Price-fixing, strikes and that volcano ... it's been a busy few months for the legal profession
APRIL AND MAY 2010 will be remembered as bumper times for those lawyers involved with the travel sector in bringing and defending claims, and analysing the regulations that govern business travel.
COLLAPSE OF BA PRICE-FIXING TRIAL
Early May saw the collapse of the prosecution bought by the Office of Fair Trading (OFT) against one current and three former executives from British Airways, who were found not guilty of conspiring with Virgin Atlantic to fix surcharges relating to fuel, following a four-year enquiry by the OFT. It was discovered that some 70,000 documents from the records of Virgin Atlantic were not disclosed to the defence prior to the hearing starting. Some of the documents significantly undermined the prosecution's case, with one confirming that Virgin had decided to raise its fuel surcharge independently and before contacting BA.
There has been considerable criticism of the way in which the prosecution was mounted, which was largely based upon the immunity offered to Virgin witnesses for whistle blowing. This was followed by the US Justice Department fining BA $300m on the basis of the same allegations, and BA's agreement in 2007 to pay a penalty of £121.5m to the UK regulator. Payment of the civil penalty to the UK regulator is now under review by BA.
There have also been significant refunds to the trade in connection with the price-fixing allegations. These financial consequences would be difficult to reverse. The case has highlighted the potential unreliability of evidence from a whistle-blower [equally guilty of price-fixing] and the need to use whistle-blowers, particularly where otherwise there would be no reliable evidence on which to bring the charges.
VOLCANIC ASH
When Eurocontrol and NATS closed airspace in April and May, after the Icelandic volcano Eyjafjallajökull filled the skies with ash, we realised just how much we rely upon international air transport. The suspension of the use of UK airspace for an initial six days, and subsequent sporadic periods, created massive travel disruption and caused devastation within the airline sector. The economic loss for airlines is such that some will struggle to survive. Not only were airlines prevented from earning revenue by flying, but EC Regulation 261/2004 landed them with massive ongoing liabilities, particularly under Article 9. This obliges EU carriers and airlines departing from an EU airport to offer passengers meals and refreshments, hotel accommodation in cases where an overnight stay is necessary, and transport between the airport and the place of accommodation. The potential for this unlimited liability to impact upon airlines has yet to be fully realised. Many thousands of passengers stranded overseas have incurred substantial additional expense, particularly with staying on at their hotel accommodation, that under the regulation can be passed on to the airline, subject to conditions. Tour operators and insurers who have paid out for passenger claims in these circumstances are also looking to airlines for recompense.
We can perhaps understand the exasperation of the airline community, which has become the insurer of last resort, with huge liabilities in circumstances where the cause was an extraordinary circumstance completely beyond its control. It is to be hoped the relaxation of rules on state aid will allow airlines to receive public funding from the EU, or their home member state, to finance any reimbursement of expenses that takes place.
The true impact and scale of these costs has yet to be realised. The regulations give no guidance for the speed by which airlines should deal with and pay for the thousands of claims received. The Air Transport Users Council has the task of policing the regulations in the UK, and on April 29 called on airlines urgently to provide a website link for information on how to claim refunds. But few carriers have dealt with this. Meanwhile, the Italian Civil Aviation Authority (ENAC) has fined Ryanair €3m for failing to comply with the regulations at Rome's Ciampino Airport. Ryanair claimed this was unlawful, and has appealed.
STRIKE INJUNCTIONS
May was a busy time for the Royal Courts of Justice, with BA successfully obtaining an injunction by Mr Justice McCombe overturning the decision to strike by cabin crew, which was due to start on May 18. This was despite an 81 per cent vote in favour of the strike. The decision was overturned by the Court of Appeal on May 20, and the strike recommenced. Such radical decisions coming one after another leads to great uncertainty for passengers and the trade. We can only hope that some form of solution is found soon.
UNFAIR LOSSES?
With international airlines losing vast amounts of money, it seems inevitable that government support will be needed in the short term if they are to survive, and if we wish to continue to use air services with the frequency and reliability we have come to expect. Can it honestly have been intended to make airlines responsible for wholly exceptional circumstances, such as volcanic ash causing a suspension of airspace, where passengers accommodation claims are disproportionate to airlines costs and profits? It surely is time to support the airline community rather than for it to be seen as a funder for major losses
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