The UK's competition authority has said that it is launching enforcement action against Ryanair and British Airways over their failure to offer refunds to passengers who were barred from taking flights under COVID-19 lockdown rules.
During COVID-19 lockdowns across the UK, instead of offering refunds to those legally unable to fly, International Airlines Group (IAG)-owned British Airways offered vouchers or rebooking and Ryanair provided the option to rebook.
The Competition and Markets Authority (CMA) said that the airlines might have breached consumer law and it has opened enforcement cases against them.
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The regulator's move comes at a desperate time for airlines that have been adversely impacted by 15 months of COVID-19 restrictions.
CMA chief executive Andrea Coscelli said that the difficult environment for airlines does not mean that consumers should be left unfairly out of pocket for following the law.
"Customers booked these flights in good faith and were legally unable to take them due to circumstances entirely outside of their control. We believe these people should have been offered their money back," Coscelli said in a statement.
Ryanair said that it welcomes the review of its policies and that it has paid refunds in justified cases after reviewing each case.
British Airways said that it has acted lawfully at all times.
"It is incredible that the government is seeking to punish further an industry that is on its knees, after prohibiting airlines from meaningful flying for well over a year now," it said by e-mail, saying that any action taken against the industry threatens to destabilise it.
Both airlines said that they have offered their customers flexible booking policies and British Airways said that it has issued more than three million refunds since the beginning of the COVID-19 pandemic.
The CMA said that it has written to both airlines and is seeking a resolution that might include refunds or other forms of redress for affected customers.
The watchdog's enforcement action could lead to court proceedings if a company persistently fails to comply with its directives.
European Airlines Seeking 'More Balanced' Passenger Rights
European airlines have said that they will seek to weaken passenger compensation and refund rights in the wake of the COVID-19 pandemic, which left the industry struggling to reimburse billions of euros in fares for grounded flights.
Airlines for Europe (A4E), which represents the region's biggest carriers, said that the so-called EU261 regulation has severely exacerbated the financial crisis for many airlines.
"We're looking for a more balanced approach to consumer protection," Air France-KLM chief executive Ben Smith said, adding that the EU's passenger rights law is "one of the most punitive" in the world.
EU rules grant consumers immediate cash refunds for cancelled flights, plus compensation for those scrapped with less than two weeks' notice or for delays of over three hours. Multibillion-euro refund bills exacerbated the cash crunch for many airlines early in the pandemic.
"When events like mass cancellations get put in place this law is not flexible enough to handle such events," Smith said at an A4E virtual news conference, joined by the heads of Ryanair, IAG, easyJet , and Lufthansa.
The European Commission indicated that it is not ready to consider any weakening of passenger rights.
"We have always tried to strike the right balance between consumer protection and the protection of the tourism and transport industry," an EU official said. "The continued and improved protection of passenger rights is crucial to ensuring the necessary consumer trust in the transport sector."
The airlines also indicated that they are planning to contest air traffic control fee increases agreed by EU governments last month to make up the effective monopoly service providers' crisis shortfall, with easyJet's CEO hinting at legal action.
"We are going to legally try this," Johan Lundgren, who is the current A4E chairman, said. "Amazingly these monopoly air navigation service providers are being allowed to pass on €5.4 billion to airlines and to our customers," he said.
Ryanair Wins Challenge Against State Aid Granted To Condor
In other Ryanair news, the airline has won a challenge against state aid granted to German charter airline Condor, which is a third victory in its fight against billions of euros in pandemic support granted to its rivals.
The Luxembourg-based General Court annulled regulators' decision approving the measure but said that Condor will not be required to repay the aid for now due to the COVID-19 pandemic and pending a new decision by the European Commission.
"The General Court annuls the Commission decision approving the state aid granted by Germany to the airline Condor Flugdienst on the ground of an inadequate statement of reasons," Europe's second-top court said.
Judges said that the EU competition enforcer had provided inadequate reasons regarding the direct causal link between the costs resulting from the extension of Condor's insolvency period and the cancellation and rescheduling of its flights as a result of travel restrictions related to the pandemic.
Last year, the EU executive cleared a €550 million German state-guaranteed loan to Condor, which is a former unit of collapsed holiday company Thomas Cook which operated a fleet of more than 50 aircraft before the pandemic, saying that the measure complied with the bloc's state aid rules.
Ryanair hailed this week’s judgment.
"If Europe is to emerge from this crisis with a functioning single market, the European Commission must stand up to national governments and stop rubberstamping discriminatory State aid to inefficient national airlines," Ryanair said in a statement.
The Commission said that it will study the judgment before taking the next steps.
Condor, in which investment fund Attestor has acquired a 51% stake from the German state, said that the ruling will not affect the company for now.
"Today's decision of the European court has no impact on the entry of Attestor as new majority owner of Condor. As the ruling suspends the implementation…it has no impact on Condor's liquidity," the company said in a statement.
The German government said that the Commission's decision could be fixed relatively quickly as it was only the reasoning that was found to be wrong.
Ryanair, which has filed 16 lawsuits against the Commission for allowing state aid to Lufthansa, Air France KLM and other rivals as well as national schemes benefiting flag carriers, won its first victories last month when the same court rejected aid given to KLM and Portugal's TAP.
The case is T-665/20 Ryanair v Commission.