Coronavirus mini-series: (7) flight delays and cancellations

Since the UK lockdown began five weeks ago, we have been confronted with a steady stream of increasingly dismal updates regarding international air travel. In this blog, Charley Turton of 12 King’s Bench Walk considers the legal position of consumers faced with delayed and cancelled flights, including the pressing issue of whether future travel vouchers offered by airlines may be acceptable alternatives to cash reimbursement of the ticket price.

The situation so far looks something like this:

  • On 5 March, Europe’s largest regional airline – Flybe – collapsed, less than two months after the government announced a rescue deal. Whilst the airline’s existing difficulties undoubtedly played a part, Flybe’s administrator cited COVID-19 as an “added pressure” on the travel industry which contributed to its desperate financial situation.
  • As of 17 March, and for the first time ever, the advice from the FCO has been against all international travel. Initial restrictions, originally in place until 15 April, have now been extended indefinitely.
  • According to the World Tourism Organisation (UNWTO) 96% of all worldwide destinations have introduced travel restrictions, with 90 destinations having completely or partially closed their borders to tourists.
  • On 23 March, Dominic Raab urged the 1 million Britons overseas to return to the UK immediately.
  • Whilst some commercial flights are still operating in order to get people home, most are grounded. Flights operating via Heathrow have reduced by 75% since the start of the outbreak.
  • Jet2 has now cancelled flights and holiday packages until 17 June, while Tui has cancelled all holidays up to and including 14 May.
  • The International Air Transport Association estimates that airlines are on course to lose $252 billion in revenue in 2020 (which had been set to be a bumper year).
  • All this in light of World Health Organisation advice dated 29 February which states: “Travel bans to affected areas or denial of entry to passengers coming from affected areas are usually not effective in preventing the importation of cases but may have a significant economic and social impact.”

Despite the extraordinary state of the world (and unprecedented levels of use of the word “unprecedented”) it is important to note that the law on passenger rights has not changed.

Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004 (“the Regulation”) establishes common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights. Its aim of ensuring a high level of protection for passengers, taking full account of the requirements of consumer protection in general, is arguably more important than ever.

But whilst the legal rights of passengers remain unchanged, enforcing those rights is proving fraught with practical difficulty.

The law

In the case of a flight cancellation by the airlines (no matter what the cause), Article 5 of the Regulation obliges the operating air carrier to offer passengers the choice among:

  1. reimbursement;
  2. re-routing at the earliest opportunity, or
  3. re-routing at a later date at the passenger’s convenience.

Reimbursement is due within seven days “in cash, by electronic bank transfer, bank orders or bank cheques or, with the signed agreement of the passenger, in travel vouchers and/or other services” (emphasis added).

Article 7 enshrines a right to compensation in the event of cancellation.

Article 5(3) provides that the carrier’s obligation to pay such compensation is obviated where cancellation is caused by ‘extraordinary circumstances’ which could not have been avoided even if all reasonable measures had been taken.

Article 9 obliges carriers to offer passengers free meals and phone calls in cases of cancellation, plus overnight hotel accommodation and transport whilst they await re-routing.

The Regulation applies to all flights from EU airports, and all flights arriving to EU airports that are operated by EU-based carriers. Most flights failing outside this ambit will be covered by the Montreal Convention, which offers compensation in case of a flight delay leading to damage and baggage problems subject to the carrier’s defence that it “took all reasonable measures” that could reasonably be required to avoid the damage.

The impact of COVID-19

In a joint letter to the EU Commission, airline lobbies A4E and ERA called for an official declaration that COVID-19 constituted ‘extraordinary circumstances’ such that the right to compensation did not arise.

On the issue of reimbursement, the letter warned that the right to a refund within seven days “could have serious financial implications for airlines in the short term.” The airlines lobbied the Commission to endorse travel vouchers as an acceptable alternative to cash refunds.

In the same letter, they urged that a limit be placed on the right to care such that air carriers’ duties would be restricted to providing three nights of accommodation subject to a maximum of €100 per night per passenger.

The guidance from the EU Commission

On 18 March 2020 the Commission issued guidelines on the impact of COVID-19 on claims under the Regulation.

The plea for COVID-19 to be categorised as an extraordinary circumstance was acceded to:

“The Commission considers that, where public authorities take measures intended to contain the Covid-19 pandemic, such measures are by their nature and origin not inherent in the normal exercise of the activity of carriers and are outside their actual control.”

The Commission confirmed that where public authorities prohibit flights outright or impose restrictions on the movement of persons which effectively ground flights, the right to compensation will not arise. So too where cancellations are justified on the grounds of concern for crew health.

But that is not a blanket answer to the right to compensation. Within the finer print of the guidance, ambiguity remains. The condition in Article 5(3) may be met “where the flight cancellation occurs in circumstances where the corresponding movement of persons is not entirely prohibited, but limited to persons benefitting from derogations (for example nationals or residents of the state concerned). Where no such person would take a given flight, the latter would remain empty if not cancelled.” The guidelines note that such cases will depend on the circumstances, encouraging a ‘case by case’ approach.

The right to reimbursement of the ticket price (which is distinct from the right to compensation) remains untouched. Unequivocally, the Commission confirmed that in situations where the carrier cancels a journey and proposes a voucher rather than a cash refund: “this offer cannot affect the passenger’s right to opt for reimbursement instead.”

On the right to care, the Commission gave uncompromising assurances to passengers that airlines remain liable for their care and assistance, including meals and accommodation, whilst they await a re-routed flight:

The Regulation contains nothing that recognises a separate category of ‘particularly extraordinary’ events, beyond the ‘extraordinary circumstances’ referred to in Article 5(3) of the Regulation. The air carrier is therefore not exempted from all of its obligations, including those under Article 9 of the Regulation, even during a long period. Passengers are especially vulnerable in such circumstances and events. In exceptional events, the intention of the Regulation is to ensure that adequate care is provided in particular to passengers waiting for re-routing under Article 8(1)(b) of the Regulation.

Battle lines are drawn

The airlines have criticised the guidance, claiming it does not go far enough. The unmodified right to care has the potential to place an onerous burden on airlines, subject of course to the availability of accommodation itself.

It has been said that the protection afforded by Article 5(3) does not go far enough in light of the ambiguity inherent in the guidance on ‘extraordinary circumstances’ and this leaves airlines open to claims for compensation they can scarce afford to pay out.

Whilst the Commission and the UK government are coming under fire from airline groups and holiday providers alike, the most significant battle line to be drawn in the wake of the international travel chaos is that between carrier and passenger.

The issue: whether a voucher for future travel is an acceptable alternative to a cash reimbursement under the Regulation.

The legal position is clear: No.

EU Commissioner for Transport Adina Vălean has said: “In case of cancellations the transport provider must reimburse or re-route the passengers. If passengers themselves decide to cancel their journeys, reimbursement of the ticket depends on its type, and companies may offer vouchers for subsequent use.”

But whilst the legal rights of passengers remain unchanged, enforcing those rights is proving fraught with practical difficulty. Processing refunds is necessarily slow due to staff shortages, the demands of ‘WFH’ and the sheer volume of claims. These difficulties are played out amidst the action of two competing forces: cash strapped passengers desperate to recover the money they are owed and flailing carriers (in particular regional and local airlines) trying to stay afloat.

A number of airlines have been pushing passengers towards vouchers in order to safeguard their dwindling cash reserves.  The travel association ABTA has perhaps confused the issue by urging the public to accept refund credit notes in respect of package holidays, whilst simultaneously criticising the airlines’ refusal to provide refunds which they have described as “one of the main contributory factors to this extreme cash crisis.”

In response to concerns about airlines’ failures to provide refunds, a Commission spokesperson said passengers should first take this up with the airline itself (a course of action which, for some, is likely to be as fruitful as a full day’s paint-watching) and if that doesn’t work, to go to the relevant national enforcement body.

A further bone of contention is likely to be voucher validity: easyJet’s are valid for 12 months and can be redeemed for any flights on sale at the time you redeem your voucher. TAP Air Portugal is offering vouchers valid for two years. Other airlines are unlikely to be so generous.

Whilst the arguments rage on, an interesting question emerges about the state of the industry in the months and years to come: what will international travel look like in the future? As carriers go bust and the industry contracts, it is likely that we will find our travel options significantly reduced. Our destinations may be limited, the freedom of choice no longer available: in effect, traveling back in time.

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