Thursday, March 14, 2013

Air France v Folkerts

In yesterday's post on the EC's proposed revisions to passenger rights regulations, we linked to a recent CJEU judgment, Air France v Folkerts, one of many the Court has issued clarifying the requirements under EC Regulation 261/2004. In this case, a passenger's flight was delayed by 2.5 hours causing the passenger to miss her connecting flight and arrive at her final destination 11 hours after her scheduled arrival time. Article 7 of Regulation 261/2004 requires compensation for delays longer than three hours, but the article does not specify whether the length of delay is measured at the point of departure or at the passenger's arrival at his or her final destination. The Court makes note of the fact that both interpretations are in evidence elsewhere in the regulation. The Court distinguishes Article 7 from Article 6, which expressly refers to delays from the point of departure, on the basis of the two articles distinct purposes. Article 6 specifies the assistance an airline must provide to passengers awaiting a delayed departure, while Article 7 provides compensation for the passenger's inconvenience ex post facto. It is sensible then to conclude, as the Court did, that if the intent of the article is to compensate a passenger for his or her inconvenience, the degree to which the passenger is inconvenienced will largely be determined by the timing of the passenger's arrival at his or her final destination. The Court's ruling is therefore to be celebrated by those who place greatest emphasis on providing redress proportional to the damage done.

Viewed from a law and economics perspective the ruling is more problematic as it opens up airlines to liability for any delay in departure that causes a missed connecting flight. Thus the incentive structure established in Article 6, which encourages airlines to keep departure delays under three hours (for certain flights), is to some degree made irrelevant by Article 7 which in light of this new interpretation provides a strong incentive for airlines to eliminate departure delays entirely, perhaps resulting in a much stricter regulation than the drafters of 261/2004  intended. This judgment could also incentivize airlines to schedule longer layovers to mitigate the risk of potential missed connections, which may not be in consumers' best interest.

Ultimately, I believe the Court has selected the interpretation that best fulfills the intent of Article 7. In so doing, however, it has again demonstrated how the ambiguities of Regulation 261/2004 continue to produce unexpected consequences while awaiting revision

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