Introduction
Background
Facts
Düsseldorf District Court
Düsseldorf Court of Appeal
Comment
The covid-19 pandemic brought airlines various problems concerning the interpretation of EC Regulation 261/2004 and the case law of the European Court of Justice (ECJ). Airlines were flooded with ticket refund requests, while governmental restrictions forced them to send home their employees or put them on furlough. Millions of transport contracts had to be reversed.
Airlines also faced challenges in situations involving travel agencies. Travel agencies add their own fees (ie, agency fees) to the cost of tickets. These fees cover agency costs and may also include any other special services. Often, it is unclear to passengers that such fees are extra and have nothing to do with the contract of carriage.
In this respect, the question arises of how the concept of "ticket" costs is to be interpreted in light of ECJ case law.(1) The ECJ had ruled that an agency fee must be reimbursed if it was charged with the knowledge and approval of the airline, a so-called "provision payment".
This legal question has now been discussed in detail before the Düsseldorf courts.
The International Air Transport Association (IATA) is an association of over 250 airlines operating worldwide and is the main airline representative in the industry. Leaving IATA is therefore not an option for the majority of airlines.
The IATA has taken on the task of simplifying the sale, issuance and settlement of flight tickets for airlines. To this end, it grants IATA agencies the authority to directly issue airline tickets for IATA-affiliated airlines. The contracts concluded by the IATA are binding on its members. The subsequent settlement of airline tickets issued by IATA agencies takes place within the framework of the Billing and Settlement Plan.
There are currently more than 2,000 IATA agencies in Germany. Each IATA agency is authorised to issue and sell tickets of IATA-affiliated airlines according to the fare conditions set by the IATA and to add an individually determined service fee to the net fare.
Since 2004, many airlines have changed their pricing model to a so-called "net price model" (ie, a zero-commission scheme). Prior to 2004, IATA agencies acted as commercial agents of airlines under section 84 et seq of the German Commercial Code (HGB) and acquired a commission claim against the airline when selling flight tickets. Due to the change to the net price model, IATA agencies lost their commercial agent status. Since then, therefore, service fees have been charged for brokering flights with bookers.
The plaintiff booked a flight via an online travel agent (a ticket consolidator licensed by the IATA). The flight was cancelled due to the covid-19 pandemic. Under the net price model, the passenger filed a lawsuit and demanded a full refund of the ticket price, including the agency fee. The defendant reimbursed the ticket price, but argued that the agent's service fee was not a part of the air fare.
According to the Düsseldorf District Court,(2) article 8 of EC Regulation 261/2004 stipulates that the full ticket price must be refunded. The agency fee need not be paid only if it was set without the knowledge and consent of the air carrier.
The ECJ had ruled in this regard that a balance must be struck between the high level of protection of passengers, on the one hand, and the interests of airlines, on the other. In this respect, it must be assumed that a commission charged by the travel agent when a passenger purchases a ticket is, in principle, to be regarded as part of the ticket price.
However, there must be certain limits in view of the interests of the airlines affected by this. The definition of the term "ticket" in article 2 lit (f) of EC Regulation 261/2004 states that the various components of a ticket, even if it is not issued by the air carrier itself, must in any case be approved by the air carrier and thus may not be determined without its knowledge. Therefore, the difference between the amount paid by the passenger and the amount received by the air carrier, amounting to the commission of an undertaking which acted as an intermediary between them, is in principle covered by the passenger's right of reimbursement. Exceptionally, this is not the case if the commission was fixed without the knowledge of the air carrier.
The Court interpreted the ECJ ruling in the form of a rule-exception relationship that commissions charged by intermediaries are in principle covered by the passenger's right of reimbursement, unless the determination was made without the knowledge of the air carrier. In a mass business such as the sale of air travel, the Court held that it is not important whether the airline had approved or known the specific amount in each individual case, or had itself paid commissions to the intermediary travel portal. It only matters whether the airline is generally aware that a certain agent charges commissions. The air carrier's knowledge that such a commission is incurred indicates the air carrier's authorisation.
As a result, the passenger's claim for full compensation for the ticket price paid was granted, including the fee for booking the flight (ie, the agency fee). The Court ruled that the air carrier was not unreasonably disadvantaged by the obligation to compensate the full amount paid by the passenger. Rather, it was up to the airline itself to exclude commercial mediation – for example, by only allowing bookings through its own booking channels or through third parties with which it has its own contractual relationship. If, however, the air carrier allowed bookings to be made in a variety of ways and was aware that commissions were generally charged for such bookings, claims for reimbursement under article 8(1)(a) of EC Regulation 261/2004 would generally also include the commission incurred.
The decision was appealed by the defendant. The defendant argued that the statement that a contractual relationship existed between the travel agency and the airline with regard to the disputed booking was wrong as it disregarded the actual economic circumstances.
The Düsseldorf Court of Appeal indicated, in its decision of 24 March 2022,(3) that it considered the appeal to be well founded. The following considerations were decisive in this regard.
The charging of a commission by an IATA agency had also taken place "without the knowledge" or "without the authorisation" of the airline within the meaning of the ECJ case law. The airline had sold tickets to the agency and had known that the agency usually added a commission in the form of a service fee to the ticket price itself. However, it had no knowledge of whether and in what amount such a fee had been charged in the specific case; therefore, the service fee was not part of the airfare and could not be subsumed under the legal terms of "knowledge" and "consent". Otherwise, airlines would incur an incalculable financial cost risk.
The Court further held that the statements of the ECJ support this legal opinion, according to which there is an exception to the basic obligation to refund if the commission was determined without the knowledge of the airline. Moreover, it could not be said that the airfare including the commission had been approved by the airline or set with its knowledge if the airline had known only that some kind of commission would be charged by the agency but had not been aware of the specific amount.
If airlines (in particular with regard to the numerous IATA agencies) were obliged to always refund the service fee to the passenger in case of a flight cancellation, this would lead to an extensive financial burden. This burden would result in an unfair balance between the interests of passengers and those of airlines. It should also be clear to the average passenger that when a flight is booked via an agency portal, it is, of course, not free of charge. Therefore, agency costs must be claimed from the travel agency itself and are not to be borne by the air carrier.
Even a high level of consumer protection does not justify reimbursement of the airfare including a commission charged without the airline's knowledge. The airline's obligation to reimburse the net airfare plus commission must therefore be limited to those cases in which the travel agency still acts as the airline's commercial agent pursuant to section 84 et seq of the HGB and is entitled to a commission claim against the airline pursuant to section 87 of the HGB.
The comments of the Court of Appeal in the present case are welcome. They deal in detail with the contractual relationship between the passenger, the airline and the travel agency.
The aviation industry will also welcome the fact that an increased level of consumer protection does not always prevail. Insofar as judges are willing to deal with a matter and apply dogmatic principles, fair rulings compatible with the applicable law are made. The case law of the district court, on the other hand, leads to strict liability on the part of the airlines. This is alien to the German legislature, at least to such an extent, so the correcting judgement by the Court of Appeal is highly welcome.
The final ruling in this case is expected soon.
For further information on this topic please contact Stefan Weckenmann at Arnecke Sibeth Dabelstein by telephone (+49 69 97 98 85 0) or email ([email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.
Endnotes
(1) EJC, C-255/15, Mennens v Emirates and ECJ, C-601/17, Harms v Vueling Airlines SA.