Airlines unfairly left passengers out of pocket, ECA says
Millions of passengers across the European Union unfairly lost money as airlines forced them to accept vouchers instead of a refund after their flights were cancelled due to the pandemic, despite EU countries dishing out a record €35 billion in state aid, the bloc’s budget watchdog has said.
Air traffic came to a near standstill as around 7,000 air routes were forced to close in March 2020, affecting tens of millions of passengers.
Legally, airlines who cancel a flight must reimburse passengers but many forced travellers to accept vouchers, the Luxembourg-based European Court of Auditors (ECA) found in a review published on Tuesday.
EU countries handed out a total of €35 billion in state aid to airlines and package-tour operators to help cushion their financial strain, with Air France and KLM receiving €11 billion collectively, Lufthansa €6 billion and TUI, TAP and SAS more than €1 billion each. Luxembourg did not provide state aid to its national airline, Luxair, during the period under audit.
But airlines did not always use the funds to reimburse passengers, the ECA said, and EU countries did not insist that airlines offer refunds as a condition to receiving subsidies.
“Airlines had hardly any revenue coming in and they found themselves short of cash,” Annemie Turtleboom, the ECA member responsible for the report, said. “Passengers were the bankers of struggling airlines.”
Different rules across the EU
Countries and airlines applied different practices, meaning people were treated differently across the bloc.
Fifteen EU countries, including Belgium, France and the Netherlands, granted an exception to the normal rules to allow airlines and package-tour operators to give vouchers instead of a refund, or delay reimbursement beyond the 14-day limit, the auditors said.
“It surprised us that member states accepted this and 15 gave their blessing,” Turtleboom added. “Airlines suffering from liquidity problems took advantage of that.”
The European Commission opened proceedings against 11 of these countries, and while most have now been resolved, there is still a pending case against Slovakia.
In Luxembourg, passengers who had accepted a voucher were no longer entitled to ask for money instead and it was not possible to transfer the voucher to other people.
Travellers in Belgium were forced to accept vouchers, with no alternative options offered, between March and June last year, while a new law was created in France to allow travel agencies to issue vouchers - without offering the possibility of a refund - for package trips cancelled between March and September last year.
Loopholes in legislation
Only in the Netherlands, Germany and Cyprus was state aid used to protect vouchers in the event of the insolvency of package travel companies, although flight-only passengers were not covered.
Air transport is a key contributor to the EU economy and in 2018, the year of the latest data, 13.5 million people worked in the industry and it contributed €840 billion to economic activity, representing 4.4% of gross domestic product (GDP).
Air passenger numbers in the EU fell from 70 million in January and February 2020 to 1 million in April due to the pandemic, figures from Eurostat show.
Between March and May 2020, around 50 million tickets were cancelled. Over the course of the year the number of passengers fell by 800 million, or 67%, compared with the previous year, according to the International Civil Aviation Organisation (ICAO).
By the end of 2020, European airlines’ revenues had fallen by 69%, from around €120 billion in 2019 to €37 billion, ICAO data shows.
The ECA recommended that the Commission do more to make sure passengers are aware of their rights when it comes to requesting reimbursement from airlines. Auditors also urged the Commission to press EU countries to remind airlines that they can use state aid to cover passenger refunds.