IATA Warns EU261 Reforms Risk Higher Costs, Reduced Connectivity in Europe

IATA says the Parliament’s proposals would function as a “reverse Robin Hood”, pushing up costs for the majority of travelers who do not benefit from compensation.

The International Air Transport Association (IATA) has intensified its criticism of proposed reforms to the EU’s passenger rights regulation, EU261, warning that amendments introduced by the European Parliament would worsen the regulation’s long-standing flaws, inflate costs for airlines and consumers, and undermine the competitiveness of European aviation.

According to IATA, the Parliament’s proposed version of EU261 not only reverses long-discussed improvements but adds new requirements that neither passengers nor airlines have requested—measures the industry says will ultimately reduce consumer choice and harm air connectivity across Europe.

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Long-Standing Problems With EU261

EU261, first implemented in 2005, was intended to protect passengers from excessive delays and cancellations. However, airlines have long argued that the system has become distorted, costly, and inefficient, with compensation triggered by events often outside their control, such as weather disruptions or air traffic control strikes.

The regulation has also been criticized for:

• Imbalanced compensation thresholds

• Legal uncertainty and inconsistent interpretations across EU states

• A lack of alignment with operational realities in aviation

• Rising industry costs, driving up ticket prices for all passengers

After years of pressure, EU governments agreed in June 2025 to a series of reforms supported by the European Council—changes that IATA says would move EU261 closer to a fair and balanced framework.

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Key Council Reform: Adjusting Compensation Thresholds

A central feature of the Council’s position was to adjust compensation eligibility thresholds:

• 4 hours for short-haul flights (previously 3 hours)

• 9 hours for long-haul flights (previously 3 hours)

The move was designed to reduce the perverse incentive for airlines to cancel flights outright instead of waiting out delays to avoid the 3-hour compensation trigger—an outcome that actually harms passengers. Data suggests that passengers overwhelmingly prefer to arrive late rather than not travel at all.

The thresholds also reflect the fact that less than 1% of flights in Europe are delayed beyond three hours, meaning that 99% of passengers are funding a compensation system used by only a tiny minority.

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Parliament Rejects Improvements, Adds New Obligations

The European Parliament, however, has proposed reversing these threshold adjustments and adding new provisions, including mandatory free cabin baggage, which IATA warns would raise fares significantly.

Passenger data collected by IATA in May 2025 shows:

• 72% of travelers prefer the lowest fare and pay only for extras they choose

• 97% are satisfied with their most recent flight

• The vast majority do not want additional mandatory costs baked into ticket prices

IATA says the Parliament’s proposals would function as a “reverse Robin Hood”, pushing up costs for the majority of travelers who do not benefit from compensation.

Willie Walsh, IATA’s Director General, warned:

“Everyone knows there’s no such thing as a free lunch. Similarly, there is no such thing as a ‘free’ bag or ‘free’ compensation thresholds. The EU Parliament’s new provisions work as a ‘reverse Robin Hood,’ putting further costs on the 99% of passengers who don’t benefit from them.”

He added that political interference in airline operations risks undermining passenger choice and damaging the market’s ability to provide affordable fares.

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Threat to European Aviation Competitiveness

IATA argues that poorly designed regulations are contributing to Europe’s stagnating air connectivity. New research shows slow growth over the past decade:

• France: +2.2% per year (2014–2024)

• Netherlands: +2.9% per year

• Germany: +0.4% per year

In an increasingly competitive global aviation market—where hubs in the Middle East, Turkey, the United States, and Asia are expanding rapidly—European airlines face mounting cost pressures.

Failure to modernize EU261 in a practical way, IATA warns, could worsen Europe’s decline in connectivity and route development.

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Additional Pressures: Taxes, Fuel Mandates, and ETS Costs

IATA emphasized that airlines are already confronting escalating financial burdens:

1. Passenger taxes

These charges reduce route viability and increase fares. Some governments are rethinking them—Sweden scrapped its passenger tax in July 2025—but many others have yet to follow.

2. ReFuelEU and Sustainable Aviation Fuel (SAF) mandates

Fuel producers are not sufficiently incentivized to scale up SAF production, leaving airlines to pay a USD 2.9 billion premium over standard jet fuel in 2025. This is in addition to mandatory contributions to the EU Emissions Trading Scheme (ETS).

3. Regulatory layering

IATA warns that the combination of taxes, SAF mandates, ETS costs, and a strengthened EU261 could make some routes commercially unviable, reducing connectivity and consumer choice.

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A Call for Smarter, More Balanced Regulation

IATA is urging lawmakers to uphold the European Council’s position and resist proposals from the European Parliament that would increase costs and reverse efforts to modernize EU261.

Walsh said the EU should embrace “fewer and smarter regulations”, referencing last year’s Draghi Report, which called for measures to boost European competitiveness and reduce unnecessary regulatory burdens.

“The best guarantee of great customer service is choice and competition delivered by a thriving air transport market,” Walsh said. “Correct reform of EU261 can be the starting point for a meaningful competitiveness strategy for European aviation.”

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Outlook: A Critical Moment for Europe’s Air Transport Sector

As policymakers negotiate the future of EU261, the stakes are high. The revised regulation could either:

• Strengthen Europe’s aviation sector in line with global competitiveness, or

• Add new layers of cost and complexity that weaken Europe’s carriers and raise fares for travelers.

IATA is urging policymakers to base decisions on data, passenger preferences, and operational reality—not political symbolism.