Israel's Supreme Court Rules Travel Agencies Cannot Charge Fees on Canceled Flights

Israel's Supreme Court has ruled that travel agencies are prohibited from charging handling fees on refunds for flights canceled by the airline. The landmark decision stems from a dispute over $30, a fee deducted by the travel agency "Issta Israel" from a passenger's refund after Wizz Air canceled his flight to Warsaw. The passenger had purchased a ticket for 1,087 shekels, and after the cancellation, received only 911 shekels back, with Issta retaining $30 as a reduced handling fee, as per their service terms.

Issta had argued that the fee was agreed upon in their terms of service, which allowed for a $60 fee for any changes or cancellations. They also stated that an additional $17 of the refund was not remitted by the airline. The consumer initially sued in small claims court, and while the parties agreed Issta would refund the disputed $17 as a gesture of goodwill, the court initially dismissed the claim regarding the $30 fee, as did the district court on appeal, stating that such deductions were permissible with explicit contractual consent.

The Supreme Court, hearing the case as a third appeal due to its broad implications, overturned the lower courts' decisions. Justice Gila Kenaf-Steinitz, writing for the unanimous panel that also included Justices Dafna Barak-Erez and Yael Vilner, stated that aviation service laws do not allow travel agencies to profit from their duty to assist passengers in obtaining full refunds. She clarified that a previous temporary order allowing such fees during the COVID-19 pandemic's aviation crisis has expired, and without it, the practice is illegal. The court viewed the travel agency's role as a conduit for transferring funds from the airline to the passenger, not as an entity entitled to retain a portion.

As a result, Issta was ordered to refund the $30 handling fee, plus linkage differences and interest, and to pay 5,000 shekels in legal costs. Attorney Ariel Dubinsky commented that this ruling could have significant implications for the travel industry, potentially affecting thousands of passengers and possibly leading to class-action lawsuits. Issta stated they are reviewing the ruling and considering their legal options.