Existing aircraft passanger protection provided under Polish and EC law.
04 grudnia 2018

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Introduction

 

Aircraft passenger rights, such as (aa) care, (bb) re-routing and (cc) compensation, under Regulation (EEC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 are in force from the sale of a ticket and theorethically are unaffected by an aircraft carrier’s financial position. In fact the problem of real passenger protection against carrier insolvency seems to remain unsolved under current regulation both European and Polish. There is a very poor ex ante protection. Measures of ex post protection are not satisfactionary from the consumer’s point of view. Commission Communication on passenger protection in the event of airline insolvency, 2013, frankly stipulates that “neither the air carriers nor the competent authorities have been able to sufficiently ensure in advance that necessary appropriate arrangements are in place to re-route flight only passengers and assist them in the interim to provide ensure that their other rights are respected (e.g. information, assistance, and reimbursement). Passengers' rights under Regulation (EC) No 261/2004 have not been fulfilled by the failing carrier - in particular rerouting stranded passengers and in providing assistance (such as accommodation). This has meant affected passengers have therefore had to be self-reliant.”

 

Local level of protection

 

Member States of the European Communities use different measures to protect the aircraft passangers such as reserve funds, insurance schemes, bank guarantees, etc. Passengers are in a position to raise claims in ordinairy proceedings which is, as mentioned above, not a satisfactory solution from the consumer’s point of view.

 

Diversity of measures of protection

 

The system of consumer protection in Poland against carrier bankruptcy is dispersed and in fact depends on many factors.

 

Insurance against carrier insolvency. Scheduled Airline Failure Insurance

 

Passengers could be insured – (aa) individually or (bb) in general travel terms - against consequences of the insolvency of the aircraft carrier. In such a case, the effects of the insolvency of the carrier are liquidated by the insurance company. However insurance of this type is not common, not obligatory. It should be stated that “Scheduled Airline Failure Insurance (SAFI) permits flight-only passengers in some [European Community] States (such as the UK and Ireland) to insure against some of the costs of air carrier insolvency. This commercial scheme is available on an individual basis and is also occasionally included in general travel insurance. SAFI covers the cost of rerouting if a passenger is stranded or a refund of the original ticket cost where a passenger cannot recover it. SAFI does not usually cover the cost of purchasing another ticket on an alternative carrier if a passenger has yet to start their journey, or any additional costs incurred as a result of delay or other non-refundable losses such as car hire. Cover is usually not available to any carrier known to be in financial difficulty and can be withdrawn from the market with little notice.”[1] The conclusion is simple : passengers who have failed to obtain insurance to cover some of the costs resulting from the insolvency of an airline on which they are booked have no protection on this level.

 

Billing Settlement Plan

 

In some cases, against the insolvency of the aircraft carrier, can protect the system of booking tickets. “Payment for tickets purchased via IATA-accredited travel agents are held within a central payment mechanism, known as the Billing Settlement Plan (BSP), before being passed to the airline (this is usually monthly, but this period can be shorter). If a member airline becomes insolvent, IATA may voluntarily refund passengers whose payments have not yet been passed to the airline. Such protection is limited - only applying to those passengers who booked within the payment period i.e. at most up to 30 days before the flight. Passengers booking via an IATA travel agent further in advance of travel would not obtain a refund as the money is no longer in the BSP system.”[2]

 

 

Refunding from the card provider

 

It should be mentioned that ticket purchases made by a credit card (debit card) in some circumstances allow consumers[3] to claim a refund from the card provider in the event of the service provider's insolvency. In fact, this refund is usually limited to the cost of the original ticket[4] and in some cases subject to a minimum amount.[5] It should be underlined that credit cards only protect passengers in cases where the ticket is purchased directly from the airline, not from an intermediary (such as a travel agent). The protection offered by credit cards is only available where the supplier has failed to provide the services agreed; in the case of a travel agent, when tickets are purchased it agrees to pass funds to the relevant airlines, and even if the airline is no longer solvent the travel agent has completed its services.

 

Voluntary assistance from other airlines

 

In case of unexpected insolvency of aircraft carrier it is possible to receive some extraordinary assistance from other responsible airlines who possibly will agree to offer to the passengers so colled "rescue fares" at a nominal charge. "Rescue fare" should be charged to cover basic outgoings such as taxes and the marginal costs of carriage (fuel, etc.).[6]

 

Replacement of air carrier by a travel agency

 

In case of organized trips (package tour), the air transport is organized by a sub-contractor of a travel agency. In such a case airlines do not sell the ticket directly to the traveler. Travel agency - in the event of the insolvency of its contractor should provide for the tourists a flight by another air carrier.

 

 

Insolvency of tour operator as a conseuqence of insolvency of aircraft carrier

 

Failure to perform air transport duties by a subcontractor – an aircraft carrier may result in the bankruptcy of a travel agency (so-called “cascade insolvency”, “domino effect”). Insolvency of travel agency results new opportunieties. According to art. 7 sec. 1 of the Act of 24 November 2017 on tourist events and related tourist services, tour operators and entrepreneurs facilitating the purchase of related tourist services are obliged to provide travelers in the event of t h e i r insolvency: aa) the costs of the continuation of the package tour or the costs of return to the country, including, in particular, transport and accommodation costs, including reasonable expenses incurred by travelers, where the tour operator or an entrepreneur facilitating the purchase of related travel services, contrary to the obligation, does not ensure this continuation or return, bb) reimbursement of payments made as payment for a tourist event or each paid entrepreneur's service facilitating the purchase of related tourist services, if for reasons related to the organizer tourism or entrepreneur facilitating the acquisition of related travel services or people who act on their behalf, a tourist event or any paid entrepreneur's service facilitating the purchase of related travel services is not or will not be implemented, cc) reimbursement of a part of the payment made for the tourist event corresponding to the part of the package or for each service paid to the entrepreneur facilitating the purchase of related travel services corresponding to the part of the service that has not been or will not be realized due to the reasons for the tourism organizer or entrepreneur facilitating the purchase of related tourist services, or people who act on their behalf. According to art. 14 sec. 1 of the Act of 24 November 2017 on tourist events and related tourist services in the event of insolvency of a tourist organizer or entrepreneur facilitating the purchase of related tourist services, the marshal of a province or an entity authorized by him to issue an advance payment order to cover the costs of continuing a tourist event or the cost of returning travelers to the country shall carry out activities related to the organization of return of travelers to country, if the tourism organizer or an entrepreneur facilitating the purchase of related tourism services, contrary to the obligation, does not ensure this return. Finally if the financial security will prove insufficient to cover the costs of continuing the tourist event or the cost of returning travelers to the country, the entity providing these securities immediately informs about the relevant voivodeship marshal and the Insurance Guarantee Fund. The Marshal of the voivodship or the unit indicated by him, applies to the Tourist Guarantee Fund for the payment of funds from the Tourist Guarantee Fund, if the financial security will prove insufficient to cover the costs of continuing the tourist event or the cost of returning travelers to the country.

 

Doubts about the possibility of mobilizing funds from the Tourist Guarantee Fund

 

In 2018 some Polish travel agents from the agency of intermediation in the sale of airline tickets collected contributions to the Tourist Guarantee Fund.[7] This practice has caused serious theoretical and practical controversy as to whether the contribution is required in this case. Travel agents explained that their service includes not only the sale of an airline ticket, but the care of the guide - resident after landing at the airport, readiness of the guide - resident to help (mediate) in the possible borrowing of the car, etc[8]. So in the case of selling tickets by travel agency may be in doubt as to whether funds from the Tourist Guarantee Fund should not be mobilized. However, this issue is a separate legal problem.

 

Protection by interlining

 

Network airlines (a group of aircraft carriers) may issue special tickets for flights involving segments on different airlines, where the ticket is issued by one (issuing) carrier and valid for all others. The issuing carrier receives payment for the ticket, and retains it until the passenger completes their journey. If the carrying airline becomes insolvent the issuing airline can either reimburse the passenger, or if the passenger is stranded, the ticket will be valid on other airlines which are participating in the interlining agreement. If the issuing airline becomes insolvent, the carrying airline may still accept the travel of the passenger, although this is not legally guaranteed.

 

Consular assistance in particular, specific cases

 

The State is not obliged to help a purely private air carrier in case of the carrier’s insolvency. Should the State help the citizens remaining abroad? The basic act of international consular law is the Convention Viennese on consular relations established in Vienna on April 24, 1963. According to art. 5 lit. e) of this Convention, consular functions rely on on providing help and care to citizens of the statesender, both natural and legal persons. The consul's basic tasks, in the Polish law, are currently specified in the Act of 13 June 25, 2015 the Consular law. According to art. 18 sec. 1 the Consular law the consul in the exercise of consular functions protects the rights and interests of the Republic of Poland and its citizens within the limits permitted by international law. According to art. 20 sec. 1 the Consular Law the consul provides assistance to a Polish citizen[9], in particular in the event of necessity of a (aa) sudden return of a Polish citizen (bb) deprived of financial resources to the Republic of Poland or to his country of residence (consular assistance). According to art. 20 sec. 2 the Consular Law consular assistance shall be provided to the extent necessary and with the necessary measures for protection important rights and interests of a Polish citizen. However regulations on consular assistance are not an adequate basis for organizing mass, organized returns to the country of the clients of an insolvent aircraft carrier. Consular assistance provided to the Polish citizens is subject to strict public finance discipline. Spending of these funds is, among others, subject to the control of the Supreme Audit Office.[10] Consular assistance in returning to the country is rather individual. Granting such an assistance requires compliance with rigorous prerequisites. The case of a customer of an insolvent aircraft carrier will usually not be the case of the necessity of a sudden return of a Polish citizen deprived of funds.

 

Submission of claims in bankruptcy proceedings

 

Tourists – as ex post measure - can submit claims - in an individual way - to the bankruptcy estate of the aircraft carrier. The prospect of satisfying creditors in such proceedings is not - statistically - large. The provisions of Polish law do not introduce any special convenience for consumers, (for example curator for creditors), dedicated to this case.[11]

 

The possibility of pursuing claims against members of the board of airlines by way of a class action or individual suit

 

According to art. 21 the Bankruptcy Law the debtor (aircraft carrier) is strictly obliged, not later than within thirty days from the day on which the basis for the declaration of bankruptcy appeared, to file for bankruptcy in the court. If the debtor is a legal person or other organizational unit without legal personality, whom the separate law grants legal capacity, the obligation to file for bankruptcy in the court, dues on anyone who, under the law, partnership agreement or statute, has the right to conduct debtor's affairs and to represent him, alone or jointly with other persons. Such persons are liable for any damage caused as a result of failure to submit the application within the due time, unless they are not at fault. These persons may be released from liability, in particular if they prove that within the period of thirty days from the day on which the basis for the declaration of bankruptcy appeared, the restructuring procedure was opened or the arrangement was approved in the proceeding to approve the arrangement. In the case of seeking damages by the creditor of an insolvent debtor, it is presumed that the damage, covers the amount of the creditor's unsecured claim against the debtor.

 

Indirect forms of passengers protection

 

There are indirect ways of protection as well. Regulation (EC) No 1008/2008 gives authorities powers in relation to the financial stability of aircraft carriers to ensure that they will be in a position to meet their obligations under the consumer acquis. Article 9 sec. 1 of Regulation (EC) 1008/2008 stipulates that the concession authorities of Member States must suspend or revoke the Operating Licence of a Community air carrier if they are no longer satisfied it can meet its actual and potential obligations for a 12-month period.

 

[1] Commission Communication on passenger protection in the event of airline insolvency, 2013.

[2] Commission Communication on passenger protection in the event of airline insolvency, 2013. Debates on BSP's qualities and shortcomings can be found on

http://ec.europa.eu/transport/themes/passengers/studies/doc/2011_30_03_minutes.pdf

[3] Protection only applies to purchases by individual consumers; businesses are assumed not to require protection, so it is not extended to purchases by corporate credit cards.

[4] Protection is limited to the amount paid for the services not delivered. It does not cover any additional losses (such as for example accommodation) or additional costs (such as for example alternative travel), and passengers would be required to organise and pay for their own accommodation and repatriation.

[5] Commission Communication on passenger protection in the event of airline insolvency, 2013.

[6] Commission Communication on passenger protection in the event of airline insolvency, 2013

[7]Art. 4 sec. 1, 2 Act of 24 November 2017 on tourist events and related tourist services stipulates that whenever the Act refers to:tourist service - it should be understood as: (aa) carriage of passengers,(bb) accommodation for purposes other than for stay purposes, which is not an integral part of passenger transport, (cc) rental of motor vehicles or other motor vehicles, (dd) another service provided to travelers which is not an integral part of the services referred above. Tourist event should be understood as a combination of at least two different types of tourist services for the same trip or holiday, meeting the conditions referred to in art. 5 sec. 1. Art. 5 sec. 1 provides that a tourist event shall be created if: 1) tourist services have been combined by one tourist entrepreneur, including at the request of the traveler or in accordance with his choice, before concluding an agreement covering all services or 2) regardless of whether separate agreements have been concluded with suppliers of individual tourist services, these services are: a) purchased at one point of sale and selected before the traveler agreed to make the payment or offered or sold at a price covering all services or at a total price, or when one of those prices is charged to the buyer, or c) advertised or sold using the term "tourist event" or the like, or d) combined after the conclusion of the contract under which the traveler was entitled to choose between different types of travel services, or e) purchased from separate tour operators through related online booking processes, during which the tourist entrepreneur with whom the first contract was concluded passes to another tourist entrepreneur or tourist entrepreneurs: name and surname of the traveler, email address and payment details, and the contract with this another tourist entrepreneur or tourism entrepreneurs will be concluded no later than 24 hours after confirming the reservation of the first tourist service.

[8] A definition for seat-only tickets is given in Regulation 1008/2008, as “sale of seats, without any other service bundled, such as accommodation, directly to the public by the air carrier or its authorised agent or a charterer”.

[9] To the same extent as a Polish citizen, the consul shall provide consular assistance to the citizen
a Member State of the European Union that is in the territory of a host country that is not a Member State European Union, does not have a diplomatic representation or consular office, or if not
may, in a given case, provide consular assistance to that citizen (art. 21 sec. 1 the Consular Law).

[10] https://www.nik.gov.pl/plik/id,15828,vp,18343.pdf

[11] R. Adamus, Umowa o podróż w prawie polskim, Warszawa 2012, p. 179

 

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