[Blind Aviation Compensation] Unclear Liability for Compensation... Urgent Need for System Reform

Compensation Standards Exist but Broad Exemption Scope
Advantageous to Airlines... Need to Strengthen Customer Protection Obligations

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Although flight delays occur frequently, consumers are not receiving proper compensation. The criteria for airlines' compensation responsibilities are unclear and tend to favor airlines, leaving legal action as the only effective recourse. There are calls for mid- to long-term institutional reforms to reduce the scope of exemption from compensation and to impose more proactive compensation obligations.

Standards Exist but Many Exemptions... Ultimately Leading to Litigation

According to industry sources on the 24th, airlines set individual compensation policies based on the consumer dispute resolution standards announced by the Fair Trade Commission. According to these standards, for international flights, compensation must be provided as follows: 10% of the fare for delays of 2 to 4 hours, 20% for delays of 4 to 12 hours, 30% for delays exceeding 12 hours, and up to $600 for cancellations.

However, these standards are not always applied. Both the consumer dispute resolution standards and the Aviation Business Act include various exceptions when addressing consumer damages. Exceptions include weather conditions, airport circumstances, natural disasters, and aircraft connection issues (when delays or cancellations of preceding flights affect subsequent connecting flights). If airlines prove these exceptions, they can be exempted from compensation liability. In reality, most flight delays are due to connection issues, and most cancellations are caused by weather, making compensation cases rare.

The Montreal Convention, an international regulation applicable to international air transport, specifies concrete compensation limits, unlike the Fair Trade Commission’s consumer dispute resolution standards. Article 19 of the Montreal Convention sets the compensation limit for passenger delays at 5346 SDR. SDR (Special Drawing Rights) is an international reserve asset created by the International Monetary Fund (IMF), equivalent to approximately 9.84 million KRW based on the previous day’s exchange rate.

However, the Montreal Convention also includes exceptions. It stipulates that carriers are not liable for compensation if they prove that they took all reasonable measures to avoid the damage or that such measures could not be taken. Additionally, no separate compensation limit is provided for cancellations.

Exploiting this, some airlines choose cancellations over delays. In 2018, Japan’s Peach Aviation notified cancellation of a flight from Naha Airport in Okinawa to Incheon Airport, citing maintenance defects after a two-hour delay in departure. In this case, Peach Aviation only provided substitute flights on its own services, and since all flights on that route were fully booked for a week, passengers were advised to use flights after that period. Ultimately, passengers had to cancel their reservations and book flights with other airlines, with some even having to stay overnight locally.

However, Peach Aviation’s policy stated that it would not provide additional compensation for alternative flights or transportation, or accommodation costs due to cancellations or delays caused by its circumstances. Refunds were only offered in the form of company points. Dissatisfied users filed a class-action lawsuit, and the case is still ongoing.

Need to Strengthen Customer Protection Obligations... "Actively Inform of Damages"

Ultimately, there are calls to institutionally strengthen customer protection obligations. Airlines should be obligated to take all reasonably required measures to prevent user damages when force majeure occurs. Currently, Article 61, Paragraph 1 of the Aviation Business Act exempts airlines from implementing damage relief plans if they prove force majeure. Imposing an obligation on airlines to make efforts to prevent user damages could reduce the scope of exemption. There are also voices calling for adding exemption reasons in the consumer dispute resolution standards and periodically reviewing compensation criteria.

Users should also actively inform airlines of damages. In cases where significant business losses occur due to flight delays, special damages under civil law can be recognized when disputing compensation liability with airlines. Attorney Ji-hye Kim, who is handling a class-action lawsuit related to delays by T’way Air, explained, “Excess expenses such as ticket repurchase costs or additional accommodation fees are generally recognized as damages, but if significant damages such as loss of business opportunities occur, users must actively inform the airline to have special damages recognized. If the airline is unaware of the customer’s specific and special circumstances, compensation liability is not recognized.”

Furthermore, there are calls for institutional improvements to encourage airlines to actively compensate for losses. The Montreal Convention regulates the carrier’s liability not for the delay itself but for damages caused by the delay. Therefore, it is effective when users who suffered damages due to delays claim compensation themselves.

Legislative Research Officer Gu Se-ju of the National Assembly Legislative Research Office emphasized, “Like the European Union (EU), where compensation can be received based on set standards without separately proving damages if certain conditions are met, Korea needs to consider introducing a compensation system that actively protects users. It is necessary to clearly define special situations exempting compensation obligations and thoroughly discuss the overall impact on the aviation industry and airfares.”