Back to overview

Commercial Question

Impact of Consumer Contracts Regulations on refund of ancillaries

updated on 23 September 2014

Question

What rights do airline carriers have to refuse the refund of fees paid for ancillaries purchased as an accompaniment to a flight booking that has been cancelled?

Answer

In the event of a customer cancelling their flight booking, it is likely that the purchase of ancillaries (eg, paid seating, excess baggage payment, upgrades and pre-ordered catering) will be viewed as being so closely entwined with the purchase of the flight booking, that these ancillaries will be regarded as being 'services' within the definition of 'passenger transport services' and, as such, will be excluded from the 14-day right to cancel offered in the United Kingdom under the Consumer Contracts Regulations 2013.

Though it is likely that in certain circumstances a 24-hour cooling off period will be available to consumers who purchase flights within the United Kingdom, there is no explicit requirement within the United Kingdom to apply the cooling-off period to ancillaries.

However, the position is different in the United States, where the Department of Transportation (DOT) is likely to require a full refund to be offered where any flight and "simultaneously" booked ancillaries (ie, those that are purchased within 24 hours of the purchase of the flight booking) are cancelled within 24 hours of booking.

Background

The legislative regime surrounding consumer rights was harmonised throughout the European Union by the EU Consumer Rights Directive 2011, which was implemented in the United Kingdom in June 2014 by the Consumer Contracts Regulations 2013.

Under the regulations, the 14-day right to cancel does not apply to contracts entered into for the purpose of 'passenger transport services', nor to the supply of accommodation and vehicle rental services. In addition, the regulations do not apply to 'packages' as defined in the Package Travel, Package Holidays and Package Tours Regulations 1992 and which can be described more fully as follows: "A prearranged combination of not fewer than two of transport, accommodation, other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package, when sold or offered for sale at an inclusive price, and when the service covers a period of more than twenty-four hours or includes overnight accommodation."

Based on the definition of 'packages', ancillaries purchased together with the flight are likely to fall outside the remit of the regulations and will not benefit from the 14-day right to cancel. Notwithstanding this fact, we considered whether the separate (ie, outside of a package) purchase of the ancillaries would fall within the passenger transport services exclusion or whether it would create a new contract of sale/purchase with the consumer, which would then afford the consumer the 14-day right to cancel. Analysis suggested that the definition of 'passenger transport services' fails to clarify whether ancillaries form part of the services referred to therein.

Though this point remains unsatisfactorily explained within the regulations, we propose that the interpretation of the term passenger transport services, which by way of being so closely entwined with the product being purchased, cannot really be separated out as an independent product (ie, without there being a flight ticket, the need to have ancillaries is superfluous) and will include ancillaries. As such, we suggest that the 14-day right to cancel shall be inapplicable to separately purchased ancillaries.

One potential complication to the scenario discussed above is the veiled presence of a 24-hour cooling-off period. The cooling-off period for flight bookings is offered by many of the mainstream carriers in the United Kingdom. The basis for this is that these carriers have voluntarily entered into an agreement to adhere to the European Civil Aviation Conference Charter, which contains a provision requiring these carriers to offer the cooling-off period. However, the charter does not apply to ancillaries and, as such, there is no specific requirement to refund the amount paid for the ancillaries, should the customer enforce a cancellation of his or her flight within the cooling-off period.

By way of accounting for the trans-Atlantic nature of the services offered by many carriers, we have also considered the applicability of the cooling-off period to ancillaries, from a US perspective. It is known that the DOT has legislated that the cooling-off period must be available to customers for all scheduled flights to or from the United States. As such, in the case of flights purchased in the United States (or, in all likelihood, through the US-based website of a carrier), the cooling-off period will apply by law. Furthermore, the DOT has indicated that passengers exercising their right to use the cooling-off period should receive a full refund. We suspect that, if asked, the DOT would advise that the refund requirement also applies to fees for ancillary services booked simultaneously with the fare (ie, those booked within a 24-hour period of having purchased the ticket).

It is likely that the DOT will not view ancillaries purchased more than 24 hours after the purchase of the ticket as being purchased simultaneously. Therefore, given the regulatory language within the United States, it is unlikely that the cooling-off period needs to be offered for ancillary services purchased more than 24 hours after the ticket purchase.

Practical implications

It follows from the preceding discussion that the ancillaries will be excluded from the 14-day right to cancel offered in the United Kingdom under the regulations. Furthermore, there is no explicit requirement within the United Kingdom to apply the cooling-off period to ancillaries. However, from the US perspective, the DOT is likely to require a full refund to be offered where any flight - and any simultaneously booked ancillaries - are cancelled within 24 hours of their booking.

With the above in mind, carriers who are signatories to the charter have a variety of options with regards to the refund of ancillaries. In the United Kingdom, if a customer cancels their flight within the cooling-off period, the carrier can (i) refund the entire cost of the ticket and any fees paid for ancillaries, or (ii) refund the cost of the ticket only and retain the fees paid for ancillaries. If a customer cancels their flight after the cooling-off period has passed, and subject to the type of ticket purchased, the carrier can (i) refund the cost of the ticket and refund the fees paid for ancillaries, or (ii) refund the cost of the ticket but retain the fees paid for ancillaries.

In the United States, if a customer cancels their flight within the 24 hours of making their booking, then carriers should offer a full refund of the ticket and any fees paid for ancillaries purchased within that 24 hour period.

Focusing on a UK market, it is clear that carriers have options as to how they choose to deal with the refund of ancillaries. Commercially speaking however, it may attract unwanted customer complaints, should a carrier choose to allow a customer to cancel their flight booking, but separate out the ancillaries (whether booked simultaneously or separately with the flight booking) and prevent their cancellation. Should a carrier wish to treat the cancellation of ancillaries differently to the flight booking, then they should make it absolutely clear to a consumer (in a clear and prominent way) that, though a consumer retains a right to cancel their ticket, this cancellation right does not extend to any ancillaries purchased.

In terms of making things clear and prominent to the consumer, the UK Advertising Standards Agency is very specific in stating that all material information (of which this is likely to be an example) is displayed at the point of purchase. By way of further clarity on this point, should a consumer be using an online booking process, this information should be displayed on the purchase screen of the booking-flow, without the need for the consumer to navigate through to another display-window or modal (ie, by having to click a further hyperlink with ensuing pop-ups).

Charith Weerasinghe is a trainee in the commercial department of Addleshaw Goddard LLP.