21 April, 2004 Montreal - IATA today filed an application for judicial review at the UK High Court to challenge a new EU regulation on penalties for delays and cancellations. "Airlines accept the need to compensate passengers for denied boarding, but we cannot accept to pay compensation for areas beyond our control. With this regulation, the EU regulators have endangered the consumer interest they seek to protect," said Giovanni Bisignani, IATA Director General and CEO.

"It is high time that EU regulators took the trouble to learn about the industry they are busy mis-regulating. If governments really want to reduce delays, rather than unfairly targeting airlines, they should place their effort in making The European Single Sky initiative effective," said Bisignani.

Misguided. "This regulation is misguided and poorly conceived," said Bisignani. "The economic incentive to operate to schedule already exists—delays and cancellations are costly. But according to Eurocontrol over 50% of delays are completely outside of the control of airlines. This is why airlines have worked with our ATC partners to reduce delays in Europe by 37% over the last three years."

Irresponsible. Delays or cancellations due to inclement weather, ATC strikes or government security requirements are not within airline control, yet the new ruling penalizes the airline for all situations equally. "It is irresponsible for governments to effectively punish airlines for maintaining safe operations. We cannot make the sun shine and we will not take risks with safety or security," said Bisignani.

Impractical. The regulation jeopardizes the future of short haul connector service to long haul flights. If a passenger on a long-haul flight misses a connection to a regional flight due to weather conditions, a strike or new security procedures, it is the short-haul operator that must compensate for the value of the entire journey. "Faced with this financial risk, many carriers will be reluctant to offer connections or will require longer connecting times. Along with consumers and airlines, regional destinations in Europe will suffer from higher costs and reduced service levels," said Bisignani.

Inconsistent: The EU is a signatory to the Montreal Convention which limits a carrier's liability for delays and cancellations in extraordinary circumstances like inclement weather. "How can airlines run a business when the regulator gives us two conflicting guidelines? The wisdom of the internationally agreed Montreal convention should form the basis of the EU's thinking as the accepted global standard," said Bisignani.

IATA and other airline associations tried to engage the regulators in a dialogue to arrive at an effective solution to the issues surrounding denied boarding. On 25 February 2004 IATA wrote to Commissioner for Transport, Loyola de Palacio, to discuss these concerns in a last ditch effort to avoid litigation. "Regrettably, we did not receive a reply," said Bisignani. "Turning to the courts was our last resort but we are confident that a positive outcome will be reached."

Notes for Editors:

1. Published 17 Feb. 2004, the regulation comes into force on 17 Feb. 2005. The full reference is Regulation 261/2004 "on establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights".

2. IATA's Legal Arguments are two-fold:

o The Regulation denies air carriers any defense against claims for delays caused by extraordinary circumstances such as bad weather, or acts of third parties such as an Air Traffic Control strike. However the Montreal Convention provides that air carriers are not held to be liable for delay if they prove that they took all measures that could reasonably be required to avoid the delay, or it was impossible for them to take such measures. The European Community took part in the Conference that drafted the Convention and has signed the Convention. The European Community must respect International Agreements that it has signed.

o The second ground for challenging the validity of the regulation is the infringement of procedural requirements with respect to the provisions on Cancellation. In the Common Position of the Council, provisions where agreed that air carriers should have the defense of extraordinary circumstances in relation to claims for reimbursement, re-routing and assistance. At the second reading of the European Parliament, no objections to these provisions were tabled and the provisions were considered accepted. The Conciliation Committee, whose role is to reconcile differences between the Council and Parliament, removed these provisions thereby denying carriers the defense of extraordinary circumstances. It is IATA's submission that the Conciliation Committee exceeded its jurisdiction in so doing.

3. IATA is filing in the UK High Court. IATA has no standing to make a challenge directly to the European Court of Justice (ECJ) and as a procedural matter must request a court of a Member State to refer the case to the ECJ. This could be done before the courts of any Member state. We have elected to initiate the procedures before the UK courts for reasons of convenience.

4. The regulation treats air transport completely differently from other modes of transport such as trains or buses despite the fact that airlines have the most advanced guidelines and procedures to deal with delays and cancellations.

5. Some EU states foresaw the problems of this regulation. The UK and Ireland voted against the regulation.

6. Intensified security procedures are mandated by governments and could add to delays. IATA believes that the regulation is unfair and disproportionate because it forces airlines to re-route or reimburse passengers even where the cancellation was required by government security concerns as was the case with several British Airways flights from London to Washington DC recently.

7. Many regional airlines in Europe operate in areas where weather conditions can be severe (e.g. Northern Scandinavia or the Outer Hebrides). If obliged to reimburse long haul tickets, they will face severe financial problems, and may refuse to connect on an interline basis (i.e. accept a ticket issued by another company on their flight). For example, a passenger flies Sydney-London on QANTAS, London-Glasgow on BA and Glasgow-Barra on a local regional airline. If the Glasgow-to-Barra airline cancels the flight because of gale force winds, they could have to reimburse the Sydney-Glasgow portions as well, and pay for a return ticket. This is financially unsustainable for a small airline