Is the pro-consumer trend of the European Court of Justice in aviation disputes changing?

On 13 June 2024, the Court of Justice of the European Union (ECJ) delivered two significant judgments related to passengers’ compensation under Regulation (EC) 261/2004. Both rulings provide a new illustration of the assessment of the notion of extraordinary exonerating circumstances, but do not break with the established case-law.

Case C-385/23, Matkustaja A vs Finnair Oyj

The fuel gauge of an aircraft in service for approximately 5 months experienced a technical failure. Considering that this failure fundamentally impinged on flight safety, the air carrier cancelled the scheduled flight and did not operate it until the following day, using a back-up aircraft. As a result, passengers were delayed for approximately 20 hours. Looking for the exemption of paying the compensation provided for in Regulation (EC) No 261/2004, the carrier argued that there had been an extraordinary circumstance and considered that it had taken all the measures that could reasonably be expected. The Court ruled that:

“Article 5(3) of Regulation (EC) No 261/2004 […] must be interpreted as meaning that the occurrence of an unexpected and unprecedented technical failure affecting a new aircraft model recently put into service which results in the air carrier cancelling a flight is covered by the concept of ‘extraordinary circumstances’, within the meaning of that provision, where the manufacturer of that aircraft recognises, after that cancellation, that that failure was caused by a hidden design defect concerning all aircraft of the same type and impinging on flight safety”.

Case C-411/23 D. S.A. vs P. S.A.

The carrier was informed by the engine manufacturer of a hidden design defect affecting the high-pressure compressor blades of the engines. A few days before the disputed flight, the carrier had the aircraft at stake inspected and identified the design defect. The carrier decided to operate the flight using a replacement aircraft, which was delayed by more than three hours on arrival at its destination. Looking for the exemption of paying the compensation amount provided for in Regulation (EC) No 261/2004, the carrier argued that there had been an extraordinary circumstance and considered that it had taken all the measures that could reasonably be expected of the company. The Court specified that:

“1. Article 5(3) of Regulation (EC) No 261/2004 […] must be interpreted as meaning that the detection of a hidden defect in the design of the engine of an aircraft which is to operate a flight is covered by the concept of ‘extraordinary circumstances’ within the meaning of that provision, even where the engine manufacturer had informed the air carrier of the existence of a defect of that kind several months before the flight concerned.

2. Article 5(3) of Regulation No 261/2004 must be interpreted as meaning that an air carrier may, as part of ‘all [the] reasonable measures’ which it is required to take in order to prevent the occurrence and the consequences of an ‘extraordinary circumstance’ within the meaning of that provision, such as the detection of a hidden defect in the design of the engine of one of its aircraft, adopt a preventive measure consisting of having a back-up fleet of aircraft on standby, provided that that measure is technically and economically feasible in the light of the carrier’s capacities at the relevant time”.

These cases concern the definition of extraordinary circumstances exempting an air carrier from compensation under Regulation (EC) 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights.

To be exempted from payment of the compensation, the air carrier must demonstrate:

• An extraordinary circumstance, i.e.
  • an event that is not inherent in the normal exercise of the carrier’s activity
  • and is beyond that carrier’s actual control;
• the impossibility to implement reasonable measures to mitigate this event.

Based on European case law, there has been an almost commonly accepted belief that a technical problem does not constitute an extraordinary exonerating circumstance. This apprehension, echoing the principle that derogation from the principle that passengers are entitled to compensation must be interpreted strictly (ECJ, 22 December 2008, Wallentin-Hermann, C-549/07, §17), led carriers to refrain from incurring the costs of defending cases involving possible hidden design defects; instead, national courts invited them to take legal action against the manufacturer at a later stage, without prejudice to passengers. As the cost to the airlines was too high, few took such action.

A closer analysis of past European case law shows that this common belief is simplistic.

The ECJ has previously decided:

• in a case of complex engine defect in the turbine, that “a technical problem in an aircraft which leads to the cancellation of a flight is not covered by the concept of ‘extraordinary circumstances’ […], unless that problem stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control” (ECJ, 22 December 2008, Wallentin-Hermann, C-549/07);
• “that a technical problem [engine problem linked to a defect in the fuel feed] which occurred unexpectedly, which is not attributable to poor maintenance and which was also not detected during routine maintenance checks, does not fall within the definition of ‘extraordinary circumstances’” (ECJ, 17 September 2015, van der Lans, C-257/14).

This is a mere case-by-case analysis, and the Court maintains a common line of reasoning, recalled in the recent 13 June 2024 judgments:

• A case-by-case assessment to be made by the national courts;
• A constant criterion of analysis relating to the external nature of the original event, which is beyond the carrier’s effective control;
• Assessment of the extent of the technical failure (e.g. a single aircraft affected or a group of aircraft of the same type) (ECJ, C-257/14, §40; C-385/23, §§26, 31);
• Recognition by a third party (manufacturer or competent authority) of the existence of a hidden defect that could affect flight safety (ECJ, C-257/14, §40; C-385/23, §39; C-411/23, §42).

Depending on the outcome of the assessment, technical problems may constitute extraordinary exonerating circumstances, in the same way as hidden design defects.

On the criterion of the reasonable measures implemented by carriers, the ECJ states that it cannot be systematically expected to have “a back-up fleet of aircraft and the corresponding crew on standby, where it has been informed of the existence of an engine design defect revealed by the engine manufacturer, in order to prevent extraordinary circumstances from arising and the consequences thereof” (C-411/23, §47). “It is for the referring court to assess, in the light of the air carrier’s financial means and its resources in terms of equipment and staff, whether it was in a position to charter back-up aircraft under the different arrangements available, namely dry lease / wet lease, or whether it was able, in the light of those resources, to replace the engine as a preventive step as part of a repair plan or to ground the aircraft until the engine had been repaired or replaced by the manufacturer“ (C-411/23, §50).

The 13 June 2024 rulings do not break with the case law hitherto established by the ECJ, but provide a new illustration of the assessment of the notion of extraordinary exonerating circumstances: regardless of when the air carrier becomes aware of the existence of a “hidden design defect […] by the aircraft manufacturer or the competent authority", that defect constitutes an extraordinary circumstance within the meaning of the provisions of Regulation (EC) No 261/2004 if it "existed at the time of the cancellation or delay“ of the flight and “the carrier had no means of control to correct it“ (C-385/23, §37; C-411/23, §40).

The Court is not shifting its pro-consumer stance: “the classification of a situation such as that at issue in the main proceedings as an ‘extraordinary circumstance’ […] is consistent with the objective of ensuring a high level of protection for air passengers pursued by that regulation, as recital 1 thereof makes clear. That objective means that air carriers must not be encouraged to refrain from taking the measures necessitated by such an incident by prioritising the maintaining of punctuality of their flights over the objective of safety“ (C-385/23, §38; C-411/23, §41).

Nonetheless, these latest rulings are welcomed by airlines facing increasingly onerous operating conditions. National courts are reminded that they must take account of the global context (C-411/23, §50) in which air carriers operates (e.g. aircraft production delays; Pratt & Whitney engine issues on some Airbus A320neo aircraft leading to aircraft grounding and difficulties in obtaining replacement parts or aircraft).

The actual implementation of this case law by national courts remains uncertain:

• Will all airlines, whatever the size of their fleet, be able to prove the recognition by a third party (manufacturer or competent authority) of the existence of a hidden defect that could affect the safety of the flight, all the more so if we consider the potential divergence of viewpoints between the competent authorities (e.g. divergence between the EASA and the Qatari authority regarding Qatar Airways’ Airbus A350s)?
• Will national judges finally agree to conduct a genuine casuistic analysis of any extraordinary circumstances invoked by carriers, without systematically applying the shortcut that a technical problem is inherent in the normal exercise of air transport?

Only time will tell.