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TinotopiaLog → EU to airlines: Drop Dead! ( 6 Feb 2003)
Thursday 06 February 2003

EU to airlines: Drop Dead!

This is insane. The Telegraph reports that the EU will require airlines to pay passengers the greater of 600% of the fare paid or at least 160, when they cancel a flight.

Ryanair, which said that its average fare was 32, described the failure to link compensation to the ticket price as “ludicrous”, and said fare rises would be inevitable.

Easyjet also criticised the scheme, which it said it could lead to pay-outs for reasons beyond airlines’ control, such as bad weather or congestion.

The rates agreed by EU ministers would provide compensation of 160 for a cancelled flight of less than 930 miles, 255 for a flight of 930-2,170 miles and 380 for longer journeys.

The plan, which will be reassessed by the European Parliament, is expected to be implemented in April.

Some reform would probably be a good idea; at the moment, in the U.S. at least, your purchase of an airline ticket doesn’t actually get you anything; if you read the fine print, you’ll notice that your contract with the airline is another one of these strange contracts where the entity you’re paying expressly disclaims any responsibility to give you any value at all for your money.

The best policy is probably to do nothing; an airline that actually took advantage of the provisions of the contracts with its passengers, and told them to buzz off, wouldn’t be in business for very long. Similarly, an airline that regularly cancels flights and doesn’t take care of the passengers well enough will soon disappear.

If you’re a die-hard statist, though, and feel that you absolutely have to stick your finger in, the best you can do is require airlines to buy their way out of their contract, if they’re unwilling or unable to provide transportation. Airlines would be required to provide the service that had been contracted for, or required to buy the tickets back from their would-be passengers at the current going price. If a flight is cancelled thirty minutes before departure time, the tickets have to be purchased from the passengers at the price the passengers would have to pay if they wanted to buy a ticket just before departure.

It looks like this would cost the airlines a fortune when they cancelled a flight, but the re-purchase costs would be their only cost for passenger compensation in the event of cancellation; they wouldn’t have to pay for hotels, taxis, meals, or any of the other things they currently pay for in the aftermath of a lot of cancellations. Plus, the airlines could offer a lot of other things, like a smaller amount of cash plus a voucher for future travel in the amount of the last-minute ticket; or the customer could trade it all for what’s behind curtain number three. The law would actually require the customer to sell the ticket back to the airline for the current going price, should the airline so demand. But the customer would be free to sell the ticket to the airline for another amount should the airline make an offer that the ticket-holder finds more attractive for some reason.

This would still result probably result in higher ticket prices, but it’d allow the airlines much greater latitude in dealing with the problem of customers who have paid for transportation but who aren’t getting it; airlines would be encouraged to get creative in compensating passengers in ways that satisfied the passengers but that didn’t cost too much. Or losses on cancellations could be minimized by simply charging the same price for last-minute tickets as for advance purchases, which presumably would make some customers happy.

Airlines that habitually cancel flights, ironically enough, would probably see their advance-purchase ticker sales rise by quite a bit as these tickets were bought by people who didn’t necessarily want to go anywhere, but who were interested in participating in the cancellation lottery. This would either provide the capital for the habitually-late airlines to pull their act together, or it would put them out of business in short order. Either way, it seems to be a win.

Posted by tino at 22:38 6.02.03
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