The International Air Transport Association (IATA) reiterated its strong concern that proposed reforms by the European Parliament to EU261 consumer rights regulation will entrench and worsen its flaws.
In a statement released today, 18th November, IATA officials pointed out that these reforms have ensured ever-rising costs to consumers and airlines whilst failing to tackle the main concerns of passengers.
According to IATA director-general Willie Walsh: “Everyone knows there’s no such thing as a free lunch. Similarly, there is no such thing as a ‘free’ bag or ‘free’ compensation thresholds. The EU Parliament’s new provisions to EU261 work as a ‘reverse Robin Hood’, putting further costs on to the 99 percent of passengers who don’t benefit from it. They are imposing things people haven’t asked for, and don’t want to pay for unless they choose to.”
Walsh further pointed out that, given a choice, passengers would prefer to pay for what he referred to as “a less gold-plated compensation scheme” in exchange for lower fares.
He continued by saying: “MEPs are meddling in business and operational issues they don’t understand. It’s essential the Parliament’s proposals are modified, and the Council position is upheld. The best guarantee of great customer service is choice and competition delivered by a thriving air transport market.”
Walsh went on to say that the correct reform of EU261 could serve as a starting point for a meaningful competitiveness strategy for European aviation, and show that European politicians are serious about the lessons of last year’s Draghi report and the need for fewer and smarter regulations.
Imperfect regulations
The shortcomings of EU261 have been known for years.
In June, European governments finally acted to put in place changes to EU261 that would safeguard connectivity and preserve the competitiveness of European aviation.
While far from perfect, the European Council attempted to achieve a more balanced regulation, something which was always the objective of reviewing EU261.
The most notable reform was to move the thresholds for compensation from the present three hours to four hours for short haul and nine hours for long haul.
This would reduce the perverse incentive for airlines to cancel delayed flights, and be consistent with passengers’ preference to arrive late rather than not at all.
The European Parliament is seeking not just to eliminate these threshold improvements, but add numerous additional measures, such as the ability to bring a cabin bag for free.
There is no evidence passengers want these provisions and much less that they are willing to pay higher fares as a result.
IATA’s passenger survey in May showed 72 percent prefer to have the lowest fare and pay for additional services as required.
The same survey noted that 97 percent of passengers were ‘somewhat’ or ‘very’ satisfied with their most recent flight.
Furthermore, IATA analysis of Eurocontrol statistics has discovered that less than one percent of flights are delayed beyond three hours.
This means that 99 percent of passengers are paying for a compensation scheme which only one percent of travelers benefit from, and it follows that the compensation scheme should therefore offer as much value for money as possible.
A sense of urgency is necessary
The need for action is growing ever more urgent, as European air connectivity growth has slowed in some of the most important markets.
IATA Economics research shows that in the 2014-2024 period, on average, France’s connectivity grew by only 2.2 percent per year, the Netherlands by 2.9 percent, and Germany by just 0.4 percent.
Governments should be pulling every lever at their disposal to create an air transport industry that is more competitive.
That means not just the right reform of EU261, but also:
- Removing passenger taxes. These damage connectivity. Some governments have recognized this: Sweden deleted its passenger tax in July. Germany has said it will do so. We urge other governments to do the same; and
- Making changes to the ReFuelEU “Green Deal” Regulation and EU Emissions Trading Scheme (ETS). Fuel producers should be incentivized to make affordable Sustainable Aviation Fuel (SAF), and airlines should be able to benefit from using it. At present, airlines pay a US$2.9 billion penalty for buying SAF compared to regular jet fuel. This is on top of payments into the ETS. The recent STIP proposal by the European Commission is a step in the right direction, but it remains to be seen when words will turn into action.
The combination of these additional costs is making the profit margins and viability of many new routes or adding frequencies highly questionable, reducing choice for consumers.
