Explanatory Memorandum to COM(2001)784 - Common rules on compensation and assistance to air passengers in the event of denied boarding and of cancellation or long delay of flights - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2001)784 - Common rules on compensation and assistance to air passengers in the event of denied boarding and of cancellation or long ... |
|---|---|
| source | COM(2001)784  |
| date | 21-12-2001 |
1. Liberalisation of air transport has brought many advantages to passengers. Competition has arrived on many routes, prices have fallen in real terms and demand is growing rapidly. This unfortunately is only part of the picture. Despite these advances, air travel does not come up to customers' expectations and too often they have valid reasons for dissatisfaction. Denied boarding and cancellation of flights, for commercial reasons, provoke strong resentment, not only because they cause serious delay and upset travel plans but also because they represent a failure by the transporter to respect its undertaking to carry passengers with reasonable dispatch (even if protected by its contract). Long delays are another problem. Although air carriers and tour operators are frequently not responsible for delays, they should not be allowed to leave passengers in their care stranded at airports for hours, unable to change their reservations or cancel their flights if they no longer serve any purpose.
2. In May 2001 the associations of European airlines presented voluntary commitments to improve their quality of service and recommended that their members adopt them, as the majority are expected to do. These are a real step forward and, when fully implemented, will raise the level of service that passengers receive. They provide for assistance to passengers delayed at airports and on-board aircraft, among other things, but do not cover compensation and assistance to those who are denied boarding or whose flights are cancelled. Legislation is required better to protect such passengers and, in its communication on the protection of air passengers in the European Union i, the Commission announced its intention to withdraw its proposal of 1998 to amend Regulation (EEC) No. 295/91 on compensation for denied boarding i, which also covered cancellations, and to replace it by a stronger one. It also announced that it would propose legislation to enable delayed passengers to cancel their journeys or continue them under satisfactory conditions. These are the aims of the present proposal.
Contents
3. Ten years ago, the Community recognised the need for common rules on compensation and assistance to passengers denied boarding, when it adopted Regulation (EEC) No. 295/91. This gave passengers the right to financial compensation, to the choice between an alternative flight at the earliest opportunity re-routing or reimbursement of the ticket (important if a journey loses its purpose because of delay) and to assistance to reduce the inconvenience of waiting for a later flight. In 1998, the Commission concluded that it needed extension and clarification and proposed an amending regulation i. Unfortunately, the Council failed to adopt this proposal because of disagreement about its application to Gibraltar airport.
4. As amended following the Parliament's opinion i, the proposal would have considerably widened the scope of the regulation. In particular, it would have extended it to non-scheduled flights, to flights from non-Community to Community airports, to cancellations other than for safety or security reasons and to paperless forms of ticket; it would also have provided for better information of passengers on their rights.
5. The Commission believes that, even amended, Regulation (EEC) No. 295/91 would still not protect passengers adequately when confronted by denied boarding or cancellation. The original and the amending regulation oblige air carriers and tour organisers (henceforth both are referred to as operators) to compensate and assist passengers. They do not, however, dissuade them from excessive denial of boarding or cancellation, nor give incentives to balance the commercial advantages against the cost to passengers. Consequently, too many passengers would have continued to suffer from these practices.
6. Another drawback of these regulations is that they set flat rates of compensation. They ignore, therefore, that individual passengers attach different values to inconvenience and loss of time. Some would willingly surrender their seats, if compensated modestly but to their satisfaction. Others, like business travellers, value their time higher and so would insist on respect of their reservations, despite generous offers of compensation. Finally, they do not create rights for passengers suffering long delays, so that they can cancel their tickets or take alternative flights. While the causes are different, passengers suffer trouble and waste of time when delayed, as they do when denied boarding or left stranded because of a cancellation. As a consequence, the Commission believes it necessary to make another proposal that will better protect passengers (summarised at the end of this explanatory memorandum), based on the following analysis.
7. While levels of denied boarding are too high, the practice is impossible to eliminate. In fact it has two causes. The first is the transfer to a later flight of passengers unable to take that on which they were booked because of operational problems, such as late arrival or cancellation of connecting flights or replacement of out-of-order aircraft by smaller ones. The passengers transferred create unexpected demand for seats, sometimes to the extent that passengers on the later flight are denied boarding. Half the time passengers are denied boarding it is for operational reasons.
8. The second cause is the practice called 'no-show', the tendency for passengers not to turn up for flights although they have confirmed reservations. Involuntary no-shows are the consequence of the operational problems mentioned: passengers are simply not in a position to take the flight that they booked. Deliberate no-shows result from some current methods of marketing, which separate the reservation of places from the sale of tickets. This allows passengers with flexible, refundable tickets (sold at high prices) to employ them for a different flight or to obtain reimbursement if unused. It also permits some selling agents to make speculative bookings of seats for future sales to customers, without payment. Agents may then fail to cancel unused reservations or do so too late.
9. Operators, therefore, forecast the probable level of no-shows on a flight. They then accept reservations up to the plane's capacity plus the estimated number of no-shows, that is they overbook. However, unexpected events may upset their calculations of probability or they may aim for very high and profitable load factors, so reducing their margin for error. They then have to deny boarding. According to the data available to the Commission, in 1999 an estimated 250,000 passengers suffered this treatment from the main Community carriers (scheduled services), or 1.1 per thousand.
10. If operators could not overbook, they would leave empty seats that could be sold to other passengers. Their revenue and profits would then fall, to which they would respond by raising prices. This would be to no one's advantage. While operators need operational flexibility to deal with unexpected events, they face no deterrent to aiming at excessively high load factors and are not given sufficient incentive carefully to balance the margin of overbooking against that of no-shows.
11. The Commission now proposes a different approach towards denied boarding, based on calls for volunteers to surrender their reservations and on compensation at a dissuasive level for passengers denied boarding against their will. A volunteer system would be a great advance, introducing much needed flexibility. When expecting to deny boarding, operators would be obliged first to call for volunteers to give up their places in exchange for certain benefits (whether in the form of money or other advantages). The operator and the potential volunteers would then negotiate and agree on the conditions of the exchange; these would reflect the value that each passenger attached to the loss of time and inconvenience involved.
12. A volunteer would not be forced to surrender his or her seat on the aircraft but would only do so by agreement. Consequently passengers accepting the exchange would not be denied boarding but act of their own will. In the United States, a volunteer system is compulsory and gives good results. In 2000 the number of passengers denied boarding against their will amounted to an estimated 18,000 passengers, 0.1 per thousand; the number of volunteers reached an estimated 330,000, nearly twenty times greater than those denied boarding (larger carriers only).
13. If, and only if, an insufficient number of volunteers came forward, would operators be allowed to deny boarding. They would have then to compensate passengers at a fixed rate, high enough both to offset the delay and trouble caused and to dissuade operators from overbooking to such an extent that they routinely deny boarding. To achieve that, compensation should be at a such that operators do not earn but lose revenue from this practice.
14. In its proposal the Commission has tried to set rates that compensate passengers and deter operators from excessive overbooking, but has had to rely on general data on fares and on the very limited information that airlines were willing to give on revenue earned from overbooking. Last year the weighted average of business class fares was about 310 Euros for intra-European flights, most falling in the range of 150 to 600 Euros. The cost of transporting passengers overbooked but not denied boarding is assumed marginal, as operators would incur almost all costs, fixed and variable, in carrying the other inter-passengers; it is hence justified to relate compensation to fares. To deter operators from denying boarding to all passengers, whatever class they travel, the Commission proposes setting the fixed rate of compensation at twice the level of most business class fares, that is 750 Euros for flights of less than 3,500 kilometres. Allowing for the difference in fares between intra-European and inter-continental flights, it proposes 1,500 Euros for flights of 3,500 kilometres or more.
15. Such levels should not prevent airlines from overbooking in order simply to fill seats that otherwise would remain empty, which would depress revenues and raise prices. The Commission's proposal is based on a call for volunteers; only if too few passengers come forward, would an operator deny boarding and pay the fixed rate of compensation. In the United States the ratio of volunteers to passengers actually prevented from flying is nearly twenty to one, and that with a low fixed level of compensation. It follows that operators would pay the fixed rate infrequently, so long as they did not overbook exaggeratedly and were effective in finding volunteers.
16. It could be argued, nevertheless, that potential volunteers would routinely demand the new fixed rate so that volunteer systems would not work. However, if they hold out for the fixed rate, they run the risk that other passengers will accept a lesser offer in an adequate number to eliminate the overbooking. In that case, they would receive no compensation but travel in the ordinary way. Finally, the basic aim of the Commission's proposal must not be overlooked. It is to induce operators to be sufficiently cautious in their reservations policy as to render denied boarding exceptional not systematic. It is not to approve the practice in general, while offering passengers palliatives.
17. If actually denied boarding, passengers should be entitled to continue their journeys as rapidly as possible (re-routing), under conditions comparable to those of their original flight. Alternatively, if they decide that their travel is no longer worthwhile, they should be able to cancel their journeys and obtain reimbursement of their tickets. The Commission believes that such rights must be well covered by law and so proposes reinforcement of the relevant article of the 1991 regulation: passengers would, in particular, gain the right to return flight in addition to reimbursement of their tickets (when they choose this instead of an alternative flight at the earliest opportunity). Volunteers would be given the same rights, as they would be confronted by similar difficulties of travel. The Commission also proposes maintaining the rights of passengers denied boarding to care while awaiting a later flight, in the form of meals, refreshments and hotel accommodation, as appropriate.
18. These rights should be accompanied by an obligation on passengers to behave correctly and avoid disruptive behaviour when flying. This means that operators should be allowed to refuse carriage to passengers, whose conduct may threaten the safety or comfort of other passengers and of crew. It is important to establish this right and to define the conditions under which operators can refuse carriage to passengers with valid tickets and confirmed reservations, in their interest and in that of passengers as a whole. It would be more effective to do this at Community level so that passengers would face the same obligation to behave correctly - and know it- and operators would come under the same rules throughout the single market. When preparing proposals for legislation on minimum requirements for airlines' contracts, the Commission will carefully consider how best to establish these rights and obligations.
19. The Commission has decided to withdraw its 1998 proposal, in order to present this new approach. Its new proposal, however, maintains almost all the innovations made in its 1998 text and in the amendments proposed by the European Parliament. Among these are the extension of the regulation's scope to non-scheduled flights, including those in package tours, and to paperless forms of ticket and the information requirements. The main difference is in the application of the regulation to flights operated by Community air carriers from third countries to airports in Member States. The 1998 proposal would have included all such flights. Consequently operators would have been subject to two sets of rules, those of the Community and of the third country. This would have put them in an impossible situation, and been considered by some countries as extraterritorial application of Community law in an unacceptable way. Consequently, the Commission proposes that the regulation would cover flights from third countries to airports in Member States only when passengers do not benefit from compensation and assistance in the third country.
20. Cancellation by an operator also represents a refusal to supply the service for which it has contracted, except in exceptional circumstances beyond its responsibility, such as political instability, severe weather conditions, inadequate security and unexpected safety failures. For the passenger, cancellation in ordinary circumstances, for commercial reasons, causes unacceptable trouble and delay, particularly when not warned in advance.
21. The Commission, therefore, proposes to keep an important feature of its 1998 proposal, as amended following the Parliament's opinion: the extension of the provisions on compensation, on reimbursement or re-routing and on assistance at the airport to passengers whose flights have been cancelled. An exception would naturally be made for cancellations that an operator can prove were made for reasons outside its responsibility. Would this allow a carrier to use safety or security as a pretext for cancelling flights, when it really does so on commercial grounds- In fact, under its air operator's certificate it is required to keep records of such incidents, which are subject to inspection by the authorities. This allows effective control and should minimise abuse.
22. Part of the inconvenience and trouble of cancellation close to the date of departure is that passengers are often not warned in advance and so are unable to change their travel plans. The amended proposal from 1998 does not tackle this problem. The Commission now proposes to do so, by requiring operators to make every effort to contact passengers before the scheduled time of departure - and to give them an incentive to succeed. This would be the possibility of seeking volunteers to give up their reservations in exchange for benefits, as with denied boarding. The advantage for passengers would not just be the benefits negotiated but also the advance warning and the freedom to make new arrangements if they wish. Of course, some passengers would prove impossible to find, while others would refuse the carrier's offer of benefits in exchange for surrendering their bookings. Such passengers, if they turned up for check-in, would have the same rights to compensation, to reimbursement of their tickets or rerouting and to care while awaiting a later flight, as those denied boarding. This proposal would introduce a degree of flexibility, beneficial to both operators and passengers, while protecting the latters' essential interests.
23. Although passengers suffer similar inconvenience and frustration from delays as from denied boarding or cancellation, there is a difference in that an operator is responsible for denied boarding and cancellation (unless for reasons beyond its responsibility) but not always for delays. Other common causes are air traffic management systems and limits to airport capacity. As stated in its communication on the protection of air passengers, the Commission considers that in present circumstances operators should not be obliged to compensate delayed passengers.
24. Nevertheless, it is quite unacceptable for operators to leave passengers stranded for many hours, when they have undertaken to transport them with reasonable dispatch. Passengers should be given the choice between an alternative flight as soon as possible or reimbursement of their tickets, if they consider that their journey has become pointless (as with denied boarding or cancellation). The Commission proposes, therefore, to extend these provisions to passengers facing serious delays. The length of delay that would trigger this assistance would be linked to the distance of the flight, as a delay of a given time generally causes more trouble and resentment if the flight is short than if long.
25. Assistance for passengers delayed at airports or on-board aircraft is another matter. The Commission believes that operators should be allowed to decide on the services given to delayed passengers (e.g. offer of refreshments, meals or hotel accommodation), so long as these passengers do not suffer discomfort or excessive inconvenience. It is encouraging that many, but not all carriers, intend to include assistance to delayed passengers in their voluntary commitments. The Commission will follow closely the implementation of these codes but, only if the results are unsatisfactory, will it consider the case for legislation. However passengers with reduced mobility, unaccompanied children or other people with special needs are less able to look after themselves, so the regulation should oblige transporters to care for them.
26. Complaints show that passengers are not always compensated under the present legislation as they should be, so measures to ensure full respect of an innovative regulation from the beginning are important. For that reason, the Commission includes an article requiring Member States to set penalties that are effective, proportionate and dissuasive and to designate bodies responsible for the enforcement of the regulation. These bodies would also investigate complaints from passengers and ensure that their rights were respected when infringements were found. The arrangements proposed would allow a passenger to complain about a possible infringement, wherever it happened, to the body in the Member State where he or she resides. If necessary, the body would pass on the complaint to that competent, which would then act. This arrangement will overcome the language and other difficulties that deter passengers from complaining in countries other than their own.
27. The regulation should greatly benefit passengers, among other things, by reducing the frequency of denied boarding and cancellations. The Commission will carefully follow the working of the legislation and its benefits for passengers, including the reduction in the frequency of denied boarding and cancellations. No later than five years after the regulation comes into force, the Commission will issue a report and propose further measures if the benefits are not convincing.
28. The Community has created an internal market in air transport services in which carriers compete under uniform rules. These rules do not only govern market access and safety but also advance the protection of passengers' rights; indeed this objective is of ever growing importance. Without harmonisation, operators would have to work under different regimes, raising their costs and frustrating competition. Passengers would be subject to multiple rules and find it difficult to know and insist on their rights. Moreover, several regimes might apply to flights between Member States, creating legal uncertainty to the detriment of passengers and operators alike. For these reasons, national rules, even assuming that they gave passengers a high level of protection, would not achieve essential Community objectives and would even frustrate their achievement.
29. The Community has long recognised the need for harmonised rules on the protection of air passengers and has adopted legislation on compensation for denied boarding i and on the liability of air carriers in the event of accidents i. Under ex-Article 100A, it has adopted legislation on package travel, intended both to give consumers a high level of protection and to create common rules i. The proposed regulation would therefore be the latest in a series, concerning areas where the Community exercises exclusive competence. The Community has no other means of action than legislation to create rights for air passengers.
30. Both operators and passengers benefit from precise and complete rules. Air transport is both an international and homogeneous service, so that divergences between regimes can create serious difficulties. Moreover, decisions on passengers' rights in the event of denied boarding or cancellation have often to be taken quickly, adding to the value of precise rules at Community level. Consequently, a regulation is a better tool than a directive, as has already been found with other measures to protect the rights of air passengers. Its provisions are proportionate to the objective and appropriate to the situations in which it is pursued.
>TABLE POSITION>
Article 1 states the basic purpose of the regulation.
Article 2 gives definitions of the terms used in the regulation.
Article 3 defines the conditions under which the regulation does and does not apply to passengers. It also clarifies its application to both air carriers and tour operators and deals with code sharing.
Article 4 requires an air carrier or tour operator to lay down and make known the rules it follows when denying boarding.
Article 5 sets out what an air carrier or tour operator must do when expecting to deny boarding, and in what order, establishing the obligation first to call for volunteers to surrender their reservations and then to deny boarding only if insufficient volunteers come forward. It establishes the right of a passenger denied boarding to compensation according to Article 7 and to assistance according to Articles 8 and 9, and that of a volunteer to assistance according to Article 8.
Article 6 protects disabled people and other passengers with special needs against denied boarding.
Article 7 lays down the level of dissuasive compensation to be paid a passenger denied boarding, which would vary by the distance of the flight.
Article 8 specifies that passengers denied boarding should have the choice between an alternative flight at the earliest opportunity and reimbursement of their ticket if their journey has lost its purpose.
Article 9 sets out the assistance that passengers denied boarding should receive to reduce the inconvenience of waiting for a later flight.
Article 10 requires an air carrier or tour operator, when cancelling a flight except for reasons beyond its responsibility, to make every effort to inform the passengers affected and seek volunteers to surrender their reservations. It also establishes the right of passengers which do not volunteer to compensation according to Article 7 and to assistance according to Articles 8 and 9.
Article 11 establishes the right of passengers who suffer long delays to the assistance specified in Article 8. Passengers with special needs would also be entitled to the assistance laid down in Article 9.
Article 12 clarifies that the regulation does not affect passengers' rights to further compensation.
Article 13 clarifies that the regulation does not limit the right of a carrier or tour operator to claim redress from a third party, if it has to meet obligations under the regulation.
Article 14 creates obligations to inform passengers of their rights both at check-in and when experiencing denied boarding, cancellation or a long delay.
Article 15 prevents the rights created by the regulation from being limited or waived through contracts.
Article 16 requires Member States to determine effective penalties for infringement of the regulation.
Article 17 requires Member States to designate bodies responsible for enforcement of the regulation.
Article 18 deals with the right of passengers to complain to a body designated by a Member State and the treatment of complaints across borders.
Article 19 requires the Commission to report on the effects of the regulation and to propose further measures, if needed.
Article 20 repeals Regulation (EEC) No. 295/91.
Article 21 sets the date of entry into force of the regulation.