News: Delays set to cost airlines dear

Passengers win new compensation rights; personal debt levels increase; Avon to enter the financial services market

If you find yourself bumped off a plane because of overbooking or the cancellation of your flight, you'll now qualify for more generous compensation than in the past.

If you find yourself bumped off a plane because of overbooking or the cancellation of your flight, you'll now qualify for more generous compensation than in the past.

Under European Union rules that came into force on Thursday, passengers using European airports and airlines have been given improved legal rights - the most important of which is recompense for poor service. Depending on your destination, payouts will range from €250 (£170) to €600 (£415).

For example, a passenger unable to board a plane as booked would be eligible for compensation of €250 if his flight was on a route of 1,500km or less.

These new rules apply to all scheduled and commercial flights, including budget airlines - where the cost of compensation is likely to be greater than the cost of the ticket.

Previously, scheduled flight operators would have compensated passengers, in cases of overbooking or cancellation, with payouts of between just £80 and £170, depending on circumstances.

Under the new rules, if your flight is delayed for more than two hours, you will be entitled to free meals and phone calls, as well as accommodation if the situation requires it. A delay of more than five hours qualifies you for a full refund on your ticket, as well as a free flight home if appropriate.

Difficulties may well lie ahead, though.

Airlines won't have to cough up compensation if a flight is cancelled for "extraordinary" reasons outside their control, such as bad weather or airport security alerts. This has sparked fears that, under such circumstances, airlines could choose to cancel instead of delay a flight, since the overall cost to them could be cheaper.

Deeper into debt

People calling for help on the hotline of the Consumer Credit Counselling Service (CCCS) last year had average debts of £26,800, the charity reports.

This 8 per cent rise on 2003 - representing roughly £2,000 per person - could be down to rising interest rates, according to Malcolm Hurlston, chairman of the CCCS.

"We are concerned by the rising burden of debt," says Mr Hurlston. "The number of calls to the CCCS increased by over a third last year.

"People in difficulty are coming to us sooner - but they come heavily burdened."

In the first week of January this year, the charity took more than 1,000 calls a day for the first time since the hotline was established - a pattern that has since continued.

About one in 10 callers go from a tentative enquiry to an in-depth counselling service (both free of charge), before going on to draw up a debt management repayment plan tailored to the individual. At this last stage, the CCCS will take a small commission from the debtor's monthly repayments to cover administrative costs.

Avon gets a makeover

Lipstick, perfume, soap... insurance? Cosmetics company Avon could soon be adding life and car cover to its basket of goodies as part of an expansion plan.

Details remain at an early stage, but Avon's 20,000-strong recruitment drive is expected to include a move into the UK financial services industry.

Avon is one of just a few large companies that still sell products door-to-door, relying on women selling to women at home during the day.

Salesmen from financial firms used to be a regular sight on British doorsteps, but the rise of cheaper telephone, direct mail and internet marketing put paid to that.

Fifteen years ago, it is estimated that some 200,000 agents sold door-to-door insurance; the figure today is no more than a few thousand.