EU finalises air passenger rights law targeting €3.2bn in unclaimed payouts
A new EU law will force airlines to streamline compensation claims and include carry-on bags in ticket prices, threatening to unlock billions in currently unpaid passenger payouts.
The European Council granted its final approval on 13 July to a sweeping overhaul of EU air passenger rights, giving carriers exactly 12 months to adapt to stricter claims procedures and new pricing rules. The legislation, which follows a 646-to-12 vote in the European Parliament on 7 July, is expected to take effect by mid-2027.
Lawmakers successfully preserved the existing financial compensation framework, defeating earlier Council proposals that sought to raise delay thresholds and reduce payout amounts. Under the finalised text, passengers remain entitled to €250, €400, or €600 for cancellations made with less than 14 days' notice, denied boarding, or delays exceeding three hours. Airlines will continue to be shielded from these costs when disruptions are caused by extraordinary circumstances beyond their control.
The most consequential shift for the aviation industry lies in the newly mandated claims administration. Carriers will be legally required to explain the compensation process to affected passengers within four days of a disrupted trip. Travellers will then have nine months to submit a claim using a standardised EU form, after which the airline faces a strict 30-day deadline to either issue payment or formally justify a refusal.
This standardisation threatens to upend a status quo that has long benefited carrier balance sheets. Consumer group BEUC estimates that European airlines are currently sitting on roughly €3.2 billion in unclaimed compensation. By stripping away the bureaucratic friction that typically deters passengers from pursuing complaints, the new rules could force a massive release of these deferred liabilities.
Beyond compensation, the overhaul strikes at the core of the unbundled airline business model that has driven sector profitability over the past two decades. Regulators are banning the practice of stripping basic items from headline ticket prices. Every fare must now include the cost of a carry-on bag in its upfront display, and all passengers will be guaranteed a free personal item in the cabin.
Additional consumer protections will further constrain airline pricing flexibility. Families will benefit from a mandate requiring free seating for children under 14 travelling with an adult. Return legs of journeys will also be formally protected, limiting the ability of carriers to cancel the second half of a trip without facing the full weight of the EU compensation regime.
