Opinion: Do air passengers really benefit from delay compensation?

Opinion: Do air passengers really benefit from delay compensation?Industry public affairs consultant Andy Cooper takes issue with the ‘delay compensation’ culture generated by EC rules and the companies which profit from it

I was peripherally involved in the process that led to the implementation of EU Regulation 261/2004, which changed the compensation limits for denied boarding, as well as introducing a new right for compensation for cancelled flights, and a right to be looked after in the event of a flight delay.

Representing the interests of large tour operators at that time, I was not unhappy with the regulation – tour operators and their charter airlines didn’t cancel flights and rarely if ever intentionally overbooked passengers.

Furthermore, tour operators had long felt it appropriate to look after their customers in the event of a flight delay, and the new proposals did not really go any further than the levels of care we were already offering.

That comfort disappeared in 2009 when the European Court of Justice (ECJ) decided to extend the law and made it obligatory to offer compensation at the same levels to delayed passengers as to those whose flights had been cancelled.

This became a concern because the levels of compensation were set so as to be “effective, proportionate and dissuasive” – i.e. intended to dissuade the airline from acting in the way it had done so.

That is reasonable when the action – cancelling a flight or denying boarding to someone because you have chosen to overbook the flight is within your own control, and thus avoidable – but begins to look like a harsh penalty when the action is generally outside your control.

The courts have since 2009 looked to extend the rights to compensation for delayed passengers, and make it more difficult for airlines to avoid making payment, partly on the basis of wanting to give a consumer benefit, and partly on the grounds of simplicity – if it is too difficult for consumers to make a claim, they will not do so, and thus lose a right.

Whilst this is superficially attractive, in that delayed passengers potentially now get significant compensation, it comes at a cost.

Ultimately, someone has to pay that compensation and since profit margins are wafer thin in the aviation sector it almost certainly comes from increased fares charged to every passenger.

To put some numbers in this, Iata predicts that 2015 will be one of the most successful years ever for the airline industry.

However, it also predicts that European airlines will make on average $4.27 per passenger profit, which at today’s exchange rates is about £2.75.

When you realise that compensation levels per passenger are set at €250 (£185), €400 (£295) or €600 (£445) depending on the length of a flight, you begin to see a slight imbalance between compensation payable and both the profit and the seat cost for flights on European airlines.

As compensation rights have been extended, a mini industry has developed of claims management companies and lawyers specialising in “helping” customers make claims for flight delays.

There is a remarkable level of consistency in the fees charged by the numerous claims businesses offering this support. They typically charge 27% of the value of the claim for their assistance, sometimes with admin fees and other costs on top.

For me, one of the more unsatisfactory decisions from the courts has been that even though the aviation industry never expected to pay compensation for flight delays – and the legislators (both European Parliament and European Council of Ministers) never intended that compensation should be payable as they made clear in submissions to the ECJ – the courts have applied the right to compensation retrospectively.

As a result, as a delayed passenger even if your flight delay was up to six years ago and you were appropriately looked after, you can still seek compensation for that delay.

Much of the work of the claims industry is encouraging customers to bring these older claims, as they recognise this provides a good source of income. Flight delays happen for many reasons, but generally no airline chooses to delay passengers as any delay, irrespective of compensation rights, comes at a cost.

The airline has additional crewing costs, operational costs and other costs arising from the delay. Some delays can be said to be within the control of the airline, but most are not directly within its control.

The aviation industry is heavily regulated and levels of maintenance of aircraft are much higher than, say, cars, buses or trains.

We would all agree this is a good thing, as the last thing any passenger would want is their aircraft going wrong mid-flight. This means aircraft often get delayed as a result of technical and other issues which need to be fixed before an aircraft departs.

The airline doesn’t want to delay the flight, but equally is not going to risk flying an unsafe aircraft. The CAA monitors flight punctuality at the 10 largest airports in the UK. The historical data shows the numbers of delays are quite small.

There were over 1.4 million flights from these airports in 2012 and just over 8,000 or 0.58% were delayed by more than three hours. The numbers were similar in 2013.
The number of passengers affected by those three-plus hour delays was slightly over one million in each year.

Some of these passengers will not be able to claim as the delay was obviously outside the airline’s control, for reasons like heavy snowfall at airports, storms, or even volcano eruptions.

A further number would be unable to claim because they were on a flight with a non-EU carrier flying into Europe from outside the EU.

But this still leaves a massive number affected by delays – I calculate 600,000-650,000 passengers each year. If every one of those passengers claimed compensation, the cost to the airline industry would be massive.

Bearing in mind that the claims industry charges a 27% fee to assist in claims, it’s easy to see how much money is simply disappearing from the aviation industry into the pockets of the claims companies.

On the basis that the profit margins of the airline industry are small, ultimately the only way the compensation costs can be recovered is by increasing the fares charged to all passengers.

So the next time you think you have paid a lot for your flight in Europe (and to be fair we still have some of the cheapest fares in the world) bear in mind that part of your fare is going towards the cost of the Bentley or Mercedes sitting on the driveway of the owners of the claims companies who are making their profits from the airline industry.

If compensation is payable at all for flight delays, it needs to be proportionate to the price paid for the journey, not some arbitrary sum set at a level to punish the airline.

Whilst the regulation is being reviewed, I’m not holding my breath that we’re going to see that proportionality introduced.

Sourced from Travel Weekly


Gatwick has busiest-ever January with numbers up 5.5%

Gatwick has busiest-ever January with numbers up 5.5%The number of passengers using Gatwick rose by 5.5% to 2.3 million last month to give the airport its busiest-ever January.

The additional 124,000 passengers handled gave the airport its 23rd successive month of growth.

Long-haul transatlantic travel grew by 11.4% year-on-year, mainly due to Norwegian’s low-cost flights to New York and Los Angeles which were introduced last summer. Dubai traffic was up 12.3% following Emirates bringing an Airbus A380 onto the Gatwick route last March.

Paris, Amsterdam and Copenhagen were the top European destinations as overall scheduled and charter numbers grow by 98,600 passengers.

Turkey attracted an additional 5,000 passengers over January last year, an increase of 19.8%.

Overall air traffic movements at Gatwick rose by 138 in the month following more efficient use of its single runway.

Chief financial officer, Nick Dunn, said: “As the world’s busiest single runway airport, we are achieving great things, and our continued investment in optimising every aspect of both the passenger experience and the operation of the airport, continues to pay off.

“The pattern of growth is set to continue but will come at a price and we will struggle to meet demand in future years.

“When looking at airport expansion, only Gatwick can deliver the economic benefit and the extra capacity the UK needs at an environmental cost it can afford.

“Gatwick expansion will also deliver more competition between airports serving London and the UK, as well as greater competition within airlines, offering passengers more choice and helping keep airfares lower.”

Sourced from Travel Weekly

Record number of airline passengers in 2014

getAsset.aspxBy Phil Davies,

Global airline passenger demand rose 5.9% last year with record carryings of 3.3 billion compared to 2013, latest Iata figures show.

The performance was above the 10-year average growth rate of 5.6% and the 5.2% growth seen in 2013.

Capacity rose 5.6% last year, with the result that load factor climbed 0.2 percentage points to 79.7%.

More than half of the growth in passenger travel occurred on airlines in emerging markets including Asia-Pacific and the Middle East.

A pick-up in Chinese domestic travel, which expanded by about 11% in 2014, helped drive the growth in recent months.

Iata director general and chief executive Tony Tyler said: “With a 5.9% expansion of demand, the industry out-performed the 10-year average growth rate.

“Carriers in the Middle East posted double-digit growth while results in Africa were barely above previous-year levels.

“Overall, a record 3.3 billion passengers boarded aircraft last year – some 170 million more than in 2013.”

But he added: “While it is clear that people will continue to travel in growing numbers, there have been signs in recent months that softening business confidence is translating into a levelling off of international travel demand.

“In the aftermath of the Greek elections and the intensifying debate on how to deliver a dynamic economic program for Europe, we must not forget the power of air connectivity to create growth.

“Governments can kick-start economic development by reducing the passenger taxes that depress demand for air transport, costing jobs and prosperity.

“There are some positive signs. The Scottish government is promising to cut its air passenger duty by 50%. And Austria’s air transport levy is being evaluated as part of comprehensive tax reforms. Scrapping the Austrian levy alone could create some 3,300 jobs.

“That should help convince politicians in these countries to move from considering reductions to delivering results.

High taxes, onerous regulation and infrastructure limitations make Europe a tough place to run an airline.

“A continent-wide commitment to address these issues so that aviation can play its critical role as an economic catalyst would be a powerful signal that Europe’s politicians really do mean business,” said Tyler.

Sourced by Travel Weekly

Delayed air passengers owed £3.2bn in compensation

Not all passengers are claiming for delayed flights Passengers delayed on flights going in and out of the EU have failed to claim GBP3.2 billion owed in compensation, according to new statistics.

In the past decade only 2% of travellers have claimed compensation for late or cancelled flights, passenger rights firm refund.me has said.

EU Regulation was approved in 2004 to secure passenger rights and ensure passengers receive up to GBP490 compensation when a flight leaving or departing the EU is three hours late or more.

However refund.me said more passengers are realising their rights with the amount of unclaimed compensation decreasing in the last three years. Around GBP385m is estimated to have been unclaimed in 2006, which came down to GBP355m in 2012 and GBP240m in 2013.

“We noticed a consistent and deliberate disregard for passenger rights that could result in hundreds of euros for millions of passengers worldwide,” said Eve Buechner, founder and CEO of refund.me, which processed 10,000 claims last year.

She said the decline in numbers was an ‘encouraging trend’ as consumers had previously “accepted that punctuality and care were more suggestions than rights”.

She added more open information from airlines and the introduction of more intermediaries between airlines and passengers had helped more passengers claim.

Sourced by Travel Daily UK

Airlines kept ‘€4bn in charges from passengers who did not fly’

Passengers who book seats but do not fly are not entitled to have their air fare returned but should get taxes and airport charges refundedBy Barry O’Halloran.

European airlines, including Aer Lingus and Ryanair, kept a total of €4.1 billion in uncollected fees, taxes and charges last year from passengers who did not fly, it was claimed yesterday.

Passengers who book seats but do not fly are not entitled to have their air fare returned but should get taxes and airport charges refunded. Irish company, Airtaxback, which claims repayments of these levies on behalf of clients, said yesterday that Europe’s airlines kept a total of €4.1 billion in uncollected charges in 2013.

No-show rate

The company said that Aer Lingus retained €55 million, while Ryanair held on to £374 million (€454 million). It bases its calculations on the airlines’ passenger figures and an estimated no-show rate of 10 per cent.

While Ryanair’s finance director, Howard Millar, agreed that the airline makes a small gain from uncollected charges, he dismissed Airtaxback’s calculation saying that the real figure was “nowhere near” what it claimed.

Mr Millar pointed out that, in the case of its special offers, which account for 25 per cent to 40 per cent of the fares it collects, the airline absorbs charges such as taxes and airport fees, which are often higher than the actual amount that it charges, and then nets them out from its revenues. “It’s not as simple as dividing one thing from the other,” he said.

Administration fee

Ryanair does refund these charges when customers who are entitled them seek repayment, but charges a €20 administration fee. Aer Lingus did not comment.

Meanwhile, the EU has changed its guidelines on state aid for airports. Brussels said yesterday the move will allow greater flexibility in funding infrastructure development and operations, particularly for small and regional airports, and will support new routes.

Sourced by Irish Times

Increase in passengers and cargo at Prestwick Airport

Glasgow Prestwick AirportThe Scottish government is in talks to take over Prestwick Airport

Passenger numbers at Glasgow Prestwick Airport were up 5% last month compared to the corresponding period last year.

Figures showed 120,977 passengers passed through the airport in October. Cargo was also up on last year at 831 tonnes, a 15% increase on October 2012.

The Scottish government is currently in negotiations to buy the unprofitable airport from owner Infratil

The New Zealand firm announced earlier this week it had written off the assets of both its UK airports.

‘Very encouraging’

Manston Airport is being bought for £1 by Scottish entrepreneur Ann Gloag, who co-founded the Stagecoach Group.

Infratil said it expected to sell Prestwick for a similar amount.

Speaking after announcing the rise in cargo and passenger numbers, Prestwick’s chief commercial officer Graeme Sweenie said: “It’s very encouraging that we’ve been growing each month for over a year.

“Now our focus is on our new winter programme of Ryanair flights.”

Sourced from BBC Scotland news.

Regional airports lose up to 77% of passengers after huge flight tax increases

Drop: Newquay AirportBy

Air Passenger Duty has risen by up to 260% for short-haul flights and 360% for long haul since 2007 – Durham Tees Valley lost £4million this year

Drop: Newquay Airport

Regional airports have lost up to 77% of their passengers in the wake of huge flight tax increases.

Air Passenger Duty has risen by up to 260% for short-haul flights and 360% for long haul since 2007.

Durham Tees Valley is one of the worst hit with losses of £4million this year.

Passengers at Blackpool, Newquay, Cardiff and Humberside are down 50% in five years, Civil ­Aviation Authority figures show.

New Zealand firm Infratil this week wrote-off the assets for Glasgow Prestwick and Manston in Kent.

Larger regional hubs, such as Newcastle International, Leeds/Bradford and Manchester managed to weather the worst effects of the downturn, while Heathrow has thrived due to its expansion.

Peel, owner of Durham-Tees, is proposing a business park with housing. It has launched similar plans at Robin Hood Airport near Doncaster, which includes a pub, offices, industrial buildings, along with new roads and footpaths.

Manchester’s proposal for an airport city is well underway.

Scottish Ministers hope to reach a deal next week to re-nationalise Prestwick .

Stagecoach co-founder Ann Gloag is buying Manston for £1.

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