When is an air carrier not an air carrier? A Regulation 261 anomaly

On 6 December 2018 the European Court of Justice ("ECJ") issued a preliminary ruling concerning the interpretation of EU Regulation 261/2004 ("Regulation 261") Article 2(a), Article 5(1)(c) and Article 7(1). These articles relate to an airline's obligation to pay compensation in the event of a delay and the definition of "air carrier" under Regulation 261.

In February 2017, the claimants booked a package trip through a travel agency from Germany to Mallorca. At the time of booking the airline responsible for the flights had not been granted its operating licence, and this remained the case until after the date of the return flight. 

Five days before the flight, the claimants were informed that they had been rebooked onto a different outbound flight operated by another, licensed, carrier. The outbound flight arrived at its destination 13.5 hours after the original booking. The return flight was also rebooked on a schedule which took off over 3.5 hours before the departure time notified on the original booking. As a consequence, the claimants filed a suit before the local German court against the airline originally named for compensation for cancellation of €500 each under Articles 5 and 7 of Regulation 261.

The German court suspended proceedings and referred to the ECJ on the interpretation of Article 2(a). The question concerned whether or not the "airline" originally contracted to perform fell under the definition of "air carrier" given that it did not have "a valid operating licence" at the relevant time.

The ECJ made reference to Article 3(5) which states that Regulation 261 applies to any operating air carrier providing transport to passengers departing or arriving in a Member State. For the purposes of the Regulation “air carrier” means an air transport undertaking with a valid operating licence. The ECJ held that the contracted airline did not satisfy the definition of the “air carrier” at the relevant time and therefore Regulation 261 did not apply to them. As a result, the claimants were unable to claim compensation from that airline for the delay to their flights.

The ECJ did note however that Article 3(5) of Regulation 261 should be read in conjunction with Article 2(a) and that their decision did not exclude the claimants' legal right to compensation outside Regulation 261. They noted that Article 3(6) allows a potential remedy under Directive 90/314/EEC pursuant to which Member States are obliged to take measures to ensure that the organiser of a package and/or the retailer party to that contract is responsible to the consumer for the proper performance of the obligations resulting from it, whether these obligations are performed themselves or by another service provider.

The decision provides clarity that, if an entity does not meet the strict criteria of an "air carrier", it does not have Regulation 261 obligations. There have been a number of decisions about the respective responsibilities of more than one "airline" involved in the performance of a flight, not least in the context of wet leases and codeshares. It did not address the potential liability of the actual carrier and indeed the judgment does address whether those flights ran on time according to their own schedule. Despite provisions in the Regulation which suggest that both contracting and actual carriers have responsibility, it follows a recent trend that only one carrier is responsible for Regulation 261 liability.

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