A league of startup companies is industrializing the process of claiming compensation from airlines, helping stranded passengers turn the table on carriers and transforming delayed flights into a fast-growing stream of revenue.
Launched in Denmark, AirHelp Ltd. offers to sift through your emails, check your booking information against effective takeoff and landing times for the past three years, and seek compensation you might not even know you were entitled to.
The company promises to pick up all administrative and legal bills, and swiftly let customers know how much money they may collect—minus a cut of at least 25% it charges for fighting in their names.
From lawyers to consumer-rights associations, compensation-claim intermediaries have been around for a long time but procedural costs typically exceeded potential rewards.
“Airlines make it so difficult, that you will give up before you get reimbursed,” said Rune Knudsen, a New Yorker who relied on AirHelp to obtain compensation last year after his flight touched down behind schedule in Copenhagen. “They take away that headache.”
By digitizing the claim procedure, the likes of AirHelp, Flightright, EUclaim and Gate28 are transforming the business into a mass-service that could tilt the balance of power between airlines and passengers.
The business is rising exponentially. EUclaim says it has collected €58 million (about $64 million) since 2007, including more than €20 million this year alone. AirHelp says it recovered €57 million on behalf of 800,000 passengers in the first six months of the year, compared with €28 million for 400,000 passengers between its creation in 2013 and 2015.
By comparison, the U.S. Transportation Department, which can impose fines on airlines when they fail to abide by its regulations, said it has brought 11 actions for overbooking violations in the past nine years, collecting $2.14 million.
Passenger rights got a boost in 2004, when the European Union spelled out payments airlines had to make for flight delays or cancellations. Such compensation kicks in as soon as delays exceed three hours and can run as high as €600 a flight, making the EU one of the most passenger-friendly skies when problems occur.
Because non-EU carriers departing from the EU also are subject to the European compensation rule, claim companies actively are trying to reach plaintiffs not just in Europe but world-wide.
In the U.S., federal law doesn’t impose penalties for delays but the DOT nearly doubled the maximum compensation for passengers bumped from oversold flights in 2011. Today, it stands at $1,350.
Airlines warn of the consequences of the online intermediaries’ rapid rise, which adds to the financial strain on some already weak European carriers.
Carriers are bristling at the way some of the passenger-rights rules have been interpreted. The EU regulation waves the requirement on a carrier to pay if a delay or cancellation is caused by extraordinary circumstances, without spelling out what those may be. In some recent court rulings judges have decided a delay caused by lightning strike or bird ingestion into an engine weren’t extraordinary circumstances when the airline delayed a flight to check the plane isn’t damaged.
“The current rules are not realistic,” said Geert Sciot, a spokesman at the Association of European Airlines lobby group. “We have become insurance companies for everything that can go wrong on a passenger’s journey, even if we have nothing to do with the problem.” Ticket prices may have to rise if the financial drain from compensation claims keeps rising, he said.
Some airlines are seeking ways to counter the new breed of online-claim specialists. In France, the Union of Autonomous Airlines, an airline lobby group, said some of its members have set up a website in a bid to elbow out the likes of AirHelp from claim procedures. But since its creation early last year, the service has only processed about 2,300 claims, according to Bertrand Moine, legal adviser at the federation.
In the U.K., airlines have in recent months joined mediation bodies through which they can offer stranded passengers vouchers or miles instead of cash, said Henry Killworth, a spokesman for the British Civil Aviation Authority. But airlines aren’t legally required to join and many haven’t, he said.
The European Commission, the bloc’s executive arm, has started negotiations with airlines on how to update passenger-rights regulations. But industry officials said numerous disagreements remain, such as a debate between low-cost and traditional carriers over whether the compensation should be proportional to ticket prices—which isn’t the case now.
Meantime, more customers are seeking claims online. William Cunningham, a 71-year old retiree in Las Vegas, recouped €900 for himself and his wife through AirHelp last year, after his British Airways flight to London was delayed for 21 hours, causing him to miss a visit to Barcelona.
He said he will never bother contacting airlines again in the event of a delay or cancellation. “I think it’s a wonderful service,” he said. “Nothing ventured, nothing gained.”