Air passenger compensation claims quadruple: Gallagher

Some regional airlines can expect the cost of compensation claims caused by new regulations to double year-on-year, according to Gallagher, the insurance and risk management company.

Gallagher’s analysis details the findings of a study led by the European Regions Airline Association (ERA) on European Regulation 261. This regulation relates to flight compensation intended to enhance and enforce the rights of passengers subjected to delays, cancellations and denied boarding.

The report found that air passenger compensation claims have risen more than 300 percent since 2016, threatening regional airlines in Europe.

For flights up to 1,500km, where delayed passengers are eligible for €250 compensation, average compensation is 275 percent more than the revenue made on a single flight. For flights between 1,500km and 3,500km, where delayed passengers are eligible for €400 compensation, average compensation exceeds revenues by 305 percent.

Peter Elson, chief executive of Gallagher’s specialist global aerospace division, said: “As risk advisers to the aerospace industry, few issues concern us more than the rising burden of EU 261 for regional airlines across Europe.

The ERA, in collaboration with Gallagher, Baines & Simmons and Clyde & Co, has made a number of recommendations on compensation. The proposals include reducing compensation by 50 percent for operators with an annual passenger load of 2.5 million or less in the preceding year. They also include a cap on the liability towards passengers limited to the proportion of the airfare that the operator bears, so the compensation is per flight and not per journey.

Gallagher’s analysis details the findings of a study led by the European Regions Airline Association (ERA) on European Regulation 261. This regulation relates to flight compensation intended to enhance and enforce the rights of passengers subjected to delays, cancellations and denied boarding.

The report found that air passenger compensation claims have risen more than 300 percent since 2016, threatening regional airlines in Europe.

For flights up to 1,500km, where delayed passengers are eligible for €250 compensation, average compensation is 275 percent more than the revenue made on a single flight. For flights between 1,500km and 3,500km, where delayed passengers are eligible for €400 compensation, average compensation exceeds revenues by 305 percent.

Peter Elson, chief executive of Gallagher’s specialist global aerospace division, said: “As risk advisers to the aerospace industry, few issues concern us more than the rising burden of EU 261 for regional airlines across Europe.

The ERA, in collaboration with Gallagher, Baines & Simmons and Clyde & Co, has made a number of recommendations on compensation. The proposals include reducing compensation by 50 percent for operators with an annual passenger load of 2.5 million or less in the preceding year. They also include a cap on the liability towards passengers limited to the proportion of the airfare that the operator bears, so the compensation is per flight and not per journey.