Uncertainty in commercial aviation over Spain’s million penalty on major low-cost airlines

The Spanish Ministry of Consumer Affairs, after a lengthy investigation into four low-cost airlines operating in Spain – Ryanair, Vueling, EasyJet and Volotea – has decided to impose an outstanding penalty of 150 million euros.

This investigation was launched last summer 2023 and brought into the spotlight certain practices that have received many complaints from passengers, the main source of conflict being the charging by airlines of a supplement in hand luggage. It is worth highlighting the magnitude of the measure, both in terms of the amount and the fact that the airlines penalized together have a market share of over 30% and are responsible for contracting millions of passengers.

The European hand luggage controversy

This topic is not only being questioned in Spain. It should be recalled that in 2023, the European Parliament urged the European Commission to initiate proceedings to prohibit passengers from being billed for their hand luggage. Although this decision was non-binding, and in fact no airline has changed its policy in this respect, it was a first move to try to legislate in the direction set out. In other words, Europe has set the guidelines, and it is now up to the European Commission, which is in charge of proposing new EU laws, to take further action.

Case-law background. Courts’ stance.

The exposed discrepancies have a considerable judicial precedent, both at national and European level. In this regard, the judgment of the Court of Justice of the European Union (CJEU), dated 18 September 2014, in case C487/12 (Vueling Airlines, S.A. v. Instituto Galego de Consumo de la Xunta de Galicia) is worth mentioning. Checked-in baggage is that which travels in the hold of the aircraft, and the CJEU considers that it is not a compulsory or indispensable service for the carriage of passengers, in which case airlines may charge a supplement on the price of the ticket, based on the principle of free pricing. A different matter is hand luggage or unchecked luggage, which the CJEU does consider to be an indispensable element of the transport, and the airline is therefore obliged to carry it without being able to demand any type of supplement or surcharge on the price of the ticket from the passenger.

This difference between the carriage of checked-in luggage and hand luggage is also reflected in the rules on air carrier liability for baggage damage, as contained in the Montreal Convention of 1999, to which the European Union is adhered. According to Article 17(2) thereof, the air carrier is liable for damage to hold baggage when the event which caused such damage occurred on board the aircraft or during any period when such baggage was in the custody of the carrier, whereas, in the case of unchecked baggage, the carrier is liable only if the damage is due to its own negligence or that of its servants or agents.

Focusing on the Spanish jurisdiction, it is worth pointing out the judgment handed down by the Commercial Court No. 1 of Madrid, dated 17 June 2022. To justify the conviction of the airline and the estimation of the passenger's claims, it applies art. 97 of the Air Navigation Law, which forces airlines to transport the passenger's hand luggage without any additional cost on top of the ticket price. Specifically, according to the provisions of this provision: The carrier shall be obliged to transport together with the passengers, and within the price of the ticket, the luggage with the weight limits, regardless of the number of packages, and volume set by the Regulations. The objects and hand luggage that the passenger carries with him shall not be considered as baggage for this purpose. The carrier shall be obliged to carry free of charge in the cabin, as hand luggage, the objects and packages which the passenger carries with him, including articles purchased in airport shops. These objects and items may be denied embarkation only for reasons of security, linked to the weight or size of the object, in relation to the specificities of the aircraft.

These decisions are, in essence, referenced as representative of the majority position. Although our daily litigation practice shows a clear diversity of criteria depending on which Spanish Court decides on our aviation cases, with regard to the charging of hand luggage, on the contrary, there seems to be a consensus: the passenger’s claim is upheld and the airlines are obliged to refund the extra amount charged.

Airline position and forward-looking scenario

ALA (Asociación de Líneas Aéreas), and regarding the fine of 150 million euros, states that the sanction is “disproportionate”; considers that the supplement charged is covered by European Regulation 1008/2008 on common rules for the operation of air services in the Community which, in its article 22, establishes the freedom to set prices. In this way, and as it is not a firm sanction, ALA maintains that the airlines will not change the conditions and passengers will continue to pay for the service as before. In addition, the airline employers' association points out that “it must be taken into account that there are many passengers who travel without hand luggage, which in the case of some airlines represent up to 40% of their customers. By splitting up the services, it is possible to choose and pay only for those services that are really needed”, they emphasize that passengers are fully aware of the price of the selected flight from the beginning of the purchase procedure and end up paying for the service they have freely chosen.

On the other hand, it is worth recalling that these companies manage to offer low ticket prices thanks to this type of policy, so that business logic and praxis suggests that making these actions illegal would imply a rise in their fares, which would have a direct impact on passengers.

In view of the above, it should be noted that the airlines are already preparing an appeal to try to resolve the dispute through administrative channels. Once this route has been completed, they will be able to go to Court to initiate legal proceedings; everything seems to indicate that this will eventually happen, and a tough legal battle is on the horizon.