BETWEEN MARCH AND May 2010 the eruption of Eyjafjallajökull resulted in the closure of airspace, the cancellation of more than 100,000 flights, and 10 million air passengers affected. The liability of airlines to care for stranded passengers caused severe economic distress. Many airlines have argued that in extreme circumstances such as the volcanic ash incident, they should not be seen as the “bank of last resort” to care, comfort and look after passengers.
On March 22 this year the Advocate General to the European Court of Justice gave his opinion in the case between Denise McDonagh and Ryanair. Between April 15 and 21, 2010, Ryanair cancelled about 9,500 flights because of the ash cloud, disrupting the journeys of some 1.4 million passengers.
Passenger rights in these circumstances are set out in EU Regulation 261/2004. Where flights are cancelled, airlines are obliged to compensate passengers, unless the cancellation was caused by “extraordinary circumstances”, which clearly applied to the closure of airspace. However, Article 9 of Regulation 261/2004 obliges an airline to offer passengers free-of-charge meals, refreshments and hotel accommodation where there is an extended period of delay – and this applies even when there are “extraordinary circumstances”.
Article 9 was the cause of the massive payout by carriers to affected passengers during the ash crisis. In this case, Mrs McDonagh was seeking to recover the costs of her care, during the delay, of €1,029 incurred for meals, refreshments, accommodation and transport. The case came before the District Court in Dublin, who referred the case on to the European Court for an interpretation of 261/2004, and in particular:
■ whether the circumstances of the closure of airspace owing to the volcanic eruption were beyond “extraordinary circumstances” – and, therefore, an airline should be released from any obligation to provide care for its passengers such as meals and accommodation costs;
■ if there is an obligation to care for passengers and pay these costs, should this be limited when the cancellation or delay is caused by extraordinary circumstances. Ryanair argued that accommodation costs should be limited to a fixed daily amount of €80 per night for a maximum of three nights, and that there should also be a limit to the cost of meals and accommodation, and transport cost.
The Advocate General has prepared his opinion for the European Court, and in practice his opinion is usually followed. He is firmly against any of the points Ryanair has made. The Advocate General says “extraordinary circumstances” should cover all exceptional events, including the closure of airspace due to the eruption of a volcano. Similarly he rejects the argument that the cost of the care airlines are obliged to provide should be limited.
Following the volcanic ash crisis, many airlines were faced with extravagant claims, such as five-star accommodation, private aircraft transfers and the cost of fine dining. Clearly there is a limit of reasonableness to passenger expenses, and in practice most of these claims have been resolved by agreement with the passenger.
If the European Court follows the opinion of the Advocate General, then this closes the door to the argument that, however extreme or unusual weather or other events might be, passenger rights, including the rights to care by the airline, remain in place, and are not avoided or limited in any way.
The world of ATOL licensing is changing, and, following an extensive consultation, the new Civil Aviation (Air Travel Organisers’ Licensing) Regulations 2011 were due to be introduced on April 30.
For business travel, sales to corporates are excluded from ATOL. However, one area that is relevant is the new concept of “airline ticket agent” (ATA). The new regulations make it clear that the current exemption to ATOL of “ticket provider” has changed. For sales of flight-only, there will be an exemption from the need to hold an ATOL, only when the ticket is sold by an agent acting as an ATA.
What this means is that no ATOL need be in place if:
■ the ticket is sold by an IATA agent issuing an IATA member airline’s ticket under the ticketing authority for that airline. No separate written agreement will be required with the airline in this case;
■ the ticket is sold by an IATA agent, issuing a non-IATA member airlines ticket under that airline’s ticketing authority, and through a billing and settlement plan (BSP) – again no written agreement is required;
■ the ticket is sold by any agent (whether or not IATA) issuing an airline’s tickets under the airline’s ticketing authority outside of a BSP, provided that the agent has a separate written agreement with the airline.
The exemption for the ATA only applies if the agent sells directly to consumers (and not to another agent) and provides confirmed tickets immediately upon receipt of payment.
While most IATA agents will be able to comply with this provision (and therefore not need an ATOL) other types of sale of flight-only may well be caught. For example, the sale of some low-cost carrier tickets, where the flights are pre-paid using the customer’s credit card, may now require an ATOL for this activity. This is because the agent booking the fare may be dealing with a non-IATA airline, and has no written agreement with the low cost carrier.