EU member states and airlines did not fully protect passenger rights during the Covid-19 pandemic, with travellers often losing money due to cancelled flights, or because they were not informed about their rights to be reimbursed, according to a report by the European Court of Auditors.
At the same time, while airlines were being bailed out with billions of euro of public money, no member state linked the receipt of that money with the obligation to reimburse passengers, the report found.
As such, airlines were effectively using passengers as banks, by keeping their money on their books during the crisis, according to one source close to the report.
The authors of the report calculated that between March and May of last year, some 50 million airline tickets were cancelled.
Despite EU law obliging airlines to reimburse passengers for cancelled or delayed flights, many passengers were not reimbursed at all, or were tricked into accepting vouchers, the report suggests.
In turn, vouchers were not protected against airline insolvency.
The Court of Auditors carried out the report in record time, covering the period March 2020 to March 2021. Officials complained that they were given fragmented information from member states about the numbers of flights cancelled, and the numbers of reimbursements made.
Portugal, one of the few countries to provide detailed data on flight cancellations, reported that 5.5 million tickets were cancelled during 2020, of which 60% were reimbursed, 28% were converted to vouchers (with no guarantee that passengers agreed), and 5%, or 300,000 tickets, cancelled with no resolution by the end of the year.
Officials say member states routinely broke EU law by not insisting that airlines reimburse passengers.
"The Covid-19 crisis brought into sharp focus the fact that air passengers were not informed fully about their rights, and that there was a risk that they would consequently lose money to which they were entitled," the report stated.
European governments began closing down commercial flights in March 2020, with the EU shutting air traffic from outside its external borders from 18 March.
While borders were gradually reopened in May, there was a general recommendation for people not to fly to other countries.
The impact on the aviation sector was devastating, the report says. "Close to 7,000 air routes in the European airport network were closed. Many planes were grounded as flights were cancelled and the sector virtually came to a standstill."
There were 88% fewer flights in April than the same month in 2019, while monthly passenger numbers fell from 70 million in January and February to only one million in April.
The EU statistics agency Eurostat estimated there were 346 million fewer passengers in the first six months of 2020, while the International Civil Aviation Organisation (ICAO) calculated a reduction of 800 million for the year as a whole.
The European Court of Auditors estimates that some 50 million tickets were cancelled between March and May 2020.
The impact on the industry was immediate. "[The] sudden halt in travel caused serious liquidity problems. Since there were virtually no new bookings, airlines found themselves short of cash to pay fixed costs or refund passengers. Airlines became dependent on their cash reserves, or on the willingness of the governments in the member states to rescue them from potential bankruptcy."
Despite the huge amount of financial support to airlines, which was granted once the EU lifted state aid restrictions, there was often no link made between the money and ticket reimbursements.
Under EU law, air passengers have the right to reimbursement of flight tickets, rerouting and on-the-ground assistance (such as refreshment or hotel accommodation) if their flights are cancelled or significantly delayed, or if they are denied boarding.
Passengers have the right to be reimbursed in seven or 14 days. Airlines are entitled to propose a voucher instead of a refund, but under EU law, passengers are not obliged to accept a voucher in place of cash reimbursement.
The report found that many passengers were unaware of their rights, and of those who did learn of their rights, over one third felt they had been poorly informed.
The situation was complicated because different member states' consumer bodies enforce the rules in different ways.
There are also differing rules, depending on whether a passenger has bought a flight-only ticket, or if they have purchased a package deal.
Despite the passenger rights directive, consumers who buy non-refundable flight-only tickets, and then cancel those tickets due to extraordinary circumstances, are not legally entitled to a refund.
However, passengers who purchase a package, which includes a flight, are entitled to a flight refund even if they cancel the trip themselves.
The report found that for those who accepted vouchers instead of cash, there were often only a limited number of alternative flight connections, or none at all for which they might be used.
Vouchers were not generally protected against airline insolvency.
In a report to the European Parliament in February, the European Commission noted that under the Passengers Travel Directive (PTD) passengers should be allowed to cancel flight tickets and package holidays if there were extraordinary or unforeseen circumstances.
In March last year, a number of member states requested that the automatic reimbursement right be suspended because of the liquidity crisis airlines were facing, and that it be replaced with a voucher system.
The Commission subsequently wrote to member states suggesting that, to ease such liquidity problems, travel companies and airlines could offer a voucher instead of a reimbursement, but that ultimately passengers should be entitled to seek a reimbursement if they so wished.
In May last year the Commission updated its rules, acknowledging the unsustainable cash flow situation for the transport and travel sectors because of rampant cancellations.
The Commission recommended ways in which vouchers could be made more attractive, as an alternative to a cash reimbursement, in order to increase their acceptance by passengers and travellers.
Despite the Commission insisting that passenger rights had to be upheld even during the pandemic, 15 member states suspended the PTD, essentially allowing airlines and travel companies to drop the obligation to reimburse passengers and offer vouchers instead.
The Commission took legal action against 11 member states, and four of those infringement proceedings are still open.
