EU261 reform: A panacea for airlines or more hot air?

On 5 June 2025, the Council of the European Union reached a political agreement regarding revisions to Regulation (EC) No 261/2004 ("EU261") on flight delays and cancellations. It remains to be seen whether this long-awaited reform of air passenger rights becomes law.

Reform overdue

It is commonly accepted within the aviation industry that EU261 reform is long overdue. Having spun out from a 1996 regulation on denied boarding, EU261 has been in force for over 20 years and given rise to a large body of CJEU and national case law interpreting it. It has also generated a fair amount of criticism; it is seen by many in the airline industry as having increased the financial burden on airlines following flight disruption, especially when the cause of such disruption is beyond the actual control of the airline. Another perhaps unintended consequence is the proliferation of claim companies who continue to profit from passenger EU261 compensation claims.  

So while EU261 may have been heralded as a cornerstone of the EU's consumer rights legislative framework, it has also been a millstone around airlines' necks and on their balance sheets. Certainly, the evolution of EU261 from consumer to liability piece was clear in the Council's recent press release regarding the 2025 proposal, describing its focus as being “on air passenger rights and on airline liability”.

A previous proposal to revise EU261 was adopted by the European Commission in March 2013 ("2013 proposal") and sought to clarify the definition of extraordinary circumstances, introduce a new right on rerouting and expand passengers’ right to information about flight disruption. Despite the Council debating the Commission’s proposal in October 2013, little progress was made and it failed to take-off.

Proposal summary and next steps

This month's political agreement ("2025 proposal") came about under the Polish presidency of the Council and is similar to the 2013 proposal with some additions. The reformed EU261 would provide for the following:

1. A non-exhaustive list of extraordinary circumstances: this would "increase legal certainty for air carriers and passengers".
2. Changes to delay times for compensation: the right to compensation for delays would arise for delays at arrival of more than four hours (journeys of 3,500km or less) and six hours (journeys of above 3,500km), representing an increase to the current three-hour threshold, with no change to the amounts of compensation, which will be welcome news for airlines.
3. Right to information: there would be updated and clarified care and assistance under Article 9 along with a strict deadline for airlines to respond to passenger claims, being 14 days from the submission of a request by a passenger. 
4. New tarmac delay rights: passengers would be entitled to minimum assistance and to be disembarked after three hours.
5. The right to be rerouted: rerouting must be offered at the earliest opportunity and must consider other airlines or alternative transport modes. 

Following the Council debate on the proposal on 5 June and an agreement in principle being reached, the draft Regulation now moves to trilogue, whereby the Parliament, Council and Commission attempt to reach a provisional agreement on the proposal. This process will take time. Inevitably, it means that the revisions will not come into effect before the next presidency (Denmark) starts on 1 July 2025. In this context, there has been a lot of political hand-wringing, including with regard to compensation amounts. There is therefore no guarantee that the proposal will progress beyond the trilogue stage.

The situation is complicated by the fact that a proposal to reform Directive (EU) 2015/2302 (the Package Travel Directive, which is implemented in the UK as the Package Travel and Linked Travel Arrangements Regulations 2018) is also currently traversing the European Parliament. This proposal contains controversial provisions that would require, among other things, refunds to be paid to travellers who have not requested them, and for third party service providers (including airlines) to provide refunds to organisers within seven days in the event that their service is cancelled. It is possible that the two proposals will converge during the trilogue process, which would inevitably delay the process further still.

Criticism of 2025 proposal

Whilst many are in agreement that EU261 needs to be modernised, there has been criticism that the 2025 proposal is overly consumer-focussed and fails to take into account the commercial and practical effect of passenger claims on airlines.

One of these effects relates to events caused by third parties, including airports and air navigation service providers (ANSPs). At present, even though disruption caused by these third parties typically falls within the extraordinary circumstances defence in Article 5(3) of EU261, and although airlines may therefore be relieved of the burden of paying compensation to passengers affected by such events, carriers still foot the bill for refunds, rerouting and care and assistance payments. Even for a single disruptive event, the costs involved can run into millions of pounds for the airlines affected. 

For airlines operating to and from the UK, three recent events fall within this category:

• The NATS systems outage of 28 August 2023, which caused an effective shutdown of UK airspace for six hours, with the knock-on effects of the shutdown affecting the operations of some airlines for several days after.
• A series of power outages at UK airports including a significant power cut on 23 June 2024 that affected two terminals at Manchester Airport and resulted in numerous flight cancellations.
• The recent electrical substation fire at London Heathrow Airport on 20 March 2025, which caused the airport to be closed for nearly a full day's operations.

In each of these circumstances, the UK Civil Aviation Authority (CAA) confirmed that the disruption to flights caused by the event was "likely to be viewed as "extraordinary circumstances"", meaning that passengers were unlikely to be entitled to fixed compensation. However, the airlines affected remained on the hook to provide passengers with a refund or rerouting along with care and assistance during the disruption, despite the disruption being clearly caused by an issue with the ANSP or airport in question.

An airport's conditions of use commonly include exclusion clauses for consequential losses suffered by airlines as users of the airport. The legal relationship between airlines and ANSPs in the UK is more complicated since the provision of such services by an ANSP is granted by the Secretary of State for Transport by way of a licence, introducing the possibility of sovereign immunity. Either way, the simplistic argument founded on Recital 8 of EU261 that an airline can just pass on liability to third parties such as its airport partners or ANSPs is unrealistic. The political agreement is a missed opportunity to address the liability balance for flight disruptions, which currently sits squarely with the airlines.

What about UK261?

Following the UK's exit from the EU, EU261 was assimilated in UK domestic law in the form of Assimilated Regulation (EC) No 261/2004 ("UK261"). UK261 is essentially the same as EU261 aside from aspects including Article 3 on scope (which introduced the concept of a "UK air carrier") and the Article 7 compensation amounts (which are in Sterling rather than Euros). There is some potential for overlap in the case of passengers bringing claims under either the EU or UK regimes, thereby allowing forum shopping for financial benefit. This, along with a possible reluctance to allow diverging case law on the issue of passenger rights to emerge, and the regulator being forced to manage two separate passenger rights regimes as a result, makes it unlikely that the UK would seek to maintain a passenger rights scheme that differs from that in place in the EU, unless the reformed scheme was contrary to existing UK law. 

That said, a 2022 consultation, “Reforming aviation consumer policy: protecting air passenger rights”, undertaken by the Department for Transport, considered the current rules around compensation for delayed domestic flights (and not international flights) along with various options that would have created a two-tier system between domestic and international flights within UK law. The conclusion to this review was that more work was needed to consider the merits and limitations of any changes in this area.

Despite this, we would expect the UK to consider adopting a reformed EU261 regime to the extent it progresses past trilogue. This is a topic that undoubtedly has many more twists and turns to go before a resolution is reached. We expect airlines, consumer rights groups and policy-makers alike will continue to follow the process with interest.