In early May, the European Commission published guidelines intended to clarify how existing EU regulations (including airlines’ obligations to compensate passengers) should be applied. This followed the conflict in the Middle East, which has led to disruptions in the energy supply (high fuel prices and shortages).
This article first examines the implications of the current European Regulation. It then sets out the content of the guidelines and, finally, discusses the consequences for airlines.
Regulation (EC) No 261/2004
Regulation (EC) No 261/2004 protects passengers’ rights regarding compensation, care and reimbursement in the event of aviation disruptions, such as flight delays, cancellations or denied boarding. The Regulation sets out the rights to which a passenger is entitled. It also clarifies the obligations of an airline.
In the event of a flight cancellation, a passenger has the right to choose between a refund of the ticket price or rebooking onto another flight, and is also entitled to assistance at the airport. If the cancellation takes place within 14 days of the scheduled departure time, the passenger is, in principle, also entitled to compensation. This does not apply if the cancellation is caused by extraordinary circumstances that could not have been avoided, despite the airline having taken all reasonable measures. In that case, the airline is not obliged to pay compensation.
To clarify the concept of ‘extraordinary circumstances’, these are circumstances that are not inherent in the normal course of a carrier’s operations. The term ‘reasonable measures’ means that the carrier has taken all measures that could reasonably be expected of it to prevent or minimise the consequences for passengers.
High fuel prices and fuel shortages
The question is whether high fuel prices and fuel shortages can be classified as extraordinary circumstances. The European Commission has ruled that increased fuel prices cannot be regarded as extraordinary circumstances within the meaning of Article 5 of the Regulation, as fuel forms part of an airline’s costs and is therefore automatically subject to significant (price) fluctuations. Managing these fluctuations falls within the scope of an airline’s normal business operations, according to the European Commission.
The European Commission further states that a large number of airlines already hedge against these fluctuating fuel prices. According to the European Commission, airlines can anticipate this by passing on these costs in their ticket prices, referring in this regard to the system of free pricing.
The European Commission further emphasises that airlines may not adjust ticket prices retrospectively to compensate for increased fuel costs.
What may, however, be regarded as extraordinary circumstances is a local fuel shortage that prevents a flight from taking place. After all, such a shortage is not inherent to the normal operations of an airline. In such a case, the onus of proof rests with the airline to demonstrate that there was a fuel shortage and that this was in fact the cause of the cancellation.
Consequences for airlines
The foregoing implies that cancelling a flight due to high fuel prices cannot be regarded as an extraordinary circumstance, whilst a local fuel shortage may, under certain circumstances, qualify as such. This will always have to be assessed on a case-by-case basis. The guidelines therefore oblige airlines to carefully align their operational and commercial strategies.
The aviation team at LVH Advocaten advises airlines on the legal interpretation and practical application of these guidelines. Please feel free to contact Bram van Ruijven without obligation.
