Background

10.1  The existing Regulation on this subject[26] was designed to provide some form of redress to passengers who are denied boarding by airlines on scheduled flights as a result of over-booking. In her helpful Explanatory Memorandum of 2 March 1998, the Parliamentary Under-Secretary of State in the Department of the Environment, Transport and the Regions (Glenda Jackson) explains the background as follows:

"As part of their yield management techniques, airlines regularly take more bookings than there are seats, on the assumption that a proportion of passengers who have bookings will not turn up. Computer analysis of the proportion of passengers who do not turn up for each flight predicts the level of overbooking needed to ensure aircraft operate at maximum capacity. By reducing airlines' costs, reflected in lower fares, and by maximising available capacity, this practice benefits consumers as well as airlines. The alternative would be to fly with empty seats, reducing capacity offered to customers and leading to higher costs. Most of the time the airlines' analysis is correct and no more passengers turn up for overbooked flights than there are seats. However, there are times when some passengers are denied boarding and it can be a significant inconvenience to those it affects.

"Council Regulation 295/91 was intended to balance the interests of consumers with those of airlines. It sets out minimum levels of compensation for passengers, at a level intended to encourage airlines to avoid excessive overbooking, while not penalising them unduly so that they take an over-cautious approach, leading to reduced capacity, higher costs and higher fares for all passengers. Passengers with confirmed reservations who, having presented themselves at the check-in desk as stipulated, are denied boarding to scheduled services departing from any airport in a Member State, are entitled to this compensation. It applies to all airlines operating international or domestic scheduled services from these airports, including non-EC operators. Each air carrier must establish its own rules for denied boarding and make these available to the European Commission, Member States, and the public via travel agents and check-in counters.

"This compensation must be paid in cash (or by voucher only with the agreement of the passenger) immediately after boarding has been denied. Other expenses arising as the result of boarding being denied, such as free telephone calls, meals, transport and where necessary accommodation are also covered by the Regulation. There is nothing to stop airlines being more generous than these minimum levels if they wish and as a matter of commercial practice many airlines provide compensation above these levels. They often also ask for volunteers who are prepared not to board, to minimise inconvenience to more time-sensitive passengers".

The document

10.2  After consulting interested parties, the Commission proposes revisions to the Regulation in the light of experience and of developments in the air transport sector. In particular, the proposal would:

-    extend denied-boarding compensation to cover seat-only charter passengers as well as scheduled passengers[27];

-    increase minimum levels of compensation, to restore them to the original 1991 values, and allow the Commission in consultation with Member States to make future adjustments to the compensation levels to reflect economic trends;

-    take account of ticketless travel, telephone reservations and electronic ticketing;

-    deal with the effects of code-sharing and franchising, by making it clear that it is the airline which denies boarding which is responsible for paying compensation;

-    clarify the rights of consumers and the obligations of airlines, in particular, to provide better information to passengers about their rights; and

-    require Member States to determine "effective, proportionate and dissuasive" penalties for infringement of the Regulation, and to provide the Commission with an annual report on cases of denied boarding on their territory.

The Government's view

10.3  The Minister says that the Government welcomes the proposal, which strengthens an important element of consumer protection legislation in the aviation sector. She says that there has been extensive consultation with representatives of airlines and consumer groups, as well as Member States, concluding:

"The proposal reflects the views of all interested parties and goes a long way to balancing their interests".

Consumers' views

10.4  We have consulted the Federation of Air Transport User Representatives in Europe (FATURE)[28], which has sent us a copy of a document dated 1 May 1997 setting out its views on the proposal as it stood then[29]. Most of FATURE's suggestions have been incorporated into the present draft of the proposal, but two have not:

-    FATURE had proposed that compensation should be payable when, for circumstances within the control of the airline, a flight is cancelled or rescheduled; it is now seeking to achieve this aim through amendments to the airlines' Conditions of Carriage;

-    FATURE had proposed that Member States should incorporate reference to the Regulations in the permits that they issue to foreign carriers; it now hopes that another way can be found to bring the requirement home to airlines.

Conclusion

10.5  The proposed changes will make significant improvements in the arrangements for denied-boarding compensation. We regret that the proposal does not incorporate a requirement for Member States to refer to the Regulations in the permits which they issue to foreign airlines; we hope that the UK Government will find a way of making it clear to third country carriers that they are obliged by law to comply with these Regulations. Meanwhile, we clear this document.

DENIED BOARDING COMPENSATION (DBC)

COMMENTS BY FATURE (THE FEDERATION OF AIR TRANSPORT USER REPRESENTATIVES IN EUROPE

Abolition of the Distinction between Scheduled and Non-Scheduled Flights

FATURE is in favour of extending the scope of the denied boarding regulations to non-scheduled flights. This is one of the few areas where a distinction between scheduled and non-scheduled flights is still drawn. We see no benefit in this and, indeed, the exclusion of non-scheduled services opens up a potential problems with seat-only sales. These are not covered by the Package Travel Directive and passengers therefore have no protection against overbooking. We are of the view that, as with scheduled flights, liability should fall, in the first instance on the carrier airline. If there is a danger that this will expose the airline to liability because of overbooking by a tour organiser, it is the responsibility of the airline to ensure that its contractual arrangements provide for it to be reimbursed. It is not acceptable to FATURE for consumers to be given the run around trying to find out who is responsible for the overbooking.

Extending the Requirements for Air Carriers to Provide Passengers with Information about DBC

FATURE was unanimous in its view that this is the most important proposed new provision in the Regulation. It is not sufficient for an airline to be required to inform passengers of their rights only after they have been denied boarding. Passengers need to know their legal rights in advance. This should be achieved by the inclusion of a notice on tickets and by posting signs in airports.

We were somewhat disappointed by [the] suggestion that it was not possible to summarise the passenger rights on signs at airports and that, instead, [the Commission was] minded to introduce a statutory requirement on airlines, airports and handling agents to post a sign saying that denied boarding compensation was available. We would very much appreciate the opportunity to comment on the precise wording of such a sign. Our initial reaction is that, if it is not possible to give details of the scheme, it might be better to keep the sign very simple and impose a legal obligation to provide details on request. What we have in mind is something along the lines:

"If you cannot get on an aircraft at this airport because it is overbooked you may be entitled to immediate financial payment. Please ask for a leaflet."

Increasing the Compensation Thresholds

FATURE was of the view that a modest increase in compensation thresholds is probably appropriate to allow for inflation. However, denied boarding compensation is paid for from airline fares and should not be excessive. Indeed, if the compensation were too high, there would be a danger of distorting passenger behaviour. We therefore endorse the Commission's proposed increases in compensation levels and [the proposal] for a simpler method of changing them.

Make it Clear that Failure to Reconfirm Does not Exempt the Airline from Paying Compensation

FATURE fully endorses the proposal that it should be made clear on the face of the Regulations that it is not open to airlines to impose additional conditions on passengers' statutory entitlement.

Make it Clear that Denied Boarding Compensation is Payable Even if the Overbooking is Caused by Substitution of a Smaller Aircraft

FATURE would wish the Commission to resist proposals by the airline associations to follow the example of the US regulations, which exempt an airline from paying denied boarding compensation when a smaller aircraft is substituted. This would reduce the present level of consumer protection.

Denied Boarding Compensation and Codesharing

There is some force in the argument that, in the case of liability, it should be possible for the passenger to act against either the contracting or the operating carrier. However, the Warsaw Convention applies to far more complicated circumstances, where there would be a very different outcome depending on the carrier held responsible. In the case of denied boarding compensation, we are of the view that it would be better to achieve certainty by making absolutely clear that the statutory obligation is imposed on the operating carrier. The reason for our choice is that it is the representatives of that carrier who are on the spot and in a position to provide immediate cash payment if that is what is demanded.

Cancellation of Flights and Involuntary Re-booking

It would appear anomalous that airlines have statutory responsibility to provide compensation in the case of denied boarding but if they cancel a flight or otherwise change a passenger's reservation against their wishes, no compensation is payable. This has led to the situation of airlines escaping their liability by telephoning passengers beforehand. We would wish to block this loophole and would invite the Commission to consider extending the right to compensation to any passengers whose reservations are changed against their wishes.

Reporting Requirements

FATURE was concerned that there is very little factual information to inform current decisions on the review of this regulation. We would ask you to include a provision (following the US example) requiring airlines to report to their national licensing authorities all cases of denied boarding. Those reports should be made public.

Third Country Carriers

Finally, in our experience it is foreign airlines rather than Community carriers who are more likely to seek to evade their liability under the denied boarding regulations. We believe that all Member States issue some form of permit to third country carriers to pick up and set down passengers on their territories. While it would not change the legal situation, it could be very effective in improving compliance if these permits were to set out, explicitly, that their grant is conditional on the airline conforming with this aspect of Community legislation. We would therefore like the amended regulation to require Member States to incorporate such a provision in the permits that they issue.

1 May 1997