CORRECTED-YOUR MONEY-How to get compensated for air travel delays

Fri May 16, 2014 5:40pm EDT

(Corrects paragraph 2 to show penalty is per EU law, not U.S. Corrects paragraph 4 to show consumers can collect only for international flight delays, not international and domestic. Corrects paragraph 5 to show forms are for complaints)

By Mitch Lipka

May 15 (Reuters) - Last summer, Mark Wilson waited in a Rome airline terminal for a connecting flight to London on his way home to New York. And waited. And waited. By the time he arrived in London four hours late, the final New York-bound flight had departed.

Wilson was offered a room at an airport hotel, which he declined. He was also due a $550 cash penalty by European Union law but says he never knew about the rule. The money sat unclaimed for more than two months, until he used the service Refund.me to collect.

"I travel constantly. I had no idea that law existed," says Wilson, 36, an investment banker.

Indeed, the right of consumers to collect cash from airlines for international flight delays and specific domestic issues is not well known, says Christopher Elliott, author of "How to be the World's Smartest Traveler" and ombudsman for National Geographic Traveler. "The rules are obscure, and airlines intentionally keep them that way."

Consumers can fill out the required forms themselves and deal directly with the airlines. You can access the U.S. complaint forms through the Department of Transportation's Aviation Consumer Protection Division (here). European fliers can find forms at individual airlines or through the European Union (here).

But some prefer to skip the extra paperwork and hire someone else to handle it, even though it will cost a hefty percentage of what's recovered. Service providers include AirHelp (www.getairhelp.com/) and Refund.me (refund.me).

Either way, fewer than 2 percent of eligible travelers try to claim the cash, and less than 1 percent of travelers receive money, says Nicolas Michaelsen, co-founder and chief marketing officer of AirHelp.

RULES FOR PAYMENTS

Passengers whose flights from Europe are delayed by at least three hours or canceled are eligible for up to about $825, depending on the length of delay and distance of the flight. The average payout is around $600, according to Michaelsen. Flights to Europe and within Europe on an European Union-based carrier are also subject to European Union law.

Domestic U.S. travelers may be eligible for even more money, but under much narrower circumstances. An airline that denies a booked passenger a seat (somebody who is bumped on an oversold flight because there are not enough volunteers to give up seats) and can't get to their destination within an hour of the scheduled time can collect 200 percent of the one-way ticket price, capped at $650.

A delay of two or more hours is worth 400 percent of the price of the one-way ticket, up to $1,300. The average payout is $643, AirHelp says.

In 2013, nearly 467,000 passengers were bumped from overbooked U.S. flights, according to U.S. Department of Transportation records. A routine airline practice can end your eligibility for a cash payment: if an airline offers you a voucher and you accept it.

"Then all bets are off," Elliott says.

Data shows that most people take the voucher when offered - only about 57,000 U.S. domestic travelers last year were involuntarily bumped. Airlines are supposed to hand those consumers the rules that govern being bumped from a flight, and payment is supposed to be immediate. But that's not always the case, travel experts say.

However, United Airlines spokesman Charles Hobart says passenger gate agents are told to immediately settle up with travelers due a payment.

Delta Air Lines last year was fined $750,000 by the Department of Transportation for not following the rules. The airline has since invested in additional training and electronic signature pads to document that passengers were properly notified and compensated, spokesman Morgan Durrant says.

So far, AirHelp has processed about 25,000 claims and says a majority of applicants received a payout, with AirHelp taking a 25 percent commission including tax. Refund.me has a two-tier fee, starting at 15 percent commission plus tax for those who return a signed power of attorney form within 28 days, and 25 percent plus tax for those who turn it in later.

A typical case works like this: Connie Lee, 31, of Oakland, California, was delayed on a trip home from Germany. She filled out an online AirHelp form once she got home, which took about five minutes. A couple of weeks later, Lee ended up receiving about $800 from her airline carrier, minus the company's 25 percent commission.

"It was a very good surprise," Lee says. (Follow us @ReutersMoney or here Editing by Beth Pinsker, Lauren Young and Andrew Hay)

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