Press Release No.:
10 January 2006
(Geneva) The International Air Transport Association (IATA) is disappointed by the complete failure of the European Court of Justice (ECJ) to strike down deeply flawed European regulations on passenger compensation for denied boarding, delays and cancellations. "It is a sad day for Europe, for consumers, for international law and for the airline industry," said Giovanni Bisignani, IATA's Director General and CEO.
IATA launched legal action on EC Regulation 261/04 in April 2004. IATA maintains that the regulation conflicts with the Montreal Convention, the global standard for passenger compensation, by making airlines liable to provide assistance to passengers even in cases that are completely outside airline control—such as delays due to inclement weather or air traffic control strikes or capacity limitations. "Penalising airlines in such cases does nothing to address these important issues. It only adds US$700 million in costs that will have to be recuperated. Higher costs for air transport with no added value does not pass the good regulation test, let alone the common-sense test. Moreover, by ignoring the Montreal Convention, Europe's shortsighted regional approach leaves the door open for other jurisdictions to do the same. Instead of a global standard universally applied, we could end up with nothing more than chaos," said Bisignani.
"Competition is the strongest incentive for airlines to assist passengers when things go wrong and the Montreal convention provides a global standard for compensation. Unfortunately Regulation 261/04 only expands a tradition of industry mis-regulation with ineffective micro-management by the previous Commission. The result limits Europe's competitiveness and does nothing to make the travel experience better. Legal arguments aside, it is unfortunate that the ECJ missed this opportunity to send a strong message to the new Commission that this is simply not acceptable," said Bisignani.
IATA will continue to lobby for a common-sense approach by regulators to the air transport industry. "This was the final piece of the previous European Commission's legacy of failure with respect to air transport policy. We will approach the current Commission to seek remedies to the regulation's many flaws. And we will continue to call for benchmarking of all European regulations against their economic impact. We have a broad agenda for the Commission to take leadership to reform outdated regulations, implement an effective single sky policy, and regulate monopoly suppliers—airports and air navigation service providers. Action in these areas will help build a competitive industry and sustain affordable air travel," Bisignani added.
Notes to Editors:
- EC Regulation 261/04 on compensation to passengers in the event of denied boarding, long delays and cancellations became law on 17 February 2005. IATA challenged certain provisions of the regulation and launched an appeal to the UK High Court in April 2004. In July 2004 the UK High Court referred the case to the European Court of Justice. The challenge is based on a number of grounds, of which two are key:
- It contravenes the Montreal Convention 1999 to which member states of the EU are a party. The Convention provides a defense to airlines in cases of delay that are beyond their control (for example, adverse weather conditions). The Regulation does not.
- A breach of the rule-making procedures.
- IATA is not opposing the rules on compensation for denied boarding. However, it is wrong that airlines are made responsible for what is beyond their control such as delays and cancellations resulting from adverse weather conditions. The disproportionate penalty for cancellation may mean a disincentive for commuter airlines to provide connection services to passengers arriving from long haul services. It may mean higher fares as passengers will be required to buy two separate tickets for two separate flights. The effect of the Regulation will be anything but consumer friendly.
- The Regulation is complex. The potential for chaos is enormous as airlines seek to apply the complicated rules at airports in cases of denied boarding, cancellation and delay. The aim must be to provide simplified, efficient and pleasant travel experience but the effect of this Regulation is far from it.
- IATA estimates that the total cost to the industry of this regulation could top USD700 million per year.