COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delays of flights and Regulation (EC) No 2027/97 on air carrier liability in respect of the carriage of passengers and their baggage by air
Date: 2013-03-13
Institutions: European Commission
Subjects: aircraft, airline, indemnification, personal effects, reservation, traveller

EUROPEAN 
COMMISSION 

Brussels, 13.3.2013  
SWD(2013) 63 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a regulation of the European Parliament and of the Council  

amending Regulation (EC) No 261/2004 establishing common rules on compensation 
and assistance to passengers in the event of denied boarding and of cancellation or long 
delays of flights and Regulation (EC) No 2027/97 on air carrier liability in respect of the 
carriage of passengers and their baggage by air  

{COM(2013) 130 final} 
{SWD(2013) 62 final} 

EN 

   EN 

 
 
 
 
  
 
COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a regulation of the European Parliament and of the Council  

amending Regulation (EC) No 261/2004 establishing common rules on compensation 
and assistance to passengers in the event of denied boarding and of cancellation or long 
delays of flights and Regulation (EC) No 2027/97 on air carrier liability in respect of the 
carriage of passengers and their baggage by air  

EN 

0 

   EN 

 
1. 

PROBLEM DEFINITION 

1.1. 

Nature of the problem 

Airlines often fail to offer passengers the rights to which they are entitled in instances of 
denied  boarding,  long  delays,  cancellations  or  mishandled  baggage,  in  particular  under 
Regulations EC) No 261/20041 ("the Regulation") and (EC) No 2027/972. 

1.2. 

Underlying drivers of the problem 

1.2.1.  An insufficiently effective and uniform enforcement across Europe 

The enforcement system currently in place is not sufficiently effective and is not applied in a 
uniform manner across the EU. Three main issues were identified: 

(a) 

(b) 

(c) 

Grey zones in Regulation 261/2004 create legal uncertainty that hinders the proper 
enforcement of the air passengers' rights and that leads to many disputes between air 
carriers and passengers. 

Inconsistent  and  insufficiently  effective  sanctioning  policies:  in  the  absence  of 
formal coordination, the various national enforcement bodies (NEBs) apply different 
sanctioning  policies  and  they  differently  interpret  various  parts  of  Regulation 
261/2004. 

No  specific  enforcement  body  is  required  to  enforce  the  provisions  of  Regulation 
2027/97 (and of the Montreal Convention3) with regard to mishandled baggage. 

Inadequate  complaint-handling  processes  and  insufficient  means  of  individual 
redress: many passengers face practical difficulties when submitting a complaint to 
an air carrier. 

1.2.2.  Certain  costs  of  the  obligations  imposed  by  the  Regulation  constitute  strong 

disincentives for compliance 

Airlines are  not able  to bear or  to price in costs and risks (of care and compensation)  in 
certain situations: 

(a) 

the  experience  of  the  volcanic  ash  cloud  in  April  2010  has  shown  that  the 
absence of any limit in time to the carriers' liability in extraordinary events of 
long duration may constitute a risk to their financial stability. 

(b) 

certain costs of care/assistance are out of proportion with regard to the carriers' 
revenues for certain small-scale operations. 

(2) 

Certain  aspects  of  the  financial  compensation  have  a  strong  disincentivizing 
effect: 

1 

2 

3 

Regulation  (EC)  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, JO 
L46/1 of 17-2-2004. 
Regulation (EC) No 2027/97 of the Council of 9 October 1997 on air carrier liability in respect of the 
carriage of passengers and their baggage by air (OJ L 285, 17.10.1997, p.1) as amended by Regulation 
(EC)  No  889/2002  of  the  European  Parliament  and  of  the  Council  of  13  May  2002  (OJ  L  140, 
30.5.2002, p.2) 
Convention  for  the  Unification  of  Certain  Rules  for  International  Carriage  by  Air  (the  Montreal 
Convention), 
18.07.2001, 
L194 
http://europa.eu/legislation_summaries/transport/air_transport/l24255_en.htm 

OJ 

of 

EN 

1 

   EN 

 
 
                                                 
(a)  Many delays cannot be absorbed within the current time threshold of 3 hours 

for the right to compensation. 

(b)  The  standardized  amounts  of  compensation  which  compensate  a  loss  of  time 
common to all passengers, can go beyond the value of the damage incurred by 
passengers4. 

(3) 

Airlines  are  liable  for  care  and  compensation  where  disruptions  are  due  to  third 
parties,  but  national  and  contractual  provisions  hinder  air  carriers  from  recovering 
costs from responsible third parties. The latter do not get economic incentives to take 
measures to reduce the frequency and/or the severety of such disruptions. 

2. 

ANALYSIS OF SUBSIDIARITY 

Firstly, there is limited scope for Member States to act alone to protect consumers, as the Air 
Services  Regulation  1008/20085  does  not  allow  scope  for  them  to  place  additional 
requirements on Community air carriers seeking to operate intra-EU services. 

the  problems 

to  divergences  of 
Secondly,  most  of 
application/enforcement  of  Regulation  261/2004  across  Member  States  which  weaken 
passengers'  rights  and  the  level-playing  field  between  air  carriers.  Only  coordinated  EU 
intervention can address these problems. 

identified 

above 

refer 

3. 

POLICY OBJECTIVES 

In  light  of  the  problems  identified  above  and  pursuant  to  article  100(2)  of  the  TFEU,  the 
general objective of this initiative is to promote the interest of air passengers by ensuring that 
air  carriers  comply  with  a  high  level  of  air  passenger  protection  during  travel  disruptions, 
while ensuring that air carriers operate under harmonised conditions in a liberalised market. 

The general objective above can be translated into more specific objectives: 

1. To ensure effective and consistent enforcement of passenger rights across the EU by: 

1.1.  Clarifying  definitions  and  key  principles  underlying  passenger  rights  and 
simplifying the rights;  

1.2. Ensuring effective and consistent sanctioning policy; 

1.3.  Ensuring  effective  complaint–handling  processes  and  means  of  redress  for 
passengers  

2. To reduce the disincentivizing effects on airlines of certain costs of the Regulation: 

2.1. Ensuring that airlines' obligations with regard to passenger rights cover risks that 
are limited in time and/or in size;  

2.2. Ensuring that financial compensation in certain situations does not translate into 
decisive disincentives for compliance; 

2.3.  Ensuring  that  third  parties  are  incentivized  to  address  the  causes  of  the  travel 
disruptions for which they are responsible.  

4 

5 

Studies have estimated the value of time to be, after adjustment for inflation, between €40 per hour (for 
leisure  travel)  and  €98  per  hour  (for  business  travel ).  As  we  are  referring  to  standardised  amounts 
covering a damage common to all passengers, it is the lowest value that should be taken as reference. 
Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 
establishing common rules for the operation of air services in the Community, OJ L 293 of 31.10.2008. 

EN 

2 

   EN 

 
                                                 
4. 

POLICY OPTIONS 

4.1. 

Possible types of EU intervention 

Two possible interventions at EU level that were suggested by stakeholders were discarded at 
an early stage of the assessment: 

• 

• 

• 

A  repeal  of  the  Regulation  would  lead  to  a  substantial  reduction  in  the  level  of 
protection of passengers' rights. 

An  industry  fund  for  all  expenses  linked  to  care  and  compensation  would  be  less 
efficient (especially with regard to rerouting) and would add administrative costs. 

Existing guidance material and voluntary commitments have already shown that 
there is not much scope for further progress via non-regulatory measures.  

An  update  of  the  current  EU  regulatory  framework  is  therefore  the  only  form  of  EU 
intervention that could address all root causes of the identified problems. 

4.2. 

Initial screening of the policy measures 

A  preliminary  screening  discarded  the  policy  measures  that  did  not  bring  sufficiently  high 
benefits  in  comparison  to  their  costs  and  disadvantages.  This  screening  took  into  account 
stakeholders' views, legal and practical compatibility, effectiveness and complementarity. 

The policy measures have also been assessed in light of the subsidiarity and proportionality 
principles. 

4.3. 

Description of the policy options 

The  considered  policy  options  differ  in  the  chosen  trade-off  between  stronger  enforcement 
and  adjusted  economic  incentives  for  airlines:  a  heavier  cost  is  an  incentive  for  airlines  for 
reducing  compliance  while  a  stronger  sanctioning  policy  is  an  incentive  for  compliance. 
Therefore, for options where the cost imposed by the obligations of the Regulation is higher, 
the enforcement policy must be stricter and better coordinated, and vice versa: 

(1) 

(2) 

(3) 

(4) 

Focus on economic incentives: focus on the reduction of costs by replacing some of 
the  obligations  with  regard  to  care  (i.e.  catering,  accommodation)  by  optional 
insurance proposed to passengers. 

Balancing  stronger  enforcement  policy  with  economic  incentives:  strong 
coordination of NEBs. Two variants reducing costs: 

(a)  Either by  increasing  the  time threshold  for the  right to  compensation in 

case of delays from three hours to at least five hours; 

(b)  Or  by  extending  the  scope  of  "extraordinary  circumstances"  to  include 

most technical defaults. 

Further sub-variants of option 2 were assessed with regard to the modification of the 
compensation  amounts  and/or  further  modification  of  the  time  thresholds  for 
compensation for delay (e.g. making the threshold dependent on the flight distance). 

Focus on enforcement: option 3 entirely focusses on stronger enforcement by NEBs 
and clarifies existing passenger rights to render their application more effective. 

Centralised  enforcement:  option  4  entirely  focuses  on  a  powerful  and  centralised 
EU  enforcement  policy  which  must  counteract  the  negative  incentives  from  the 
compliance cost. 

EN 

3 

   EN 

 
Option 1 

Option 2a 

Option 2b 

Option 3 

Option 4 

Improved 
enforcement 

"Light" 
coordination 

"Medium" coordination 

How? 

-  Better  flow  of 
information 
between  NEBs 
and 
Commission 

separate 

- 
general 
enforcement and 
complaint 
handling 

- 
Commission 
investigations by NEBs 

can 

request 

-  A  formal  committee  can  decide  on 
common  procedures  (e.g.  transfer  of 
complaints, exchange of information) 

- separate enforcement from complaint 
handling 

"Medium" 
coordination + 
obligation of 
means 

addition 

to 
In 
2: 
option 
obligation 
for 
airlines  to  have  a 
representative 
in 
airport 
each 
for 
competent 
decisions 
with 
regard to care and 
compensation 

"Strong" 
coordination 

enforcement 

EU 
body: 

-  NEBs  would  be 
subsidiaries  of  the 
central body 

-  separate  general 
enforcement 
and 
complaint handling 

Economic 
(dis)incentives 

Low cost 

Medium cost 

High cost 

High cost 

Care 

- Optional 
insurance for 
passengers 

- Time limit on accommodation in 
extraordinary events of long duration 
- Partial derogation for small-scale 
operations 

- Industry fund for 
extraordinary 
events of long 
duration 

- Industry fund (as 
option 3) 

- right to rerouting 
in case of long 
delay 

Compensation 
payments 

of 

Right 
compensation 
for 
more 
hours  

delay 

of 
than  5 

of 
Right 
compensation  for 
delay  of  more 
than 5 hours 

of 
Right 
compensation  for 
delay  of  more 
than 3 hours 

of 
Right 
compensation  for 
delay  of  more 
than 3 hours 

of 
Right 
compensation 
for 
delay  of  more  than 
3 hours 

Strict  definition 
of  extraordinary 
circumstances 

Strict definition of 
extraordinary 
circumstances 

Reduced 
lump-
sum  amounts  of 
compensation 
with  focus  on 
short distances 

Further 
sub-
variants:  reduced 
compensation 
amounts  or  not  – 
single  or  multiple 
thresholds 
time 
for 
delay 
compensation  

Larger  scope  for 
extraordinary 
circumstances 
(includes 
technical defaults) 

Two  sub-variants: 
reduced 
compensation 
amounts or not  

Strict definition of 
extraordinary 
circumstances 

Strict  definition  of 
extraordinary 
circumstances  

Unchanged  lump-
sum  amounts  for 
compensation 

Unchanged 
sum  amounts 
compensation 

lump-
for 

Common 
features 

- Clarification of rights for missed connecting flights, advance rescheduling, mobility equipment, 
tarmac delays and "no show" policy 
- Enforcement body for existing rights in case of mishandled baggage 
- Minimum complaint handling procedures for airlines  
- Burden sharing with third parties 

EN 

4 

   EN 

 
 
 
5. 

ANALYSIS OF IMPACTS 

5.1. 

Economic impacts 

Impact on enforcement policies 

In  all  options,  enforcement  policy  –  which  is  currently  mainly  based  on  individual 
complaints  -  would  become  more  efficient  by  taking  a  more  pro-active  role  by  checking 
airlines’  manuals,  terms  and  conditions  and  contingency  plans  for  compliance  with 
passengers' rights. 

The coordination between national enforcement policies becomes stronger from option 1 to 4 
but the associated administrative costs also tend to increase. 

Clarification and simplification of rights 

In all policy options, existing rights for air passengers are clarified, especially with regard to 
the notion of extraordinary circumstances, reducing the room for interpretation. 

Under options 2 and 4, the rights are further simplified by the measure implying that care in 
the  form  of  meals  and  refreshments  always  be  provided  after  a  delay  of  two  hours, 
irrespective of the flight distance and the origin of the traveller’s delay. 

Impact on compliance cost 

The  impact  on  compliance  cost  for  airlines  can  be  summarized  in  a  simplified  way  as 
follows:  

• 

• 

• 

under option 1, the compliance cost would be significantly reduced; an extraordinary 
event of long duration would have limited impact; and costs would remain similar for 
regional carriers. 

Under  option  2  (and  its  variants),  the  cost  would  be  similar  to  baseline  but  its 
upward potential would be limited in case more passengers claim their compensation 
or in an extraordinary event of long duration; the cost for regional carriers would be 
similar as for other airline types. 

Under  options  3  and  4,  the  cost  would  be  similar  to  baseline,  but  with  a  higher 
upward potential in case more passengers claim their compensation; there would be a 
limitation on cost developments in an extraordinary event of long duration; but the 
cost for regional carriers would remain very high in proportion to their revenues.  

EN 

5 

   EN 

 
Impact  of  the  full  policy  packages 
compared to the baseline scenario 

Total  cost  at  current  claim 
rate  (assumed  to  increase 
slowly over time) 

Theoretical  maximum  cost  of 
Regulation 
entitled 
(if 
passengers claim compensation) 

all 

(2015-

% change 

(2015-

% change 

NPV 
2025) 

In € million 

10.4 

2.1 

9.8 

compared 
to baseline 

- 

-80% 

-6% 

NPV 
2025) 

In € million 

23.6 

8.0 

18.4 

compared 
baseline 

to 

- 

-66% 

-22% 

9.6 

-8% 

17.5 

-26% 

Baseline 

Option 1 

Option  2a  (unchanged  compensation 
levels) 

Option  2b  (unchanged  compensation 
levels) 

Option 3 

Option 4 

11.3 

11.6 

+9% 

+12% 

26.0 

26.2 

+10% 

+11% 

Source: Steer Davies Gleave + Commission estimates 

Airports and other third parties could share a part of the airline costs as the four options give 
airlines  enhanced  possibilities  to  claim  compensation  for  incurred  costs  from  third  parties 
responsible for delays or cancellations. 

Other economic impacts 
The impact on SMEs6 is very limited as only few are concerned by this Regulation. Most of 
them would benefit from the specific measures proposed for small-scale operations in option 
2. 

All policy options cause some new administrative costs for airlines (mainly the preparation 
of contingency plans)  and for NEBs  (mainly the implementation of the proactive policy the 
costs of which could be compensated by a reduction in the number of complaints). 

5.2. 

Social impacts 

5.2.1. 

Impact on consumers 

All options present common features: 

• 

• 

• 

Better enforcement of passengers' rights (including for baggage) 

Improved means to enforce individual claims.  

A clarification and strengthening of rights in many instances 

Option  1  significantly  reduces  the  obligations  of  airlines  versus  passengers  during  travel 
disruptions. While passengers can opt for insurance in function of their individual situation, 
many  passengers,  in  the  light  of  the  low  occurrence  rate  of  delays  and  cancellations,  may 
misjudge the risk of needing such insurance. 

Under  option  2,  the  care  and  assistance  obligations  are  enhanced,  but  the  right  to  claim 
financial compensation is somewhat reduced. Moreover, passengers are less well protected in 
the case of extraordinary events of long duration (except passengers with reduced mobility) 

6 

No micro-enterprises are concerned by this Regulation. 

EN 

6 

   EN 

 
 
 
 
                                                 
and  on  regional  flights7.  This  is  however  compensated  by  a  better  enforcement  of  the 
existing rights (see above). 

Options 3 and 4 contain many advantages for passengers such as reinforcement and a better 
enforcement  of  their  rights.  However,  it  may  also  translate  into  slightly  higher  ticket  prices 
and tax payers will contribute to the higher enforcement cost. 

5.2.2. 

Impact on employment 

The  employment  impact  of  the  policy  options  remains  limited  as  they  mainly  aim  at  fine-
tuning existing passenger rights and better enforcement. 

The policy options have no adverse effects on the fundamental rights of citizens. 

5.3. 

Environmental impacts 

The impact of the assessed policy options on CO2 emissions remains limited. 

5.4. 

Comparing the options 

Option  2  is  prefereable  over  the  others  as  it  is  the  most  effective  and  efficient  to  meet  the 
policy objectives. 

Option 2a is slightly preferred over 2b because keeping the delay threshold at 3 hours as in 2b 
might  trigger  more  cancellations8  and  the  fact  that  the  (unchanged)  right  to  compensation 
already arises after 3 hours, i.e. before the (unchanged) right to reimbursement (5 hours), may 
confuse passengers. 

There  is  no  objective  criterion  to  prefer  one  sub-variant  of  option  2a  over  another.  It  is  a 
matter  of  political  judgement  whether  an  additonal  cost  reduction  –  via  changes  in  the 
compensation  levels  or  additional  changes  in  the  time  threshold  for  delays  -  is  regarded 
justified despite the reduced possibilities for compensation for the passengers. 

6. 

MONITORING AND EVALUATION 

The Commission would properly evaluate the implementation of the Regulation 4 years after 
its  adoption  by  the  Council  and  the  Parliament.  The  evaluation  will  be  done  by  the 
Commission in close cooperation with stakeholders. 

The annual reports of the NEBs will be the main tool for monitoring the level of compliance 
and  the  consistency  of  national  enforcement policies. The Commission  can  draw  up regular 
reports based on the national reports, complemented where necessary by its own experience, 
by ad hoc studies or information from passenger surveys.  

7 
8 

Based on 2011 data, this measure concerns less than 0.05% of all passengers covered by the Regulation 
As shown by airline schedule optimisation models 

EN 

7 

   EN