Understanding ‘unavoidable and foreseeable’: an interpretation of Regulation 1008/2008

By Simon Phippard, Luke Wilcox

09-2020

Ruling in Case C-28/19

Cases on the price transparency requirements of Regulation (EC) 1008/2008 are relatively infrequent but a potential compliance problem for airlines. In the Air Berlin case [1] in 2017 the Court of Justice of the European Union held that carriers must show both the air fare and, separately, any taxes, charges, surcharges and fees that are ‘unavoidable and foreseeable’ under Article 23(1) of Regulation 1008 from the first time their price is presented. This appears to be the case even if an airline chooses to structure its prices on the basis that, for instance, airport charges are included in the basic fare. The CJEU has now given a further ruling on their interpretation of ‘unavoidable and foreseeable’ in Ryanair Ltd and Others v Autorità Garante della Concorrenza e del Mercato.

Background

In June 2011, the Italian Competition and Market Authority (‘AGCM’) fined Ryanair for not including certain elements in the price published on their website that the AGCM believed were required under Article 23(1) of Regulation 1008.  The elements not included were: 1) online check-in fees, 2) VAT on the air fare and any optional supplements relating to domestic flights, 3) administrative fees for payments made with a credit card other than those cards approved by Ryanair. 

Referral to the Court of Justice of the European Union

Ryanair appealed, and the referring court asked the CJEU whether the above elements constituted an ‘unavoidable and foreseeable’ price supplement or an optional price supplement, for the purposes of Article 23(1) of Regulation 1008.

The CJEU’s ruling

The court began by restating their interpretation of Article 23(1) of Regulation 1008/2008 that an airline must ‘indicate, from the first time that their price is shown, the air fare and, separately, taxes, charges, surcharges and fees that are both unavoidable and foreseeable, whilst it must indicate the optional price supplements in a clear, transparent and unambiguous way at the start of the booking process.’ 

The way Article 23(1) differentiates between price elements which must be displayed "at all times" and those which must be shown at "the start of the booking process" may, at first sight, seem confusing. In addition to the timing requirement, the article also addresses the fare elements that must be shown separately. The court’s interpretation is that the headline price must be displayed "at all times": this is the first price a potential customer would see, and must include the unavoidable and foreseeable charges. The "start of the booking process" relates to the booking of that particular supplement: an airline does not need to display the prices for supplements that a passenger has not yet chosen. Acceptance of this supplement is on an ‘opt in’ basis.

The CJEU dealt with each of the specific elements in order:

1) Check-in fees: Where a passenger can choose between at least two check-in methods – at least one of which does not incur fees – then such fees are avoidable and are instead optional price supplements that can be refused or accepted by the passenger. In that event, these would not need to be shown until the passenger reaches that part of the booking process where a choice has to be made as to the check-in process. It is for the referring court to determine whether or not the airline does in fact offer that choice.

2) VAT: The VAT applied to air fares for domestic flights is unavoidable and foreseeable if it is provided for by national legislation and automatically applied. Such a tax must be indicated the first time a price is shown. Conversely, VAT applied to optional supplements relating to domestic flights (such as priority boarding) must instead be shown in the price as soon as the passenger selects the supplement. Whilst unavoidable, this VAT is not foreseeable as it relates to a choice by the passenger and, therefore, is only an optional price supplement.

3) Administrative fees: Where a fee is charged for paying using a credit card other than the cards approved by the air carrier (Mastercard was the approved provider for Ryanair), this fee must be indicated from the first time the price is shown. This fee is foreseeable, as it relates to the policy of the air carrier. Similarly, the court held it to be unavoidable, as the option offered to the consumer is subject to a condition – namely the possession of a particular credit card - imposed by the carrier. It would make no difference if a majority of customers held the credit card: if only one customer was forced to pay the charge, it would be regarded as unavoidable. 

Conclusion:

The CJEU’s ruling in this case provides further guidance on how to interpret the terms ‘unavoidable and foreseeable’ in the context of Article 23(1) Regulation 1008/2008. It once again highlights that taxes, charges, surcharges and fees falling within this interpretation must be indicated from the first time a carrier’s price is shown, separately from the air fare.

Furthermore, it demonstrates the need for careful consideration of an air carrier’s pricing structure and online offering. Failure to navigate the transparency requirements correctly can leave a carrier exposed to penalties. This is true not only in relation to the specific instances raised in this case, but applies however a carrier structures and displays its prices for essential and optional elements of the air transport service.

 

[1] Judgment in Case C-290/16, Air Berlin plc & Co., paragraph 36.