strikes, which are not uncommon in transport. It also covers extreme weather such as floodings or the 2010 eruption of a volcano in Iceland, which grounded flights for almost a week, stranding about 10 million travellers.
Airlines argue compensation needs to be limited in such cases in order to protect carriers against potential hefty liabilities. Citing the 2010 volcano eruption, the Association of European Airlines (AEA) said that “while such cases are clearly outside the airlines’ control, nevertheless carriers face a virtually unlimited liability to look after stranded passengers”.
Many European airlines are currently struggling in the face of competition from Gulf carriers. So they have used the cost argument to ask for a more “balanced regulation” on passenger compensation that “does not put extra burden on airlines”.
However, the cost argument seems to be contradicted by research from the airline sector itself. An assessment by the German Airline Association from 2014 estimated the financial impact of passenger compensation to be almost negligible, at €0.80 per ticket.
“Due to our experience with the enforceability of claims in different European markets we assume that the impact on other countries’ airlines is even less than the €0.80,” said Philipp Kadelbach from Flightright.
Critics also claim airlines have been able to invoke the ‘force majeure’ clause too easily as a way of refusing compensation.
When it comes to rail, operators simply do not have that possibility. According to a 2013 ruling by the European Court of Justice, ‘force majeure’ can no longer be invoked by railways to refuse compensating stranded passengers in case of a delay or cancellation. Airlines, coaches and ships, for their part, are exempted from compensation in such cases, which are defined by EU law.
This means European railways are obliged to compensate at least 25% of the ticket price in case of a delay of 1-2 hours and at least 50% of the ticket price in case of a delay of two or more hours, even if the delay is caused by ‘force majeure’.
The Court even clarified that there were grounds for a double compensation:
Railway operators have balked at the ruling, which they see as unfair because airlines and other transport modes are entitled to invoke ‘force majeure’ to refuse compensation.
The European Commission has acknowledged the problem and intends to rectify this by revising the rail passenger rights regulation. The railway sector is currently “not fighting on equal terms,” EU officials told EURACTIV.
“The impact assessment will examine whether the absence of an exemption to pay compensation in cases of 'force majeure' puts rail transport at a competitive disadvantage compared to other transport modes, taking into account relevant cost factors,” the EU executive said in its roadmap to revise the regulation.
These competition issues “are likely to be further exacerbated” after the adoption of the 4th railway package, which foresees further liberalisation of the rail market and a phase-out of exemptions to compensation for domestic rail services, the Commission said. Until these exemptions are eliminated, the EU executive said rail passengers will “continue to suffer from uneven protection” on domestic journeys.
Earlier in 2013, the EU executive tabled a revision of the 2004 air passenger rights regulation, which lays down rules on compensation and assistance for travellers in the event of denied boarding, cancellation or long delay to flights.
Discussions on the new regulation have so far focused on the “extraordinary circumstances” under which airlines can deny compensation claims.
Airlines fought hard to obtain favourable conditions. “The main problem was the ‘equalisation’ of flight delays and cancellations,” said Georges Bach a Luxembourg MEP from the European People’s Party (EPP) who is rapporteur on the dossier in the European Parliament.
Equalisation means a flight is considered cancelled when the delay is longer than, say, three hours.
“They were totally opposed to this equalisation of delayed flights and cancellations,” said Bach in an interview with EURACTIV, explaining that airlines wanted a separate legislation for cancellations.
The AEA says it needs a regulation that provides clarity for passengers and “does not put extra burden on airlines”. It also calls for “shared liability among the stakeholders in the value chain” in case of multi-sector journeys.
The legislation is currently blocked in the EU institutions because of the standoff between the UK and Spain over Gibraltar.