Airline Insolvency-Pasenger Rights

On the collapse of the Scottish airline, FlyGlobespan, previously reported, those customers who had booked a package holiday with the company were protected by the Civil Aviation Authority's Air Travel Organiser's Licensing scheme (ATOL). This enabled those abroad to continue with their holiday and arrangements were made to provide them with alternative flights home at the end of it. Those that had yet to travel were entitled to a refund.

Those who had booked a flight-only deal were not covered by the ATOL system, however. If they paid for the flight by credit card they could obtain a refund from the credit card company under Section 75 of the Consumer Credit Act 1974. This does not apply to charge cards (e.g. American Express, Diners etc.) or to debit cards but some of the companies that issue these do provide protection under their terms and conditions of issue. It did not matter whether the customer paid for the flight in total with a credit card: provided that even part of the payment was by credit card and that this amount was £100 or more then they were covered for a full refund.

There was some confusion in this case, however, as FlyGlobespan used the ATOL logo on their website leading to some travel agents and customers to think that all bookings, including flight-only were covered. The CAA stated that they were entitled to do this and that it was for the customer to read the terms and conditions to see which travel arrangements were and which were not included.

John

Compensation in the Event of Airline Bankruptcy

Motion for a Resolution by European Parliament

Mathieu Grosch, Artur Zasada on behalf of the PPE Group

Saïd El Khadraoui on behalf of the S&D Group

Dirk Sterckx on behalf of the ALDE Group

Michael Cramer, Frieda Brepoels on behalf of the Verts/ALE Group

B7-0153/2009

European Parliament resolution on passenger compensation in the event of airline bankruptcy

The European Parliament, – having regard to the oral question of 15 October 2009 to the Commission on passenger

compensation in the event of airline bankruptcy (O-0089/09 – B7-0210/2009),

– having regard to Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours,

– having regard to Regulation (EC) No 2027/97 of the European Parliament and of the Council of 9 October 1997 on air carrier liability in the event of accidents,

– having regard to Regulation (EC) No 785/2004 of the European Parliament and of the Council of 21 April 2004 on insurance requirements for air carriers and aircraft operators,

– having regard to Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91,

– having regard to Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community,

– having regard to Rule 115(5) of its Rules of Procedure,

A. whereas Council Directive 90/314/EEC regulates aspects of the package holiday business and provides for appropriate compensation and repatriation of consumers in the event of the bankruptcy of package holiday firms,

B. whereasRegulation(EC)No2027/97establishesthenatureofaircarriers'liabilityinthe event of accidents and compensation arrangements for passengers,

C. whereasRegulation(EC)No785/2004laysdowntheinsurancerequirementsaircarriers and aircraft operators must meet,

D. whereas Regulation (EC) No 261/2004 provides for compensation for and assistance to passengers who are denied boarding or whose flights are subject to cancellation or long delay,

E. whereasRegulation(EC)No1008/2008establishesstringentfinancialrulesforaircraft operators,

PE428.771v01-00 2/3 RE\796786EN.doc

F. whereastherehasbeensubstantialgrowthinthelastdecadeinthenumberofrelatively small low-cost carriers flying to recognised holiday destinations and the number of passengers they carry,

G. whereas there have been 77 bankruptcies in the aviation sector in the last nine years, resulting in some instances in many thousands of passengers being stranded at their destinations and unable to use the return portion of their flight ticket,

1. Notes that the Commission has undertaken wide-ranging consultation of stakeholders on the question of airline bankruptcy;

2. Recalls that the Commission undertook a major study of the difficulties surrounding airline bankruptcy and its impact on passengers and forwarded its findings to Parliament in February 2009;

3. Notes the findings of that study and the range of options which it examines;

4. Recalls in this regard that there are a number of options which the Commission could pursue to strengthen the position of passengers of bankrupt airlines, including compulsory insurance for airlines, a voluntary insurance arrangement for passengers which airlines would be required to propose, and the establishment of a guarantee fund;

5. Calls on the Commission to examine the possibility of a legislative proposal and submit it, if it considers it appropriate, by 1 July 2010 which has as its specific objective the provision of compensation for passengers of airlines which go bankrupt and establishes financial and administrative arrangements, including the principle of mutual responsibility for passengers of all airlines flying in the same direction with available seats, which would ensure repatriation for passengers who are stranded at non-home airports in the event of airline bankruptcy; asks the Commission to propose, when reviewing Travel Package Directive 90/314/EC, an extension for repatriation or rerouting for the passengers concerned;

6. Calls on the Commission to consider the possibility of extending such measures to airlines which have ceased operations and caused passengers similar inconvenience to that caused by airlines which go into bankruptcy;

7. Calls on the Commission to investigate the quick release of impounded aircraft by national regulatory bodies so that those aircraft can be used to bring stranded people home;

8. Instructs its President to forward this resolution to the Council, the Commission and the parliaments and governments of the Member States.

New Commissioners / Speech Kuneva

Meglena Kuneva, the leaving commissioner for Consumer Policy held a press conference regarding the "Revision of the Package Travel Directive" (see below)

Along the way: The new designated commissioner for Consumer Policy is John Dalli (MT) and for Transport (and as VicePresident) Siim Kallas (EE)

Press conference speaking points

Brussels, 26 November 2009

SPEECH/09/559

Ladies and gentleman,

It is my great pleasure today to announce that we intend to review the current EU rules on package travel to give millions of consumers better protection if their holiday goes wrong.

Why do we feel that the current rules need a makeover?

First of all, our current EU law on package travel - the Package Travel Directive - was written almost 20 years ago, in 1990.

Back in those days, millions of European holidaymakers picked their package holiday from a glossy brochure and booked at a travel agent on the local high street.

The Package Travel insisted on:

- clear information in brochures,

- gave people the right to assistance if they had difficulties on the spot,

- gave them protection for substandard services,

- And it put in place insolvency protection if the tour operator or airline went bust.

But the 1990 Package Travel Directive is no longer suited for today’s travel market.

Increasingly large volumes of bookings are made by consumers putting together their own packages, often online.

Today, 56% of EU citizens organise their holidays themselves, so the number of those opting for a traditional pre-arranged package has fallen dramatically.

Just to give you one example, in 1997, 98 % of passengers travelling from the UK on leisure flights were protected by the Directive, now less than 50% are protected.

Fewer and fewer people are getting the holiday protection they deserve. That is NOT good enough. There are 3 main areas I want to focus on in this review:

1. The first, is the central issue of the Scope of the Directive.

Simply put, which of new kinds of package holidays should be covered by EU protection?

Most pressingly, we need to look at adapting the rules to take account of the "next generation" of "dynamic packages". This is where consumers make up their own package choosing two or more services, for example a flight and a hotel, either from one supplier – like Expedia or Opodo. Or from different suppliers that are commercially linked.

In the past 2 years, almost 1 in 4 EU citizens have booked these new "dynamic packages." In some countries, like Sweden and Ireland, the figure is as high as 40%!

My starting point is that we should look to extend the protection in the current directive as far as possible to cover all the new kinds of ‘dynamic packages.’ That way, we can provide more legal certainty for businesses and tough protection for consumers.

Of course we are looking forward to getting detailed feedback from industry and all stakeholders before taking final decisions on this issue.

Package Travel Label

Speaking of legal certainty, I want to draw your attention particularly, to the new ‘Travel Protection Label’ which we are considering introducing. The idea is to have a logo which makes it absolutely clear for consumers and businesses which holidays are covered by this Package Holiday Protection. I hope that this initiative will gain widespread support during the consultation.

2. Legal Responsibility

The second big issue we need to get right in this consultation is the issue of legal responsibility.

Simply put, who is responsible for what when things go wrong? Is it the carrier, is it the travel agent, is it the tour operator?

Today the old distinctions between carriers, tour operators and travel agents are often blurred. It is often not all that clear who is actually responsible for making sure that everything that is the holiday contract which the consumer signs has been properly carried out.

We urgently need to clarify these legal responsibilities.

3. Insolvency Finally, I want to come to the critical issue of protection for consumers in the

case of insolvency – in particular, what do when airlines go bust.

I know that many of you, like me, will have watched with great concern the TV pictures, as Sky Europe, XL, Future, Zoom and other airlines went bankrupt in recent months and years.

Thousands of airline passengers were stranded in airports across Europe, with worthless tickets, unable to get home. Like me, I am sure many of you watched with dismay and thought, how can this be legal? How can this be right?

Bankruptcy has become an increasing concern for European consumers. The rise of airline insolvencies has grown substantially. Between November 2005 and September 2008 alone, 29 airlines went bust.

In far too many cases European consumers found themselves "left out in the cold" unprotected and with no way of getting home.

Now is the right time to the ask the tough questions about the need to extend basic protection against airline bankruptcy to consumers across the board, including to stand alone airline tickets.

Ladies and gentlemen,

I Iook forward with great interest to getting feedback from industry, consumer organisations and the public on this consultation.

Armed with that feedback, I am confident we can get the right solutions and deliver: more low cost holidays; more competition; and more value for money and choice for consumers.

Thank you, now I am happy to take any questions you might have.

Bust airlines

MEPs back compensation for grounded passengers:

If your airline goes bankrupt and leaves you stranded what are your legal rights? Members of the Parliament's Transport Committee want grounded passengers to have access to a special compensation fund. In the last decade almost 100 airlines across the European Union have gone bankrupt - leaving thousands of holiday makers and business flyers out of pocket and stuck at a foreign airport.

Sabena, Sky Europe and Olympic Airlines are just three of the large carriers that have gone bankrupt due to a combination of high fuel costs, competition and new security measures after 9/11.

Transport Chair Brian Simpson speaks of "clear loophole"

On 7 October during the plenary session in Brussels, the Chair of the all-party Transport Committee, Brian Simpson (Labour, North West of England), formally asked the European Commissioner for Transport Antonio Tajani to set up "a reserve compensation fund" and consider updating passengers' rights legislation.

He told fellow MEPs that "here we have a clear loophole and it would be preferable for all if we could work together and fill it in".

He added: "We have also floated the idea of establishing a reserve compensation fund, but this must not be seen as a demand. We merely wish to open up the debate as to what mechanism will help us best solve this problem."

Transport Commissioner Tajani backs compensation

Commissioner Tajani told Members that "passengers should indeed receive compensation. We are working on specific measures to find the best solution. One solution is a compensation fund derived from airlines' contributions. Another would be changes in bankruptcy law in the member states".

There is a consensus across the Parliament's main political groups that the European Union needs to do more to help passengers stranded by bankrupt airlines. A Parliamentary resolution is due to be tabled later in the autumn.

Source: 20091002STO61739

Action against Italy (ECJ Case C-121/09) re Art 7 PTD

Form of order sought a declaration that the Italian Republic has failed to fulfil its obligations under Article 7 of the ptd

Pleas in law and main arguments

1. By fixing a period of three months from the foreseen date of the end of travel for the purpose of making an application for action by the Guarantee Fund for package travel consumers, the Italian Republic has failed to fulfil its obligations under Article 7 of Directive 90/314.

2. Article 7 of Directive 90/314 provides that the organiser and/or retailer party to the contract is to provide sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency. According to the interpretation given in Community case-law, that provision imposes an obligation of result on the Member States, which entails affording the purchaser of package travel the right to effective protection against the risks of the organisers' insolvency and, in particular, the refunding of sums paid over and repatriation.

3. Next, Article 8 allows Member States to adopt more stringent provisions, but only if the latter offer greater consumer protection.

4. In the instant case, the object of the Italian legislation in question, according to information sent by the national authorities during the infringement procedure, is to ensure that the State budget has the opportunity of recovering sums paid to consumers and so of preserving the State's financial interests instead of ensuring greater protection for the purchasers of package travel.

5. Although the Commission understands that Italy has an interest in ensuring the proper balanced running of the Guarantee Fund, making it easier for the latter to bring an action for indemnity against the tour operator, it takes the view that such a measure, by imposing an absolute limit on the presentation of the application for action by the Fund, introduces a condition capable of depriving the consumer of the rights guaranteed by Directive 90/314.

6. It is true, as the Italian authorities maintain, that consumers may make their application for action by the Fund as soon as they are aware of circumstances that threaten to prevent the performance of the contract. However, in order to avail themselves of that opportunity they must be aware of those circumstances. Excluding those cases in which the travel organiser's insolvency is obvious, by reason of a declaration of insolvency, in most cases consumers do not know the exact financial situation of the operator. It is therefore reasonable that they should in the first place turn to the operator to obtain repayment of sums paid, sending it a letter, perhaps a reminder, and finally an order to pay. In that manner there is a risk that the period of three months fixed by Article 5 of Ministerial Decree No 349/1999 may already have long elapsed when the application is made for action by the Fund, with the result that consumers are deprived of the right to obtain the refund of the sums paid.

7. To remedy the infringement alleged in these proceedings, the Italian authorities declared, first, that they wished to extend from three to 12 months the period in which the application may be made and then that they intended to abolish it.

8. In addition, they published in the Official Gazette of the Italian Republic a communication informing potentially interested persons that, pending abolition of the period in question, for the purposes of ensuring consumer protection applications may be made to the Guarantee Fund at any time.

9. The Commission considers that such measures, while a laudable attempt to make good the consequences of the infringement complained of, do not do enough to eliminate the risk that purchasers of package travel may be deprived of their right to effective protection in the event of the organiser's insolvency.

Australia: holiday makers warned on using unlicensed travel agents

The Australian Travel Compensation Fund says booking with a licensed agent is “more important than ever'”as more businesses struggle in the tough economic climate. The TCF has exceeded $50 million in payments to Australian travellers who have been left out of pocket after their travel agencies collapsed. However, travellers are eligible for financial protection only if they used a licensed agent. The TCF was set up in 1986 to provide a safety net for travellers who would lose money if a travel agency collapsed or became insolvent.

Source: news.com.au; find article here>>.