Update: DfT response to consultation on Aviation Consumer Policy Reform

On 27 June 2023 the DfT published the Government's response to the consultation. As well as setting out the Government's position on the most important issues explored as part of the consultation, the response also provided a high-level summary of the responses that were provided by key stakeholders in the industry. Unsurprisingly, it is clear that many stakeholders have a markedly different view to the DfT in several areas.

This article looks at five key areas covered by the consultation (regulators' enforcement powers, mandatory ADR for airlines, changes to the compensation regime for delays and cancellations to domestic UK flights, the right of package organisers to seek refunds through existing legislation, and improving accessibility of air travel) and summarises the recommendations made by the DfT and the positions taken by industry stakeholders in relation to them.

1. Enhanced enforcement powers for regulators

In the initial consultation report the DfT expressed the view that the enforcement powers available to the Civil Aviation Authority (the "CAA") and the Competition and Markets Authority ("CMA") were time-consuming and placed a disproportionate administrative burden on the regulators themselves. The DfT therefore proposed various new administrative enforcement powers designed to allow the regulators to take action against aviation businesses without first needing to apply to Court for an enforcement order. The proposed powers included the power to determine if consumer rights law had been breached, the power to direct a business to end or prevent future infringements, the power to order compensation for consumers and, crucially, the power to impose fines, which could be turnover based.

Interestingly over 50% of respondents to the consultation (made up of individuals, airlines, advisory boards and travel agents) agreed that the regulators should have increased administrative enforcement powers, including the power to impose fines on offending businesses. However, roughly one third of respondents (predominantly airports, airlines and trade bodies) felt that the regulators already had sufficient powers to enforce breaches of consumer law and that the courts, rather than the regulators, were the appropriate bodies to consider potential breaches due to the inherently interpretative nature of consumer protection law. Similarly, there were mixed responses to the question as to what kind of cases would be suitable for enforcement through administrative powers rather than through the courts.

Responding to these comments the DfT has reaffirmed that the Government's priority is to "promptly and flexibly address systemic breaches of consumer rights" by first taking a collaborative approach to resolve any issues with aviation businesses directly as opposed to regulatory and/or legal enforcement being the default position. However, the DfT has also confirmed that it remains of the view that the regulators do in fact require additional powers to ensure compliance with consumer protection law. Such powers are likely to include the power to issue fixed penalty notices.

The DfT has therefore confirmed that it is the Government's intention to legislate to grant additional administrative enforcement powers as soon as the parliamentary timetable allows. At present it is not immediately clear what precise shape the enforcement powers will take, but it is likely that they will focus on collective harm rather than individual redress. The DfT has also stated that it will work with the CAA when designing the additional powers, and it may also consult with industry stakeholders when calibrating the appropriate level of fines. This neatly ties in with the DfT's review, launched in August 2022, of the efficacy, efficiency, governance and accountability of the CAA in enforcing consumer rights with its current powers. The Government will take into consideration any recommendations arising from the consultation relating to the use of the CAA's current powers in its report on the CAA, due later this year.

2. Mandatory ADR for airlines

The consultation asked respondents to consider whether Alternative Dispute Resolution ("ADR"), which is currently voluntary, should be made mandatory for airlines operating to, from and domestically within the UK to deal with passenger related disputes. Alternatively, if respondents objected to mandatory ADR, the DfT proposed that an ombudsman could be appointed to oversee such disputes instead.

Over two thirds of respondents to the consultation agreed with the proposal to make ADR mandatory. The main reason for this level of support was the ease of use and the clarity that this would grant to consumers. Respondents also cited the speed and cost-efficiency of decisions made using ADR as another reason to support the proposal, and some noted that the voluntary nature of ADR effectively allowed airlines to opt out of the system and carry on with "bad behaviour" with limited fear of reprisal.

On the other hand, roughly 25% of respondents, who were largely airlines, disagreed with the proposal. They cited the increased costs that would face businesses if they were obliged to sign up to such schemes, which would inevitably result in higher airfares overall, and noted that ADR is not guaranteed to be quicker in every case. A further concern is that ADR bodies are not necessarily qualified to determine complex areas of consumer protection law and that if ADR becomes mandatory airlines may be denied the chance to seek judicial interpretation on complicated issues. This point may be particularly important if, as is feared, the Retained EU Law (Revocation and Reform) Act 2023 fails to include pre-existing CJEU case law on the interpretation of Regulation (EC) No. 2004/261, with the effect that such case law will cease to have effect in the UK from 1 January 2024.

In response the DfT has stated that although its desire is to see airlines handle their own complaints in the first instance, it believes consumers need a clear route to escalate their complaints regardless of who they have booked with. The Government therefore intends to introduce legislation to make membership of an ADR scheme compulsory for all airlines operating to, from and domestically within the UK. The exact details of this legislation, including whether it will be necessary for all airlines within one corporate group to register for ADR (rather than, for example, the parent company only), are currently unknown. The DfT has also stated that it will continue to consider how ADR can be improved, including through better data collection and transparency in relation to the results of ADR, and whether an ombudsman would be suitable for the industry.

3. Passenger compensation regime for delays and cancellations to domestic UK flights

The consultation sought stakeholders' views on a radical change to the passenger compensation regime for domestic UK flights for delays and cancellations. The current system under UK261 provides for fixed rate compensation payable for delays of over 3 hours (subject to the exceptional circumstances defence), irrespective of the ticket price. The proposal was to introduce a new UK domestic compensation model based on: (1) the length of flight delay (with varying compensation for delays of 1, 2 and over 3 hours); and (2) the actual price paid for the ticket.

According to the Government's response, the stakeholder responses received to this section of the consultation highlighted both benefits and significant complexities to changing the domestic compensation regime. The responses indicated to the government that any reform to the compensation system would be complex and involve a range of competing factors. As such, the Government has decided that more work is needed to consider the merits and limitations on this subject before any changes are imposed. To this end, the Government has committed to carry out further consultation on compensation (for all forms of disruption, including cancellations, delays and denied boarding) before implementing any proposals in this area.

4. Right for package organisers to seek refunds through legislation

The Government's responses did not specifically comment on the question in the consultation as to what the advantages and disadvantages would be of enabling package organisers to recoup a refund from the airline directly when a flight that forms part of a package holiday is cancelled. The stakeholder responses suggested advantages and disadvantages, but the Government's response to this wider section was that more work is needed to consider the merits and limitations of any changes in this area. The DfT has therefore confirmed that this issue will be considered as part of the further consultation that it has committed to on compensation for all forms of disruption.

5. Improving accessibility of air travel

Minister for Aviation, Baroness Vere, emphasised in the foreword to the responses that the Government is committed to working with industry to improve the consumer experience in air travel, stating that passengers are at the heart of UK aviation. One of the key topics of the consultation that was aimed at improving the consumer experience was accessibility and inclusivity of aviation for all.

The Government stated that accessibility in aviation remains a priority and committed to exploring further options with the CAA to improve accessibility, such as providing better information for disabled passengers, improving accessibility training for staff, and engaging with disabled and less mobile passengers directly in order to understand the barriers they face to air travel, and welcome their suggestions for improvement.

In order to tackle the issue of damage caused to passengers' wheelchairs or mobility aids, the Government committed to taking the following actions:

a) Increasing the level of compensation payable if a passenger's wheelchair or mobility aid is damaged;

b) Legislating to remove the Montreal Convention 1999 cap on compensation for domestic UK flights, and encouraging UK airlines to waive the cap for international flights;

c) Training ground handling staff through the government's REAL disability training module to ensure powered wheelchairs are not knowingly damaged; and

d) Encouraging airlines not to charge a fee for the use of a special declaration, to help reduce the burden on passengers who may be required to make a special declaration.

Conclusion

Despite mixed reactions from the industry, it is clear that the DfT is determined to take forward legislative reforms to grant additional powers to the regulators and to impose mandatory ADR on airlines operating to, from and domestically within the UK. As well motivated as its intentions may be, there are serious concerns among industry stakeholders as to whether the DfT's proposals in this respect represent the right way to go about enhancing consumer protection in the UK. The precise detail of the legislation proposed by the DfT remains to be seen and it is not clear when the DfT expects to be able to publish more detail in this respect. In relation to the passenger compensation regime and the rights of package organisers in particular it is clear that no further progress will be made in this respect until further consultations have taken place, but it is encouraging that the DfT is already willing to take significant steps to improve the accessibility of air travel for disabled passengers.