IATA chief says EU doing 'very little' to address airlines' competitiveness

BRUSSELS (Reuters) -Willie Walsh, director general of the International Air Transport Association (IATA), said on Tuesday that the European Union has taken "very little action" to address airlines' competitiveness and criticised its passenger compensation policy.

European airlines have numerous challenges in recent years from air traffic control strikes, especially in France, engine manufacturer issues to delays in new, fuel-efficient aircraft from Boeing.

EU institutions are currently negotiating a reform of the bloc's 20-year old passenger rights' regulation, called EU261, which Walsh said was long outdated.

Walsh said the compensation scheme for flight delays punishes 99% of passengers as fewer than 1% of flights are delayed past the three-hour threshold.

Member states agreed in June to push out the flight delay threshold to four hours from the current three for short haul flights and six hours for long haul, subject to agreement with the European Parliament.

"This would reduce the perverse incentive for airlines to cancel delayed flights, and be consistent with passengers’ preference to arrive late rather than not at all," IATA said in a statement earlier on Tuesday. IATA had been calling for thresholds of five hours and nine hours respectively.

The European Parliament, however, wants to axe the thresholds and add the ability to bring a free cabin bag, among other changes. The parliament, Commission and council are due to meet on Wednesday and in early December to continue negotiations.

(Reporting by Julia Payne; Editing by Joe Bavier and Susan Fenton)