The rise of ‘claim farms’ in Europe highlights that legislation must be revised according to market realities

The revision of EU261—the European legislation that deals with passenger rights in the event of denied boarding, flight delays or cancellations—remains politically deadlocked.

Spain and the United Kingdom continue to argue about whether Gibraltar Airport should be included within the scope of European legislation.

Though Brexit may or may not resolve this issue, the revision of Regulation 261/2004 and several other legislations are blocked at European Council level. 

The upsurge in court cases attempting to clarify the current legislation highlights the need for this deadlock to be broken, given that the main aim of the revision is to clarify elements that are open to interpretation.

This guidance clarifies important issues both for airlines and their passengers on the activities of claim farms

Claims agencies are stepping in to exploit the situation. These agencies, or claim farms, take on a passenger’s compensation battle should a flight be delayed or cancelled.

The European Commission has issued guidance to air passengers on the activities of these agencies.

The EU advises that passengers should always contact the carrier first. National enforcement bodies and alternative dispute resolution services can also help passengers should a compensation claim be disputed by an airline. 

“Passengers deserve good information about their rights,” says Rafael Schvartzman, IATA’s Regional Vice President for Europe.

“This guidance clarifies important issues both for airlines and their passengers on the activities of claim farms, particularly warning against those that resort to fraudulent practices.”

Dubious practices include submitting claims without asking for the passenger’s permission and unsolicited telemarketing.

If something goes wrong with a flight, airlines have a strong commercial incentive to put it right

IATA advises that passengers should only deal with a claim agency that is transparent about its charges, has a clear power of attorney, and has a robust data privacy policy. Travel agencies and tour operators must not transmit passengers’ personal data to claim farms.  

“Airlines are in a strongly competitive market, and good customer service is vital,” says Schvartzman.

“If something goes wrong with a flight, airlines have a strong commercial incentive to put it right. A claim agency cannot recreate the relationship between the airline and the passenger.

“Moreover, using a third-party service can result in substantial costs that eat away at the compensation payment. We fully agree with the European Commission that a passenger’s first contact should always be with  their airline.”

Major overhaul

Curing the claim agency problem, however, will not happen through European Commission guidance alone. The existing passenger rights regime in Europe needs an overhaul.

“A major reason for the proliferation of these agencies is that the EU261 passenger rights legislation is complex, often misunderstood, and inconsistently applied,” Schvartzman suggests.

“We hope that the political deadlock which is currently blocking the revision of EU261 is resolved so that the much-needed clarification of the regulation can proceed, to the benefit of everyone in Europe.”

The revision re-balances passenger rights with airline obligations

IATA has welcomed proposals included in the revision for several reasons.

Firstly, the revision re-balances passenger rights with airline obligations: higher trigger points are introduced so that the flight length determines the length of the delay after which compensation needs to be paid to the passenger.

This is to the advantage of all as airlines are given time to fix a problem and operate a flight instead of choosing to cancel it.

The revision would also clarify the list of extraordinary circumstances, the limitation of care and assistance, the right of redress for air carriers, and contingency planning in the case of massive disruption.

Most importantly, the revision gives additional rights to passengers, such as care after two hours for all flights, better and timelier information, the possibility to correct a spelling mistake, and transparency requirements for cabin and checked luggage.

There are some industry concerns, however. The partial ban of the No Show policy may jeopardize the freedom of pricing, and making the final destination as the end point for a delay calculation instead of calculating delays per flight could seriously affect interlining.

The European Commission view

The changes proposed for the provisions relating to care and assistance in EU261 originate from the European Court of Justice’s rulings or are meant to clarify or simplify them. Introducing a single time threshold of two hours for the right to care for flights of all distances is a case in point.

For passengers, a cancellation is always worse than a delay, and rerouting is always subject to availability of seats on other flights

The proposal also explicitly introduces the right to compensation in cases of long delays.

However, the time threshold after which the right to compensation arises is proposed to be increased from three hours to five, nine or 12 hours depending on the length of journey. 

This allows airlines to take into account the practical problems encountered by air carriers when addressing the causes of delays at remote airports. It is accepted that if the airline is not given a reasonable time period to deal with the causes of a flight delay, there might be a financial incentive to cancel the flight.

For passengers, a cancellation is always worse than a delay, and rerouting is always subject to availability of seats on other flights.

“Air passenger rights are a great achievement for the EU citizens and significantly contributed to improving air transport in the EU,” says Jean-Louis Colson, Head of Unit, Social Aspects and Passenger Rights, European Commission.

“The rules on passenger rights provide minimum protection for citizens and in doing so facilitate mobility.

I hope the Commission’s proposed revision to the regulation can be adopted soon by the co-legislators

"They also help create a level playing field for transport operators and also aim to a high quality in Europe which gives our industry a good reputation with international passengers. 

“We are aware that this regulation has certain shortcomings and needs to be modernized.

"I hope the Commission’s proposed revision to the regulation can be adopted soon by the co-legislators. Before the new regulation is in force, we count on the airlines’ efforts for a correct application of air passenger rights.” 

The Commission referred to EU261 in its Communication on an Aviation Strategy for Europe, urging the European Parliament and the Council to swiftly adopt the proposed revisions to the regulation.

Until that happens, new judgements from the European Court of Justice will undoubtedly keep on coming. 

Though the European Commission has published guidelines on the application of the rules included in EU261, taking into account case law, these guidelines are not binding.

They have been welcomed by all stakeholders but do not replace the much-needed revision.

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