Passenger rights, package travel and the extent of an airline's liability for cancelled flights under Regulation 261/2004

By Simon Phippard, Sandra Nicolle, Nicholas Puschman

07-2019

The extent of an airline's liability towards passengers, where a flight (as part of a travel package) is cancelled, is at the heart of the HQ, JO v Aegean Airlines SA (C-163/18) case referred to the Court of Justice of the European Union (CJEU), which delivered its judgment on 10 July 2019.

Following an Opinion issued by the Advocate General in March 2019, the CJEU has held that where a passenger has the right to hold its travel organiser liable for the reimbursement for the cost of their flight ticket under Directive 90/314, they are not entitled to simultaneously claim reimbursement from the air carrier – even if the travel organiser is financially incapable of reimbursing the cost of the tickets.

Background

During summer 2015 Aegean Airlines undertook to provide charter flights between Greece and the Netherlands which a tour organiser, Hellas Travel, used to offer package holidays to the Dutch market. The claimants booked tickets for these return flights as part of a 'package tour' (as defined in Directive 90/314) and paid the price to Hellas. A few days before the first flight, Hellas informed the claimants that it was no longer able to pay Aegean Airlines the price of the flights due to a lack of bookings and an unstable situation in Greece, and so Aegean Airlines had decided to cancel the flights. Hellas subsequently became insolvent and did not reimburse the claimants the cost of the tickets.

The claimants argued before the Dutch courts that under the provisions of Regulation 261/2004, Aegean Airlines was liable to compensate them for the flight cancellation and to reimburse the cost of their flights. The court held that the Claimants were entitled to be compensated by Aegean Airlines for the cancelled flight but it did not rule on whether the cost of reimbursing the flight costs should be borne by the airline.

Referral to the CJEU

The referring court asked the CJEU to provide an interpretation of article 8(2) of Regulation 261. The court asked whether that article meant that a passenger who could hold their travel organiser liable for the reimbursement for the cost of their ticket under Directive 90/314, could no longer claim reimbursement from the air carrier under Regulation 261/2004, even where the travel organiser could not reimburse the cost of the tickets.

Preliminary Ruling

The CJEU stated that the wording of Article 8(2) is clear: passengers are entitled to reimbursement in the event of cancellation of a flight that is a part of a package tour, unless they already have this right under Directive 90/314. The mere existence of this right to reimbursement under Directive 90/314 is sufficient to negate the right also to claim under Regulation 261/2004. This argument was also made in the Advocate General's Opinion earlier this year which suggested that it would be contrary to EU law to interpret Article 8 as meaning that Regulation 261/2004 could serve as a fall-back for passengers who fail to obtain compensation under Directive 90/314.

The CJEU also agreed with the Advocate General in his view that, from a historical review of Regulation 261/2004, the above interpretation is correct: this Regulation is not intended to exclude package tour passengers entirely; however Directive 90/314 does provide adequate protection and should be the relevant legislation to deal with this scenario. Passengers are not entitled to double reimbursement under the Regulation and the Directive as this would amount to excessive compensation and imposing liability on air carriers for actions or events caused by tour organisers would be unwarranted.

This applies whether or not the tour organiser is able to reimburse the tickets, or whether it has taken measures to guarantee reimbursement or not. The objective of Regulation 261/2004 is to ensure a certain level of protection for passengers, and the protection given by Directive 90/314 is already adequate.

Of course under Article 7 of the Directive, the tour organiser must guarantee to offer a refund in the event of insolvency. The Directive does not set out any particular way for tour organisers to achieve this; however it obliges tour organisers to prepare to refund their customers if they become insolvent. National legislation is meant to transpose this obligation. If a Member State does not transpose this law and it causes loss to a passenger, the passenger is entitled to bring an action in damages against the Member State.

Clarity for Airlines

This case provides clarity on the regime that applies to passengers exercising their rights in the event of flight cancellations. Passengers are increasingly aware of and willing to exercise their rights to compensation under Regulation 261/2004. But where a flight is part of a package tour, as in this case, reimbursement of the cost of the tickets for cancellation remains the responsibility of the tour organiser under Directive 90/314. This judgment is helpful to airlines, in that it defines the extent of their liability under Regulation 261/2004, and reaffirms that while the instrument seeks to provide a high level of protection to passengers, it will not do so to the unwarranted detriment of airlines.