High Court Rules Travel Agents Cannot Deduct Fees From Flight Refund
Translated & summarized from Ice by baba
Israel's Supreme Court ruled that travel agencies cannot deduct fees from flight refunds when airlines cancel flights. The decision stems from a case where a passenger was charged $30 in fees by IATA for a canceled Wizz Air flight.
The story in 5 lines · by baba
- Travel agents cannot charge fees for airline-canceled flight refunds.
- The Supreme Court overturned lower court rulings in favor of a consumer.
- The ruling applies after a pandemic-era fee allowance expired.
- Agencies must pass full refunds to passengers; they don't cover airline non-payment.
- The decision may lead to widespread class-action lawsuits against agencies.
Israel's Supreme Court has unanimously ruled that travel agencies are prohibited from deducting handling fees from refunds owed to passengers when a flight is canceled by the airline. The landmark decision, authored by Justice Gila Kenafy-Steinitz, clarifies that the Aviation Services Law is intended to protect consumers and does not permit agencies to profit from their role in facilitating refunds.
The court defined travel agencies as an "intermediate link" and a "conduit for refund payments," rejecting attempts to withhold funds before they reach the rightful owner. While a temporary order during the COVID-19 pandemic (2020) allowed for such fees, the court noted this expired in 2021, reverting to the original prohibition.
However, the justices, including Kenafy-Steinitz, Barak-Erez, and Vilner, stipulated that agencies do not bear a "result obligation." This means they are not required to cover amounts the airline refuses to transfer, but they must pass on the full amount received to the passenger.
The precedent-setting case originated from a consumer dispute over just $30. A passenger who purchased a 1,087 shekel ticket to Warsaw through IATA, with Wizz Air canceling the flight, received a partial refund. IATA had deducted approximately $47, citing handling fees and amounts allegedly not returned by the airline, relying on service terms allowing up to $60 per cancellation.
After losing in lower courts, which upheld the contractual agreement, the Supreme Court accepted the case for a third hearing, overturned the previous rulings, and ordered IATA to refund the fees plus 5,000 shekels in legal costs. Commercial law experts anticipate this ruling could trigger a wave of class-action lawsuits against travel agencies, potentially exposing them to significant group refund demands, especially since this practice continued after the pandemic-era order expired.
