It hasn’t been a great few months for airlines trying to avoid paying compensation for delays. Just as the banks made provision for compensation over the PPI scandal, now some carriers are examining their books to assess the potential hit on delay compensation.

A crackdown on carriers that refuse to pay up for delays caused by technical faults has had some accountants doing their sums and looking alarmed, with a potential backlog of €250-600 per passenger dating back to 2009.

Airlines previously had a get-out clause when flights were delayed; if it was a technical fault, they argued successfully that it did not warrant compensation under European Union flight delay rules. This defence has now been overturned after several court cases brought by out-of-pocket passengers, culminating in a Court of Appeal ruling last October in consumers’ favour.

This prompted Jet2 and Thomson to make a last-ditch bid to overthrow it in the Supreme Court – Jet2 argued that technical delays didn’t count and Thomson disputed the six-year limit for liability, insisting that two years should be the maximum. But last October judges at the Supreme Court decided that neither airline had grounds to appeal on these bases.

Last week, there was more bad news for airlines, when the CAA announced that two of the biggest offenders – Jet2 and Wizz Air – had finally given in and would pay compensation for “ordinary technical faults”. Both had previously rejected any claim older than two years.

The two carriers were among 15 of the biggest airlines that fly into the UK to be put under scrutiny by the CAA in a crackdown on bad behaviour.

Claims avalanche

Jet2 has estimated its potential compensation bill is likely to be up to £22 million, with £17 million already set aside for the expected avalanche of claims. Wizz Air, based in Hungary, has refused to comply with the two-year limit and the CAA has referred the matter to the Hungarian Authority for Consumer Protection, which has taken up the case.

At the same time, Jet2 and Aer Lingus were also found lacking in the information they provided to passengers during disruptions and have now signed legal undertakings to improve this.

The CAA is not letting it rest there. A further 15 carriers – the next biggest airlines that serve the UK – are shortly to be examined. Round two will see the CAA’s spotlight turn on to American Airlines, Delta, Norwegian and Qatar Airways, among others.

“We will be doing some further work later this year,” said a CAA spokesperson, adding that the previous batch had “by and large been compliant or had changed their policies while we were working with them”.

Yet how much the airlines are potentially liable for is unclear. The CAA has no firm idea, as it only sees disputed claims, but its spokesperson said: “Many will have just let a rejected claim go or not claimed at all. The majority of people don’t claim.”

Complaints are still valid if they fall within the six-year limit and have not already been heard by a court.

Bott & Co is one of the leading “no win, no fee” solicitors specialising in flight delay claims and were behind the High Court victories over Jet2 and Thomson; the law firm set up its flight compensation division in February 2013 and has since recovered £8.3 million for clients.

Reading the small print

Last week, in another test case, the firm defeated Ryanair, which insisted its small print meant it was only liable for claims dating back two years. “The regulation specifically says airlines can’t limit or restrict passenger rights in the legislation,” said a Bott & Co spokesperson.

Lawyers from the firm estimate the Ryanair ruling will potentially affect 2.26 million passengers, with a total potential clawback of £610 million. Ryanair says it has already accounted for potential claims with a levy on its fares. It plans to appeal and tried to rubbish claims about its liability, saying there was a “tiny potential group” who might submit claims dating back six years. “Ryanair estimates that even if its appeal in this matter is ultimately unsuccessful, its potential liability is likely to be less than €5 million,” the airline added.

Whether the industry sees a deluge of applications and PPI-style cold-calling companies springing up to act on consumers’ behalf is another matter.

It is difficult to get a clear picture on how much the airlines are in for. Asked for an off-the-record estimate, one leading airline said it was impossible to guess, but research by Which? found that 9,000 flights were delayed by more than three hours in the 12 months to the end of May.

The magazine’s rough estimate is that this means some 900,000 passengers are eligible to claim, meaning a minimum bill of €225 million in just one year.

Impact on flight costs

The good news for the airlines is that Which? found that only 38% of passengers filed compensation claims – but this may change if the PPI claims firms turn their attention to the airline world.

The industry has tried to make out that big claims will mean big fare rises, but Bott & Co insists that a mass of claims is unlikely to lead to a hike in flight prices. “In May 2014, the European Commission said that if every single passenger who was entitled brought a claim – which not everyone does – and the airlines tried to reclaim it, it would only amount to €1-3 extra on a ticket,” the law firm’s spokesperson told TTG.

In the UK at least, the industry seems to have conceded defeat and accepted it must toe the line. But as in the Wizz Air case, the question of how other nations handle it remains to be seen.

Now the UK court battles are over (except for Ryanair), airlines are focused on trying to change European law to bring in the lower two-year claims limit, and to reduce or exempt liability for technical delays.

Dale Keller, chief executive of the Board of Airline Representatives in the UK, confirmed the change of tactics. “We’ll be working with Iata to resolve the problem at source.

Our primary issue now is getting the regulations changed rather than fighting it at local level,” he said.

He added that the issue “is not going to go away in a hurry”. This seems particularly so in the UK now that the CAA is more involved. The industry has lost in the courts and now has its regulatory body to contend with as well as the law. The CAA’s spokesperson was quite emphatic about how it will proceed in the next few months: “The law has been clear for a while now and this is what passengers are entitled to. We expect passengers to be given their rights.”