Airlines join banks on the naughty step

Banks have been on the naughty step for so long that they probably thought that no one else would ever join them. Not so, as the airline industry is soon to go there too. A land mark ruling in the courts last month made the airlines liable to repay customers for delays due to technical faults to their aircraft. With some industry figures suggesting a backlog of payments worth between €250 and €600 per passenger stretching back to 2009 then the airline industry needs to settle in next to the banks on the step and be ready for several years of consumer opprobrium.

To date, airlines used a get-out clause when pursued by an irate passenger. They couldn’t possible reimburse the passenger as the technical fault, they argued, did not warrant compensation under the terms of the European Union flight delay rules. This defence has now been over-turned. More importantly, despite a legal challenge from Ryan Air (which they lost) the courts rules that claims could be submitted beyond their requested two year limit, stretching back as far as six years.

The implications for the industry are far-reaching – and expensive. Jet2, one of the two airlines branded by the CAA as one of the worst offenders (alongside Wizz Air) estimates that its compensation bill is likely to be up to £22 million, with £17 million already set aside for claims. Ryanair thinks its liability will be much smaller, around €5 million. Not a huge amount for a profitable airline such as Ryanair but they’ll still need to sell a lot more Pringles to cover it.

The CAA does not just have these two recalcitrants in their gaze;  a further fifteen airlines that serve the UK market are shortly to be examined. Amongst there are some of the biggest and best known airlines, including American Airlines, Delta, Norwegian and Qatar Airways.

In the same way that the PPI mi-selling scandal prompted a flurry of legal ‘ambulance chasers’, are we now going to see an explosion of solicitors offering ‘no win, no fee’ type deals to passengers hoping to make a claim against the airlines? Probably. The law firm behind the recent High Court victory over Jet2 has set already up a dedicated flight compensation division and has already recovered £8.3 million for its clients!

Research by ‘Which?’ found that 9,000 flights were delayed by more than three hours in the twelve months up until May of this year. If that is the case, one travel trade magazine, ‘TTG’, then estimates that up to 900,000 passengers could be affected and are eligible to claim, landing the airlines with a total bill for  €225 million for just year alone!

Will this result in higher airfares as the airlines seek to recover their costs? The industry is undecided and much depends on the number of passengers that do pursue a claim. Which? found that only 38% of passengers filed a claim and the European Commission estimates that even if everyone who was entitled to claim did so, then it would only lead to an increase of €1-3 extra on each ticket.

Of course, having the right to claim it and actually receiving the money are two different things. How many of us can easily lay our hands  on all the information relating to flights we made six years ago? And as we increasingly move towards entirely paper-less ticketing, how easy will it be to retrieve the information from your smartphone?

The airlines’ previous obduracy on this issue has now come back to haunt them and the phrase, ‘you can run, but you can’t hide’ come to mind. So back on the naughty step they go where we can all see them.

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