Airlines Reluctantly Adapt to Reimbursing Travelers for Flight Disruptions

European airlines are bowing to consumer demands for faster compensation due to flight disruption.

Traveler demands have gained force thanks to recent court rulings, plus the rise of several compensation claims companies.

In five recent legal proceedings, Ryanair paid damages to passengers for delayed and canceled flights due to last year's labor strikes, according to testimony revealed in a German court last month. The Dublin-based budget carrier had previously insisted it would fight the claims related to strikes.

Ryanair joins Lufthansa, Air France/KLM, and other carriers that face large backlogs in claims due to labor-related, weather-related, and mechanical delays in the past few years. Airlines have tended to be slow in responding to claims, taking more than two years to respond in some cases.

Europe is a hotbed for claims compensation because under European law passengers may claim reimbursement of up to about $680 (€600) if their flight is delayed for three hours or more under most circumstances.

First Mover

In a small but notable move, TUI Fly, an airline owned by tour operator TUI, has begun to automate its claims redemption process.

A customer uses TUIFly's mobile app to file a flight compensation claim, via a system powered by Justclaims.eu, one of several flight compensation and legal consultancies providing services to the travel industry.

TUI Fly is using technology from JustClaims.eu, a claims compensation firm, to power its service. The companies said it's the first time an airline has outsourced its process to a tech vendor.

More than a dozen services have sprung up since 2010 to help consumers claim compensation. However, airlines have balked at cooperating with these companies.

"Justclaims is not a claims farm but more a company that offers a service to manage claims, which is totally different," said a spokesperson for TUI Fly, explaining why the airline is using the vendor's tech.

Many airlines have yet to make simple moves, such as creating online forms that prompt consumers to fill out relevant information in a structured way rather than send emails that require more manual review.

The aviation attorneys at Justclaims argue that some of the vendors handle claims unprofessionally. "We aim to make their services redundant or obsolete by helping airlines cope with the claims efficiently and accurately on their own," said its managing director Ulrich Steppler.

Competitive Landscape

About two dozen companies offer flight compensation services to consumers.

Carriers may face an additional volume of claims as these claims businesses speed up their processing and market their services more heavily.

AirHelp has the largest market share in Europe. It has offered to help carriers to speed up their processing efforts, but it hasn't had any takers yet, said Johnny Quach, chief product officer. However since November 2017, Kayak, the travel price-comparison search engine, has been referring some consumers to AirHelp.

ClaimCompass.eu, the third-largest of the companies, said a few European online travel agencies will refer customers to it for claims compensation this year, with a few Asia-based online travel agencies and a European travel management company due to begin early next year.

"We're not only talking about helping airlines and online travel agencies pay out claims," said Alexander Sumin, co-founder and chief marketing officer. "But we can build solutions to predict rotational delays and weather disruptions, and we can help airlines and online travel agencies persuade passengers to redeem the compensation toward future flights rather than cash and use it as a retention mechanism."

FlightRight, the second-largest of the services, was acquired in February 2019 by Intermedia. It expects to deliver about $113 million (€100 million) to consumers this year.

Market leader AirHelp, which has 650 workers, is emphasizing automation this year in both how it processes claims and how it uses digital marketing to target consumers who have eligible flights, Quach said.