Reimbursement for Flight Disruptions Slowly Gets Smarter

Travelers on European flights are guaranteed reimbursement for lengthy delays, lost bags, and other disruptions to their trips. But most never claim this money, due to the complexity of bringing forward a lawsuit against a giant airline in its home country.

It can be a legal nightmare for the average consumer or business travel to get the restitution that is legally owed to them by European law. It can take a long time for claims to be resolved, as well, sometimes being tied up in legal proceedings for years.

A few years ago we reported on the rise of companies looking to make it easier for flyers to get the money owed to them. We recently caught up with Henrik Zillmer, CEO of AirHelp, who said European airlines have become more cooperative when posed with claims for reimbursement. The deluge of requests from companies like AirHelp and Refund.me has led them to, in some cases, expedite the lengthy process, according to Zillmer.

“We found out that 85 percent of people who are entitled don’t get their compensation,” said Zillmer, who pegged the number at 95 percent two years ago. “There’s still a huge educational task for us. … On the airline side, things have gotten a little bit easier on the big full-service airlines. They are now acknowledging the law; we have a much better relationship with the big top five [airlines] in the U.S. than we did two or three years ago. They’re seeing that is is something that is not going away, and even though they are not really good at processing these claims they have to pay out. Of course, we had to sue them more than 55,000 times.”

AirHelp’s employee count has ballooned to 500, with lawyers across Europe and the time-intensive process of filing claims needing the human touch. It’s now expanding its operations in North and South America, although refunds from airlines in North America are more limited than in Europe.

Automation is simplifying a claim process that in the past had to be handled by hundreds of workers. Bots and algorithms than proactively reach out to travelers for the information necessary to file a successful claim. New services can even scrape a flyer’s emails for past flights which may have been disrupted.

Zillmer says corporate travel accounts for about 30 percent of the claims the company pushes forward, which Airhelp pursues for a 25 percent cut of the money once finally paid out. It’s not a total slam dunk for travel managers to use the service, because it takes around 100 flights until you get one disrupted enough that a claim can be made, but the company does have partnerships with global travel management companies.

For airlines, even paying out every dollar they actually owe customers would have a marginal effect on their business. He envisions a future where global airlines work more closely with companies like AirHelp to automate and standardize this process instead of manually dealing with every claim.

“In reality, there’s still only about one dollar that ticket prices would increase [if every claim was actually paid out],” said Zillmer. “The big chunk of money lies in fuel and other costs, not in air passenger rights. Its an inconvenience to them to process the claim. It’s all manual today, so it’s expensive for them to process the claims. They don’t want to adapt because it’s not important to them, and they hope it just goes away.”

He also sees a throughline from flight prediction to a more advanced and consumer-friendly set of travel insurance products to come. Companies like Freebird offer rebooked flights if a customer is sufficiently delayed, and others like Lumo are using predictive technology to chart delays months ahead of time.

AirHelp is using technology to let travelers know if their flight is eligible for reimbursement, and a larger convergence is happening across the industry between travel insurance products, which rarely get attached to a flight, and smarter predictions of disruptions.

“We’re kind of in the insurance space, but we’re not really insurance,” said ZIllmer. “A lot of the products we see being offered to the travel management companies may seem fancy, but if you know the probability that a flight will be disrupted, you can put an insurance model behind it and realize most of these products will never be used. It’s hard to rebook someone on a flight before the one that has been delayed if you have to wait hours to be [eligible to be] rebooked. Prediction is very important in this space, and insurance is a very difficult space with a high barrier to entry, but this is a space we’re looking at.”