Middleman watch: AirHelp (series, #5)
Final installment in my deep dive into a middleman between passengers and airlines
Photo by Jan Vašek on Pixabay
This article, a brief epilogue about Henning von Vogelsang, concludes my series on AirHelp.
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After Henning von Vogelsang got out of his contract with AirHelp, he went looking for a different way to collect compensation from the European airline that had delayed his flight by four hours.
If you’ve been reading this series, especially the second installment, you know that passengers can file EC 261 claims with the airlines directly. But von Vogelsang didn’t know it at the time, so he looked for a law firm that would do it for him.
An alternative to a claims agency
He settled on a German law firm called RATIS, for which flight delay compensation is one of several practice areas. It was by talking to an attorney at that firm that von Vogelsang learned he could send a letter to submit a claim on his own—something he had never heard either from AirHelp or from Expedia, the online travel agency that had referred him to AirHelp.
RATIS appealed to von Vogelsang in part because most of their services in flight compensation are free to passengers. In the simple, amicable case of an airline complying with the initial claim request, RATIS hands over to the passenger the full amount received from the airline—no commission for such a slam dunk. This is in sharp contrast to AirHelp, which charges passengers 25 percent for such simple cases (or more if referred by a “partner” such as Expedia). Most if not all other claims agencies have a similar pricing system—charging a percentage of the payout even in simple cases.
What about more challenging cases, the kind that require legal expertise? Well, von Vogelsang explains, if an airline doesn’t respond to the initial letter, RATIS and the client can decide to take legal action—from issuing a court order that puts the burden of proof on the airline all the way to suing the airline. But even for such potentially costly legal services, the passenger doesn’t pay the law firm! Instead, payment for legal fees comes from the airline, assuming the airline loses the case. But even if the airline wins the case (that is, if they successfully argue that the flight disruption was caused by “extraordinary circumstances” as defined in EC 261), the passenger doesn’t pay because the law firm covers the client’s legal costs.
Not so with AirHelp: if AirHelp needs to take legal action, the company tacks on an additional 15 percent on top of its regular service fee. So a passenger might end up paying as much as half their compensation to AirHelp (25 to 35 percent for the basic service plus 15 percent for the legal action).
A preference for fairness
Let’s acknowledge that searching for an attractive alternative to AirHelp was far from costless for von Vogelsang. He spent considerable time and effort—first in getting out of his contract with AirHelp and then finding the law firm and vetting it. If he were merely trying to maximize his financial payoff from the travel disruption, his willingness to take on these transaction costs would be counterproductive to his goals—“irrational” in the language of economics. Most people’s unwillingness to spend a lot of time searching helps explain why so many passengers turn to AirHelp, whose omnipresence in quick Web searches makes the company’s service seem like the go-to the method for getting flight compensation.
Most people have a preference for fairness, for which they’re willing to pay a price.
But von Vogelsang’s goals go beyond trying to maximize financial gain. He has what economists call “social preferences,” including the preference for fairness, preferences for which people are willing to pay a price. Most people have a preference for fairness—it is just that for von Vogelsang this preference is particularly strong. “I have a deep sense of fairness,” he told me. “It’s about what’s fair, the rights we have, [the rights] they have, and the effort they make to deflect responsibility and to avoid reimbursing customers for failed or unfulfilled services because they think they can get away with it.” No wonder he was willing to spend so much time finding a fair solution to his problem with the airline, and no wonder he spent so much time talking to me.
An admirable middleman?
I have not dealt with RATIS myself, nor spoken with anyone from their company. In theory, their business model seems far more admirable than AirHelp’s: RATIS has lawyers that clients and prospective clients can confer with, they are forthright about what passengers can do on their own, they don’t charge for simple claims, and they are presumably so expert in discerning eligible claims from claims involving extraordinary circumstances (and getting airlines to cover legal fees) that they don’t charge their clients even for those cases that require expert legal help. In this way, RATIS seems to be embracing the middleman role I call the Risk Bearer, in addition to serving as a Concierge and an Enforcer.
I told von Vogelsang that it sounded like RATIS only takes cases that they are confident they can win, probably because they have data on flights and weather conditions that would determine if extraordinary circumstances occurred to absolve the airline.
He thought I was right about that. But he added a disclaimer: “I haven’t gone through the complete process yet and I hope no surprises are awaiting me.”
I’ll be curious to know what happens in the new year. I also want to know whether there are other firms specializing in flight compensation that use a business model similar to RATIS’s, or that offer any alternative to the high-commission, easy-revenue claims agency model.
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About the author
Marina Krakovsky, the voice behind Power of Three, is the author of The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit (Palgrave Macmillan). She is also co-author, with economist Kay-Yut Chen, of Secrets of the Moneylab: How Behavioral Economics Can Improve Your Business (Portfolio/Penguin). In her writing, speaking, and consulting, her main focus is on the practical application of ideas from psychology and economics. Her articles and essays have appeared in Discover, FastCompany, the New York Times Magazine, Scientific American, O (The Oprah Magazine), Psychology Today, Slate, the Washington Post, Wired, and more.