Europe Can’t Afford the European Parliament’s Gold-Plated Wish-List for EU261

By Thomas Reynaert, IATA Senior Vice President, External Affairs

This week, the European Parliament showed its hand regarding the long-awaited reforms to EU261 passenger rights regulation—and it’s a misguided wish-list. Almost every element of the EU Parliament’s proposal adds protections, complications, and costs. Costs that Europe cannot afford.

The original intention of EU261 – to ensure passengers were looked after during delays, and compensated if they were denied boarding due to overbooking – has been subverted by various legal rulings, most notably Sturgeon, which introduced compensation rates for delayed or cancelled flights. With over 80 legal amendments, reform of the original regulation has become essential.

Instead of fixing these flaws, MEPs are competing to pile on obligations. Last year’s Draghi Report warned of declining competitiveness: EU productivity growth since 2019 is just 0.5% annually versus 1.6% in the U.S., partly due to regulatory burdens. EU261 is a perfect example of this regulatory overreach. It already costs airlines nearly €10 billion per year and is a dead weight on connectivity.

The proposed EU261 revision now moves to negotiations between Parliament and Member States. With MEPs ignoring economic reality, the Council must be the ones to see the big picture and hold firm to their June proposals. Three issues stand out:

• Thresholds for compensation. Most passengers would prefer to arrive ‘better late than never’ but the current thresholds (e.g. 3 hours for flights up to 1500km) encourage cancellations rather than schedule recovery. Three hours bears no relation to the practicalities of finding an alternative if an aircraft has a problem. The Council’s four-hour threshold is more pragmatic; reverting to the three hours MEPs are insisting on would likely leave more passengers stranded, defeating any real consumer benefit.
• Cabin bags. These should remain an issue of choice. Choice for passengers, and choice for airlines to pursue different business models. Many passengers choose not to pay for a cabin bag, finding the existing rule for an under-seat bag sufficient for their needs. The European Parliament want to give everyone a carry-on trolley bag for “free”. But in the same way that there is no such thing as a free lunch, there is no such thing as a free bag. In reality, all passengers will be paying for a bag, whether they want to or not.
• Automated compensation. This sounds simple but the reality is far more complex. Extraordinary circumstances, multi-leg journeys and rebookings make blanket automation unworkable. The present cost of administering EU261 is already around €1.5 billion—automated compensation would make this much worse.

What passengers want. What Europe needs.

Multiple surveys (including IATA’s own polling), and actual consumer behavior, demonstrate that a majority of passengers want the cheapest flight possible, and to pay for the added-on services that they want. Loading compulsory costs onto the ticket in the form of EU261 obligations goes against the desires of travelers. The cost of EU261, if the Parliament gets its way, could rise to €10 for each passenger. It is a kind of ‘reverse Robin Hood’, paid for by the many and enjoyed by the few.

The European single market has been brought together thanks to cheap air travel. Nothing else can connect Krakow to Copenhagen or Athens to Amsterdam with such speed and at such affordable cost. But while Europe’s hub airports are full, thinner routes barely break even. European airlines will earn an average profit of €7.80 per passenger this year. Many regional routes operate on razor-thin margins. Every extra charge or regulatory cost threatens their viability, reducing connectivity and choice.

I suggest that MEPs should be careful what they wish for. Calling for free bags and higher compensation levels sounds an easy ‘win’, but their constituents may not be so happy when their choice of air connections reduces. What will be the reaction if a carrier cuts jobs and investment, or even pulls flights altogether? A gold-plated compensation scheme is no good if passenger choice and economic benefits are reduced as a result.

> Read our full position paper (pdf)