Flight delays compensation : punctuality or pay out?

Flight delays compensation : punctuality or pay out?

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Author: Sarah Booth

Jet2 is set to appeal a Court of Appeal decision as to whether 'technical problems affecting the operation of an aircraft' is an extraordinary circumstance entitling a carrier to avoid liability to pay flight delay compensation to passengers.

Regulation (EC) 261/2004 (the "Regulations") states that an airline must pay compensation to passengers for cancelled or heavily delayed flights. The Regulations apply to anybody whose flight departs from an airport in a European member state or whose flight arrives into a member state and is operated by a European Airline. If a passenger's flight is delayed or if the passenger misses a connecting flight and arrives at his final destination more than three hours later than planned, the passenger is entitled to compensation of between 250 and 600 Euros dependent upon the length of the delay and the length of the flight.

Airlines can defend a claim under the Regulations if it can show that the reason for the delay was an 'extraordinary circumstance', such as civil unrest, terrorism or severe weather.

Jet2.com v Huzar

In Jet2.com Limited v Huzar ('the Jet2 case') the courts considered whether a 'technical problem affecting the operation of an aircraft' is an extraordinary circumstance which entitles the airline to successfully defend a claim. The Court of Appeal dismissed Jet2's appeal against a lower court's decision, stating that the extraordinary circumstances defence did not apply, stating that 'difficult technical problems arise as a matter of course in the normal exercise of the carrier's activity'.

Although the Court of Appeal decided in favour of the consumer in this instance, Lord Justice Elias acknowledged that the issue was 'not without difficulty'. Jet2.com stated that it intends to appeal the matter to the Supreme Court.

The Civil Aviation Authority has commented that, in light of Jet2's intention to appeal, it expects further developments on this issue. Despite reports in the press of the 'floodgates opening', it is likely that in current court proceedings, where an airline is relying on the defence of 'technical problems' as an extraordinary circumstance, the airline will ask the court for a stay pending the decision of the Supreme Court in the Jet2 case. The decision about whether to grant a stay will be decided on a case by case basis. It is also likely that airlines will seek to delay paying compensation in respect of any new claims under the Regulations until the Supreme Court decision in the Jet2 case is known.

Impact of the decision

Whilst the level of compensation paid to each passenger is typically low, when this is multiplied by the number of passengers on a delayed aircraft, the potential liability can be significant. With such significant liabilities hanging over the airline industry, the question arises as to who will shoulder the burden of these liabilities.

When negotiating new agreements, airlines may seek to pass on liabilities under the Regulations to the suppliers of maintenance and ground handling services. Airlines may also seek to challenge liability provisions in existing contracts and we may see an increase in litigation between airlines and maintenance providers as a result of the decision.

It has been reported that Ryanair has taken steps to mitigate the impact of the Regulations by introducing a £2/2 Euros '261 levy'. It remains to be seen whether other airlines will be forced to increase their prices to reflect the potential liabilities under the claims.

This dispute looks set to rumble on for the near future and there is unlikely to be any further clarity or consistency on the application of the Regulations until the decision of the Supreme Court is issued.

About the Author

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Sarah Booth

Solicitor

03700 86 5743

Sarah is a solicitor in the commercial team, experienced in providing commercial contracts advice on a wide of strategic and business-critical commercial agreements. Her wide experience includes, IP & licensing agreements, IT contracts, franchising and outsourcing. She has particular knowledge of the aviation industry having undertaken an in-house secondment at a major UK airline and is experienced in drafting ground handling agreements, aircraft maintenance agreements and dealing with a wide range of aviation law issues.

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