A June 2014 judgment by the UK court of appeal found that airlines are liable for compensation under European Council Regulation No. 261/2004 to passengers where a flight has been delayed on account of an unforeseeable aircraft technical problem.
The Regulation and the court’s decision
Regulation 261 provides for compensation in the event of passengers being denied boarding against their will by an airline or where a flight is cancelled. The airline must, in these instances, offer rerouting or reimbursement and assistance in the form of accommodation and meals and pay the passenger the prescribed monetary compensation, which is EUR 250 for all flights of 1500 kilometres or less, EUR 400 for all intra-Community flights of more than 1500 kilometres and for all other flights between 1500 and 3500 kilometres, and EUR 600 for all other flights. In 2010 the European Court of Justice held that the inconvenience and damages suffered by passengers as a result of cancellations is comparable to those resulting from delay and therefore warrant like treatment, including compensation.
Air carriers are not obliged to pay compensation if they can prove that “the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”. In Jet2.com Ltd v Huzar the UK court of appeal found that extraordinary circumstances exist only in the case of “events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control.”
Technical defects or problems in aircraft are, unless caused by events outside the activities of an airline (such as sabotage or hidden manufacturing defects or for reasons beyond its actual control), inherent in the normal activity of an airline and therefore do not constitute unexpected flight safety shortcomings – regardless of whether technical problems come to light during ordinary maintenance or on account of failure to carry out proper maintenance.
Compensation provided for by Regulation 261 is supplementary to similar compensation provided for by the Montreal Convention 1999, in terms of which a “carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo…[unless] servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.” The liability of the carrier, resulting from such delay, is limited to 4 150 Special Drawing Rights (SDR) for each passenger. The European Court of Justice found that the Montreal Convention catered for damages of an individual nature whereas Regulation 261 provided for damages that were common to all passengers of cancelled flights, thereby allowing both the Montreal Convention and Regulation 261 to co-exist.
Effect of decision
The effect of these decisions is to place an ever greater burden on airlines on a near strict liability basis. Under the guise of consumer and passenger protection, the lawmakers and courts of the European Union and United Kingdom have put airlines, which operate in a very competitive industry with very slim margins, under undue strain. Ultimately, passengers will bear the adverse consequences of these obligations being placed on airlines in the form of increased fares.
Given that it is less costly to cancel a flight than to delay it (partly as a result of the exceptions in Regulation 261 that apply to compensation payable in the event of cancellation), airlines are more likely to cancel flights that would otherwise have merely been delayed, and thereby cause passengers even greater inconvenience.
With more airlines failing in the face of increased costs and obligations being imposed on them, fewer options will remain and, as competition dwindles, consumers can expect a sharp rise in airfares.
As South Africa follows the developed world’s approach to consumer protection it is important for it not to place additional difficulties on an already overburdened airline industry in which several new market entrants have already failed.