Lawyer expects further airline insolvency review calls over refunds issue

A leading industry lawyer believes the omittance of package organisers from a recent refunds commitment by airlines begs the question of whether the government’s airline insolvency review will ever be implemented.

Travlaw partner Matt Gatenby told Travel Weekly pledges made to the European Commission (EC) by 16 carriers to refund passengers within seven days of cancellations showed “movement”.

But he expects further calls for the review’s recommendation of a “unified approach” on refunds to be implemented. The final report was published in March 2019.

Gatenby said: “The UK insolvency review was there before Covid, at which time refunds became a big issue not only in the trade but in the national and international media, so if it’s not going to be looked at now, when?”

He said many operators decided not to trade amid Covid uncertainties because airline bookings were too risky, and this “really impacted companies”.

“There is no preferential provision for operators [from airlines],” he said. “What we have seen during Covid is that the position is now worse.”

British Airways, Ryanair, easyJet, Wizz Air and Lufthansa were among carriers committing to the EC. They said refund backlogs had been “cleared in the vast majority of cases” and promised passengers would now “be informed more clearly” of their refund rights for cancellations, which include rerouteing or a cash refund.

Airlines may also offer vouchers but passengers must “expressly choose them”. “Most” airlines accepted unused vouchers can be exchanged for cash, the EC said.

While flights booked as part of a package were not affected, passengers who booked via an intermediary retained the right to a direct refund, with airlines “expected to inform passengers”.

The president of the European Travel Agents and Tour Operators’ Association, Pawel Niewiadomski, said not extending the commitment was “just pushing down the problem to operators”.

Gatenby noted that there was “potential” for airlines in the UK to avoid the same commitment since Brexit, despite the UK mirroring EU regulation 261/2004 when it left. But no legal case has yet ruled on whether changes to EU laws on travel and aviation since Brexit will automatically apply. “It’s in the UK’s gift,” said Gatenby.

Ryanair, which has long argued it does not recognise travel agents as legitimate intermediaries, did not directly address the question of whether the EC refunds commitment would apply to package travel organisers. But a spokesperson said: “In accordance with EU Regulation 261/2004, any passenger that requests a refund directly with Ryanair, will receive their refund in within seven working days of submitting their refund request.”

Lufthansa Group, parent of Lufthansa, Brussels Airlines and Eurowings, which all made the EC commitment, welcomed the “constructive process”.

A spokesman said: “The improvements required are manageable, create more satisfaction for passengers and legal certainty for the airlines. We will always comply with the current legal legislations.”

He added: “Lufthansa Group would refund any customer directly if they send a request directly to us and in case they did not get any reimbursement from an OTA in the meantime.

“These procedures usually also apply for our customers in the UK, which we apply also outside the UK.”

Wizz Air and British Airways did not comment.

Other airlines to make the commitment were Austrian Airlines, Air France, KLM, TAP, Norwegian, Alitalia, Aegean Airlines, Iberia and Vueling.

Since the airlines’ EC commitment, the UK’s Competition and Markets Authority (CMA) has dropped its probe into British Airways and Ryanair refunds during Covid due to a lack of clarity in the law left the matter “insufficiently certain”.

The competition watchdog was investigating a separate issue of whether passengers who were unable to board flights that did go ahead due to the government’s Covid restrictions were entitled to a refund.

Consumer protection law sets out that passengers are entitled to refunds when an airline cancels a flight, because the firm cannot provide its contracted services. However, it does not clearly cover whether people should be refunded when their flight goes ahead but they are legally prohibited from taking it.

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