A small London design company is facing a £900 bill after BA’s sister airline, Vueling, trashed their salesman’s expensive metal suitcase and then refused to reimburse the firm unless they took it to a shoe repair centre more than two hours from their office.

The Montreal Convention says airlines must compensate passengers if their luggage is damaged or lost up to the value of about £1,150.

However, Vueling has been telling customers the maximum it will pay out is €50 (£43).

Circleline Design, based in Dalston, has been battling with the Spanish carrier which, along with BA, is part of International Airlines Group. Its salesman booked a BA flight from Milan to Barcelona only to find that despite booking on the BA website, he was travelling with budget airline Vueling.

That inconvenience was nothing to what he found when he arrived and retrieved his metal £900 Rimowa suitcase containing silk samples from the luggage return carousel. Its locks had been destroyed, it had been punctured, and according to a company spokeswoman, it “looked like someone had taken an axe to it”.

The airline has refused to refund the firm. It insisted they take the suitcase to a shoe repair service in Northwood, Middlesex, even though Vueling staff examined it at the time in Spain. There is no mention of this requirement in Vueling’s terms and conditions.

“We rang the repair firm who told us you have to bring the bag in and no matter the condition of the bag. If it cannot be repaired, they [Vueling] will give us a maximum of €50 as that’s their policy. It’s a four-hour round trip for us, so it’s not worth it if the most we’ll get back is £45. Vueling has refused to discuss the matter further, as have BA, even though the flight was booked on the BA website,” she says.

The airline, which requires passengers whose luggage is lost to call an expensive 0844 number, similarly refused to discuss the matter when asked by Guardian Money this week.

Money readers have reported being ignored in the past by Vueling after trying to make EU delay compensation claims.

The Montreal Convention (1999) limits an airline’s liability to 1,131 special drawing rights (which currently equates to £1,150) when a bag is lost or damaged. It makes clear the airline is responsible for checked in luggage, once it is handed over at the airport.

The UK’s Civil Aviation Authority told Money that, while the rules are clear, it can be hard for consumers to enact their rights if the airline is not UK-based or it simply ignores them. Vueling is not a member of a dispute resolution service in the UK meaning passengers must complain to the CAA’s Spanish equivalent, Aesa.

On consumer advice pages in English, Aesa sets out how to complain if EU delay compensation is not paid, but makes no mention of luggage.

Money asked Aesa about the case, but it is yet to respond.

Meanwhile, back in east London, staff at Circleline say they are considering a small claims action against the airline, using the IAG address in London.

“Vueling is just ignoring us and presumably lots of others in the same boat. We are inclined to bring a claim against them to make the point. To simply ignore the rules is disgraceful. We certainly won’t be using Vueling again in a hurry,” says a spokeswoman.

Your rights

When hold luggage is lost, delayed or damaged, airlines are liable for your losses up to maximum of about £1,150, although getting the money is often problematic.

If your bag is merely delayed, most airlines will reimburse you for the bare essentials such as toiletries, underwear and laundry costs. If your bag is delayed on your return home, you can probably forget it.

If you are claiming for a lost or damaged bag when you have been on two or more different airlines on a journey, the final airline is generally held to be responsible.

If your baggage is damaged, report it upon arrival at the airport where you should receive a “property irregularity report”. You will also need to put in a written claim within seven days. Having a PIR is no guarantee that the airline will accept the claim.

The airline may pay for your baggage to be repaired, or may provide replacement baggage. Airlines do not allow for “new for old” replacement but you should not be worse off as a result of them losing your case.

Most big airlines subscribe to an alternate dispute resolution (ADR) body. If the airline or airport does not have an agreement with an ADR, you can refer your complaint to the CAA. A better action would probably be a small claims court action – provided the airline has a UK presence.