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January 10, 2011 / David Woodford

Airlines not paying BAA is a better solution than introducing government fines

After the talk about the Government introducing fines for airlines that don’t deal well with poor weather conditions it is good to see that Virgin is choosing not to pay its fees. Government fines are just additional regulation whereas if airlines don’t pay BAA and possibly even seek damages from them the money paid will be as close as we can get to the actual costs of the disruption and will to those affected.

The ministers talking about fines intended to focus it on the passenger. However the Government fining airlines doesn’t do this as it doesn’t allow the customer to make their case for the exact amount of damage they received. The idea that some official can decide how much the fact you missed your holiday means to you is ridiculous.

What is better is that when anyone enters into an agreement they have to be in a position to do what they agreed and if they aren’t should have to pay the costs of this to the other person. In the case of the snow disruption (we assume) the airlines were promised a functioning airport and were then able to agree to fly passengers.

When the airports closed the airport was breaking its agreement. In doing so it meant that the airlines broke their agreements because they should have been able to rely upon the airports being open. This then means that the airlines incurred damages as their passengers didn’t get the flights so they should be able to claim these damages back of BAA. So the amount BAA pays will be the amount the passengers lost.

In fact it works even better than this because the decision of how much to invest in “snow technology” is actually based on the benefits to society of it being in place. Since under fines it is assumed that the best outcome is for as much as possible to be invested so there is no risk of the airport closing. This, of course, doesn’t make sense as the benefit of the airport being open is limited.

However, under the current system the ability to pass on these costs is reduced mainly because it is very difficult for passengers to get compensated for all the damages they incur. IF the Government wants to help passengers it should make it easier for them to claim larger sums from the airlines and easier for the airlines to then claim these sums from the airport operator. It is the airport operator that should take the risk of the weather as they decide the levels of investment, but the cost they have to pay should be equal to the costs incurred and the “market” is the best way of doing this.

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