As conference interventions go, it was fairly spectacular. 

The co-owner and CEO of a European carrier stood up at the European Regions Airline Association annual conference in Prague and said European Union EU261 regulations on passenger compensation were driving him out of the charter market and were “the biggest threat to the safety of my passengers.”

Many European airlines—particularly smaller ones—are so concerned about being hit by hefty compensation claims if a flight breaches the three-hour delay mark that there is a risk of crews or mechanics taking shortcuts, Jesper Rungholm said.

Rungholm runs Danish Air Transport (DAT), which operates domestic Danish and Scandinavian scheduled and charter services for tour operators. The company has a fleet of around 20 aircraft, based around ATR 42/72 turboprops, Airbus A320-family and MD-80 narrowbodies.

Rungholm told conference delegates the legislation was making passengers greedy and driving rapidly rising costs. DAT paid less than €400,000 ($450,000) in EU261 payments in 2017, but that leapt to €2 million in 2018 as more passengers filed claims. 

When a carrier operating within or flying out of the EU breaches the three-hour delay mark, passengers are entitled to €250 compensation. That can rise to as much as €600 if, for example, passengers have a through ticket where their initial flight from a regional airport to a hub is late, resulting in them missing their long-haul connection and arriving at their ultimate destination hours behind schedule. Once the three-hour delay line is crossed, airlines must prove “extraordinary circumstances” to avoid paying compensation. For the most part, the scale is balanced in favor of the passenger.

“We have had passengers sitting with stopwatches, to record when the three-hour mark is reached,” Rungholm said. “We’ve had people sitting in the cabin shouting, ‘Damn, we made it,’ when the door was opened a few minutes short of three hours. It’s going to kill the small airlines because of the disproportionate amount of money they have to pay.”

DAT told ATW it issued instructions to staff that safety must come first, but there was no doubt that crews felt under pressure. A single crew member calling in sick could lead to delays or cancellations of flights. 

“Am I really obliged to pay if a crew is hit by food poisoning? The answer is, yes, I am,” he said.

Roy Kinnear, CCO of Europe’s largest regional airline, Flybe, is similarly concerned. 

“Our average sector price, including tax, is £60 ($75); the compensation is thus extremely disproportionate,” he said.

The problem is worsened by the fact that “claims manager” companies, which Kinnear calls “ambulance chasers,” pursue claims on passengers’ behalf for a share of the compensation. 

Flybe has budgeted £10 million in EU261 compensation in 2019.

Rungholm said his fears that EU261 pressures could lead to safety lapses has been dismissed by the European Union and EASA. Their attitude, he said, was, “nobody has died yet.” 

EASA said it has several collaborative groups with industry to support its analysis activities within its safety risk management process that feeds into the European Plan for Aviation Safety. 

“Regulation 261 has been raised during this process,” the agency said. 

IATA, however, wants EU261 to be reformed.  

“I think it’s recognized by a great many people, including in the [European] Commission, that the present balance of EU261 is not correct,” an IATA spokesman said. “There are examples of compensation far exceeding the cost of the original ticket, which clearly wasn’t the original intention. And there have been individual interpretations of EU261 in national law courts that have created inconsistencies for airlines and passengers alike.”

Rungholm and Kinnear believe the solution lies in modifying EU261 to give airlines more time to respond to unforeseen problems and to provide an escalating scale of compensation rather than the sudden imposition of large fees after three hours. Rungholm, for example, believes that setting the delay threshold at six hours would allow airlines to recover in the great majority of cases.