EU 261 and the C Suite
Updated: Dec 8, 2022
Peter Lynam wonders why airline executives are not more concerned at EU261 losses..
The passenger compensation regulations (EU261/UK261) are now almost 20 years old.
At the outset customer awareness was poor and the claim rate was in single figures percentage of those eligible. After a few years Claims Management Companies started to assert themselves in this area and claim rates accelerated towards 50pc at some airlines. In the (then) 28 member states the courts applied a variety of interpretations on the rules, further complicating the issue for airlines.
Five Aero and other advisory companies have tried (and usually failed) to engage senior management at airlines on this topic despite the EU261 pay-outs coming straight off the airline’s bottom line.
We have argued that for every million pounds paid out an airline enjoying a ten per cent profit margin has a choice – to avoid payment (not by subterfuge although we have observed some whose internal processes are so weak there is inevitable over payment), by improving operations, planning and resilience OR to pursue ten million pounds of additional revenue for every million pounds paid out, to generate the additional profit needed to cover profit lost through EU261.
At some airlines annual pay-outs exceed £100 million and how many can just magic up 1bn extra revenue?
Why then is it so difficult to get the attention of the C Suite? In many airlines ownership of the processes and the payments budget is fragmented. Often it is difficult to identify one single owner around the top table (it could be Finance, Legal, Operations, Commercial etc).
The process is invariably opaque and often detailed knowledge resides only way down the hierarchy and that person struggles to attract attention.
Hope springs eternal that the rules will be “relaxed” but 20 years on this seems as far away as ever. Maybe other issues take priority or resolution seems easier to achieve.
Five Aero are experts in the EU261 process and mitigating its effects on airline operations. We can help reduce EU261 liabilities and deliver benefits straight to the bottom line.