Why Stronger EU Compensation Rules Will Cost Customers the Most

Yesterday I noted that an EU court ruled that airlines will have to pay compensation to passengers when they cancel flights as a result of labor actions. When unions organize a sick out, and there aren’t enough crew to staff a plane, airlines don’t just lose revenue from the flight they will have to issue checks to each inconvenienced passenger.

To a consumer that sounds great, right? You bought a ticket you expect the airline to deliver on-time transportation, unless weather or other emergencies get in the way. And the European Union rules are pretty strict. I recently wrote a post explaining when you’re entitled to compensation and how to claim it.

Airlines had argued that job actions are the kind of “extraordinary circumstances” that exempt payment. The most recent ruling found otherwise.

Let’s play this out.

  • That gives unions a much stronger hand. The consequences to an airline of a work slowdown become much more costly, so the airline will have to go to greater lengths to appease unions and prevent this.

  • Stronger union bargaining power results in higher labor costs and also more stringent job protections.

  • Higher costs will mean either higher fares, or that some flights become uneconomic to offer and carriers reduce service.

  • Stricter work rules and stronger job protections further divorce service standards from employment consequences. That doesn’t improve service.

Most strikes in Europe are more formal and fall under industrial relations laws.

While I do think that airlines ought to have to deliver on their promises, the Court of Justice of the European Union handed unions a new gun to aim at airlines, and may make unofficial actions much more effective. That could make air travel less reliable, more costly, and less pleasant.

And that’s why I’m not ready to be unambiguously excited over what’s otherwise been seen as a pro-consumer ruling.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. What would be an ideal ruling? I can’t think of anything better, even if there’s no perfect choice.

  2. You leave out some very important points:
    Strikes in the EU happen ALL the time.
    AirFrance is on strike every few month, you can’t really book AF anymore if you plan on getting somewhere.
    You can sue the labor union in an expedite process if they are abusing their power.
    Happened not so long ago with LH pilots, LH sued, next day judge decided in court that LH pilots are not allowed to go on strike since they have no solid ground for their strike and therefore they were not allowed to go on strike for another 6-9 months as ‘penalty’

    Lets face it, strikes happen for a reason, no 1 reason is employees getting underpaid. So yes, it is the airline’s fault if they underpay their workers which leads to them being on strike all the time.
    Instead they should pay a fair wage, have a labor agreement that clearly sets the guideline both for the union and the airline.
    If its not profitable for the airline anymore, then yes, increase the ticket price. But the current system, that the airline can just abondan their customers by having employees on strike and we all pay not for 2€ higher ticket costs but instead with our valueable time being stranded at airports is just a nightmare.
    Also, have you ever tried to claim compensation for expenses such as hotels + food from airlines like Easyjet, Ryanair, Iberia, …? It takes FOREVER and its a mess. Never have I received a single dime without pressing charges.
    So yes, being stranded at the airport, paying out of your own pocket for the hotel and then, losing a full vacation day + waiting for a year for a reimbursement for the hotel / staying at a shitty airport easyjet / tuifly hotel instead of relaxing at the nice booked hotel for the vacation is a complete nightmare.
    I’ll rather pay 10% more for my tickets to make sure everyone is getting paid what they deserve and nobody has to go on strike.

  3. @Lucas “I’ll rather pay 10% more for my tickets to make sure everyone is getting paid what they deserve and nobody has to go on strike.”

    This doesn’t make job actions less likely, it makes them more lucrative for unions.

  4. “Lets face it, strikes happen for a reason, no 1 reason is employees getting underpaid.”

    Underpaid vs what? vs what they want? vs the value they create? vs the market price for labor? Who are you to judge whether their measuring stick is the appropriate one?

  5. mostly hurts EU airlines. Makes it more difficult to compete against US and other nations airlines flying to and from Europe as union sick outs only hurt the Euro routes. Euro airlines have higher percentage of Euro routes than non-Euro airlines. When the Euro airlines become less profitable, other airlines take their place and good old Euro labor union members get laid off. Unions deserve it. Greedy pigs get slaughtered.

    Lucas is clueless.

  6. I can see the American slant here but from a Euro perspective, we get what we pay for and we like it. In the USA I feel constantly ripped off for everything from flights to hotels to food and the service everywhere is horrible. However much I’d like to chastise the employees and front line people, in the end I know they mostly don’t care about what they do because they are not getting paid properly and others who may care have lost interest as the management prioritizes profit over service. I’d take Euro service any day and funny enough our hotels, dining and flights are all cheaper than in the USA. The difference in profitability is just being pocketed by the fat cats, not being shared with the customer or employee.

  7. Unfortunately, this appears to be Gary being anti-regulation again… Companies should be able to do whatever they want, and have no consequences. Even though we have lost it in the US, labor is a force that should have power, and the companies negotiate with them. The customer has a contract with the company, and thus the company is responsible for the actions of their contractors, labor.

  8. “Unfortunately, this appears to be Gary being anti-regulation again…”
    No, this appears to be Gary understanding the reality of unintended consequences. The government granting more power to unions will most assuredly result in bad outcomes for the consumer. Unions are a pox on society.

  9. @brian “I can see the American slant here but from a Euro perspective, we get what we pay for and we like it…I’d take Euro service any day and funny enough our hotels, dining and flights are all cheaper than in the USA.”

    Your argument doesn’t make sense. You say that Europe pays more and so you get better quality. Then you declare that hotels, dining, and flights are in fact cheaper than in the US. Either you pay more and get higher quality or you pay less and get lower quality. You cannot pay less (in taxes and services) and get higher quality.

    I grew up in Los Angeles and I have also traveled to different parts of Europe. Dining is definitely not cheaper in places like London, Paris, and Switzerland compared to LA and most of the US, except maybe New York.

    Hotels are also at least at parity for hotels in LA versus these major Western European cities if not cheaper (including the Scandinavian countries).

    Unless you live or are thinking from an Eastern European perspective, “Europe” is definitely not cheaper in terms of dining or hotels.

  10. I thought the recent EU court ruling refers to the so called “wildcat strikes” at TUIfly where employees just called in sick enmasse. It was not an official strike. The court ruling did not refer to the union organized industrial action. I think the court is correct to recognize that there was real harm done to the consumer and that to recover losses related to such wildcat strikes the airline should go after the offending employees/work group/union and ask the proper court for proper punishment for such illegal act.

  11. As Ron said, this ruling was only for “wildcat” strikes, and only really in the circumstances in the case here, where the airline had control:

    “Apart from the fact that the wildcat strike stems from a decision taken by the air carrier, it should be noted that, despite the high rate of absenteeism mentioned by the referring court, that wildcat strike ceased following an agreement that it concluded with the staff representatives.

    “Therefore, such a strike cannot be classified as an ‘extraordinary circumstance’.”

    Don’t try and make it what it isn’t.

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