Airline Concerns Grow over Brazil Consumer Lawsuits

 - January 6, 2020, 11:08 AM

Brazilian courts have taken a liberal stance in holding airlines responsible for delays, even those due to weather and other outside causes, and airline associations are pushing back. To airlines, the size of the problem is startling. “Of every 100 international flights between Brazil and the U.S., 79 will be sued,” according to Dany Oliveira, International Air Transport Association (IATA) director for Brazil.

During a panel on the Brazilian market at the October ALTA (Latin American and Caribbean Airlines) conference in Brasilia, civil aviation secretary Ronei Glanzman cited a claim by a U.S. carrier that Brazil accounts for 80 percent of its lawsuits. LATAM CEO Jerome Cadier observed ruefully that when Congonhas Airport closed for 20 minutes due to a drone invading the airspace, the first suit came in less than 24 hours. Conversely, Gatwick Airport’s 30-hour closure due to drones resulted in no lawsuits.

The number of lawsuits has risen from 64,000 in all of 2018 to 109,000 in just the first half of 2019, according to Ibaer (the Brazilian institute of aeronautical law). IATA’s Oliveira said airlines see eight lawsuits for every 100 domestic flights in Brazil, while in the U.S., the rate amounts to one for every 10,000 flights. Most lawsuits involve lost or delayed luggage. According to Brazilian airline association ABAER, 85 percent of its members’ flights depart and arrive on time, compared with 82 percent in the U.S., and baggage handling failures amount to 2.45 per 1,000, less than half the world average of 5.69. ABEAR estimates costs of 500 million reais ($123 million) to its members in 2020, an estimate that doesn’t include nonmembers and overseas carriers.

The explosion in lawsuits has resulted from favorable jurisprudence to consumers, amplified by a proliferation of websites designed to convert flight cancellations, delays, or overbooking into lawsuits. The Montreal Convention limits airline liability to proven financial damages, while EU regulation 261/2004 specifies compensation for delays of more than three hours. Both, however, exempt airlines from compensation for weather and other delays beyond its control. Business newspaper Valor Econômico cites lawyer Ricardo Bernardi’s assertion that many judges feel airlines should indemnify, regardless of the reason for cancellation or delay, and that they should presume a ruling of harm. Brazil's supreme court holds that the Montreal Convention applies only to international flights, but regulation of domestic flights falls under the consumer defense code, which, for example, prohibits overbooking.

The open-handedness of Brazilian courts has spawned dozens of websites offering to facilitate legal claims. At least two offer $250 cash in 48 hours to purchase claims from consumers, while others offer to handle claims for 30 percent of the sum awarded. Several state bar associations have won restraining orders against the sites for the unlicensed practice of law, while the sites argue that they merely intermediate claims for consumers, working in partnership with law firms that file the claims in court. A federal circuit court rejected two bar association suits, ruling the matter national and necessarily argued at the federal level, not by state entities.