The Tel Aviv Magistrate Court recently dismissed a claim based on the Aviation Services Law 2012 for compensation due to a downgrade in respect of a flight ticket purchased with flight points.(1)

Facts

The plaintiff was due to depart with her family on an El Al flight from Israel to New York in business class.(2) However, due to overbooking, the plaintiff was downgraded to economy class. This change caused the plaintiff anxiety and mental anguish. The plaintiff's flight ticket, unlike those of her family, had been purchased by her employer in exchange for his flight points.

Due to the downgrade, El Al's representative offered the plaintiff compensation by way of a future flight ticket in business class to any El Al destination worldwide. However, the plaintiff refused this offer.

The plaintiff filed a claim for IS25,590, based on Clause 9(b) (compensation due to a change in flight ticket) and Clause 11(A)(1)(5) (exemplary damages) of the Aviation Services Law.

Clause 9(b) provides as follows:

"where the flight operator or organizer has decided on the transfer of a passenger to a class which is of lower level than that stipulated in the flight ticket issued to him, it will pay the passenger monetary compensation for the change in the terms of the flight ticket, as stated in the Second Schedule, in an amount which will be calculated as a rate of the flight ticket paid by the passenger, and if the flight includes a stopover – in an amount equivalent to the price paid for the flight ticket, multiplied by the ratio between flight distance in which the passenger was transferred to a lower class, as stated, and the total flight distance."

According to the Second Schedule to the Aviation Services Law (monetary compensation for changes to flight ticket condition), compensation is calculated as follows.

Change to flight conditions Percentage of compensation for flight paid by passenger
Transfer from first class to business class 60%
Transfer from business class to economy class 80%
Transfer from first class to economy class 90%
Transfer from first class or business class to economy class in flight longer than 4,500 kilometres 100%

Parties' arguments

Plaintiff's arguments

The plaintiff argued that she was entitled to compensation based on Clause 9(b) of the Aviation Services Law – that is, 100% of the price of a round-trip flight from Israel to New York, as the distance of the flight was longer than 4,500 kilometres.

The plaintiff contended that although it is not specifically stipulated as such in the law or its second schedule, the reference to "compensation" in the law means that the passenger is entitled to monetary compensation, even if the ticket was purchased with flight points.

The plaintiff alleged that the price of a round-trip flight in business class from Israel to New York was $4,000, and that El Al should compensate her for this amount. In addition, as El Al failed to fulfil its obligations under the law, it should pay her an additional amount of IS10,350 – the maximum amount of exemplary damages under Clause 11 of the law.

El Al's arguments

El Al contended that since the flight ticket was paid for with flight points, the refund should be made through flight points, rather than a monetary payment.

El Al further argued that the compensation offered to the plaintiff (a round-trip flight to any El Al destination) was better than that prescribed by the law (half of the flight points paid, as the downgrade was made only on the segment from Israel to New York).

Decision

The court rejected the claim, finding that the plaintiff's interpretation of Clause 9(b) did not correspond to the language of the law or its purpose. El Al was not obliged to compensate the plaintiff by way of monetary payment; compensation by way of flight points was sufficient in this regard.

The court ordered the plaintiff to pay costs amounting to IS6,500.

Although the claim was dismissed, the court addressed obiter dicta two additional issues which arose in the case.

Right to compensation for passenger who did not pay for ticket

According to the law, compensation is paid only to a "paying passenger", as it is calculated in relation to the amount "paid by the passenger". The court noted that, theoretically, according to the language of the law, the "other party" that finances the purchase of the ticket is not entitled to compensation, as such party is not a passenger.

The court further noted that in order to avoid an unreasonable outcome whereby no one is entitled to compensation, El Al's decision to offer compensation to the person who purchased the ticket (or to the passenger, subject to the purchaser's consent) was appropriate.

Whether compensation should apply to full flight price or half, as downgrade was made only on one flight segment

The court stated that as the law relates to a situation whereby the flight includes a stopover and provides that the calculation of compensation relates only to the segment in which the downgrade was made, the same logic should apply to the downgrade if it is made for only half of the journey.

For further information on this topic please contact Peggy Sharon or Keren Marco at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (peggysh@levitansharon.co.il or kerenm@levitansharon.co.il). The Levitan, Sharon & Co website can be accessed at www.israelinsurancelaw.com.

Endnotes

(1) Limor Bar v El Al Israeli Airlines, FP (Tel Aviv) 28050-06-15.

(2) The plaintiff's family had tickets in economy class.

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