Sarah Joanna Haas Ulrich Steppler December 21 2022 Key developments in German airline and aviation industry in 2022 Arnecke Sibeth Dabelstein | Aviation - Germany Sarah Joanna Haas, Ulrich Steppler Aviation JurisprudenceLegislative and regulatory updates2023 outlookJurisprudenceIn 2022, the German courts have been especially busy with cases involving passenger claims and the implementation of judgments rendered by the Court of Justice of the European Union (CJEU). Passenger refunds relating to the covid-19 pandemic have reached the courts of appeal and have led to various interesting decisions.Extension of scope of applicability of EU Flight Compensation Regulation The German courts are happily applying the judgment of 7 April 2022,(1) in which the CJEU decided that a connecting flight falls within the scope of the EU Flight Compensation Regulation if the journey started from an airport located in a member state. German claim agencies in particular have been taking advantage of this decision to pursue compensation payments for flight delays that occurred outside of the European Union.Failure of refuelling system of airport enables extraordinary circumstance defenceWhile the April 2022 decision brought more claims to the German courts, the CJEU's decision in C-308/21(2) gave German airlines a secure answer to the question of how to classify circumstances that lie outside of their scope and how to defend them. In this case, relating to the failure of a refuelling system, the CJEU decided that if the fuel system of an airport is managed by the airport or a third party, the general failure of the fuel supply is to be considered as a circumstance with external cause with regard to the air carrier, which is thus not controllable by such air carrier.This judgment has been especially welcomed in light of claims arising as a result of a lack of staff, particularly security staff, at German airports in Summer 2022. As these problems concern the general operations of an airport, the CJEU's judgment can be invoked in such cases and passengers' claims can be dismissed. This judgment will also be welcomed by the airline industry in defending disruptions resulting from ground handlers or security employees being on strike.Agency fees are not part of air fare and no reimbursement is due by airlineMore than two years after the covid-19 pandemic, which led to millions of reimbursements, several courts of appeal, including a higher regional court, have clarified that agency or service fees are not part of the air fare and therefore need not be reimbursed by the refunding air carrier (for further details, see "Agency fees are not to be reimbursed as airfare by airline – long-needed, industry-adapted correction by Düsseldorf Court of Appeal").Düsseldorf Court of Appeal, Munich Higher Regional Court and Hamburg Court of AppealIn these cases,(3) the different claimants booked tickets via online travel agents that added their own service fee to the ticket price without informing the passengers accordingly. Instead, they made the passengers believe that the air fare was higher than it actually was.After the flights were cancelled, the airline refunded the real ticket price, without the added service fee. The German local courts had decided that a "general knowledge" that agents sometimes add their own service fees to ticket prices was sufficient to grant claims against airlines for the refund of the service fee as well.The higher German courts have now decided that an airline must know and approve the exact amount of the service fee in advance.Erding Local CourtAnother important development in cases relating to reimbursements is that the courts have finally started to understand how the International Air Transport Association (IATA) Billing and Settlement Plan (BSP) system works – in particular, that this payment method (between passenger, travel agent and airline) only works with a mandate and authority to receive money for the agent on behalf of the passenger.In this case in front of the Erding Local Court,(4) the passengers booked a flight through an IATA travel agent. The payment was processed via the BSP link procedure. The flights were cancelled due to the covid-19 pandemic and the passengers demanded a refund of the ticket price. The airline arranged the refund to the original method of payment (ie, the bank account of the travel agent). In the travel agent's general terms and conditions, a mandate to receive money was regulated. The airfare had been refunded to the travel agent even before the lawsuit was filed, but it had not been forwarded to the passenger.The lawsuit was dismissed because the defendant was allowed to use the initial payment method to discharge the debt on the basis of the mandate to receive money. Such an authority to collect and receive money is often hidden in the terms and conditions of a travel agent. Defending these cases still requires an extra effort, but this decision indicates that air carriers may prevail.Legislative and regulatory updatesNew consumer protection regimeThe requirements of the EU Enforcement and Modernisation Directive have been implemented into German law. As a result, penalties may now be imposed for infringements of German provisions that adopt:the EU Unfair Terms in Consumer Contracts Directive; andthe EU Consumer Rights Directive.Such penalties will only be enforceable in a coordinated action, according to the EU Consumer Protection Cooperation Regulation.Decision on automated reimbursement of claims under EU Flight Compensation RegulationDuring their respective conferences, the German state secretaries for consumer protection and justice resolved to increase pressure on air carriers to make use of legal tech solutions to speed up refund processes and the pay-out of justified compensation claims.The secretaries seem to have ignored the passenger's choice under article 8 of the EU Flight Compensation Regulation. Full automation without the passenger's involvement and prior consent would be against the law.Bilateral ASA between Germany and AngolaGermany has concluded the draft of the Act to enable the bilateral agreement from 7 February 2020 between Germany and Angola to enter into force. The Act was published on 24 November 2022 and shall run through the legislative process in 2023. The air service agreement (ASA) leans on other ASAs that Germany has concluded in the past and it is the first one with Angola.Amendment of bilateral service agreement between Germany and Hong Kong The amendment was signed in Hong Kong on 8 August 2019 and the act of implementation will enter into force after the legislative procedure has been concluded. The amendment takes into account the changed regulatory environment in Hong Kong.Tornado weapon system will be followed by F-35 aircraft On 14 March 2022, the German Defence Ministry decided to initiate the procurement of the F-35 aircraft type for the nuclear sharing task via a so-called "foreign military sales" procedure in the United States. The role of electronic warfare is to be secured through the further development of the Eurofighter weapon system.Russia-Ukraine conflictThe goal of Germany and its allies and partners remains the same: all three treaties – the Open Skies Treaty, the Conventional Armed Forces Treaty and the Vienna Document – should work together to optimise arms control. In this respect, Germany certified a new Open Skies aircraft, an A 319, on 4 November 2022.2023 outlook Will national enforcement bodies become the new judges in passenger claims?Following the CJEU's decision in C-597/20,(5) it remains to be seen whether there will be any regulatory development regarding the possibility of the German national enforcement body for the EU Flight Compensation Regulation to decide upon passenger claims as a preceding authority before a court case.In the case, the CJEU decided that member states may authorise national authorities to force an air carrier to pay compensation to passengers. However, the passenger and the air carrier must have the possibility of a judicial remedy. So far, no plans to adopt the regulatory possibility have been expressed by the German government.Sustainability remains top priorityThe sustainability of air travel remains one of the industry's top priorities and will continue to dominate in 2023. Germany participates in the EU Emissions Trading Scheme and in the International Civil Aviation Organisation's Carbon Offsetting and Reduction Scheme for International Aviation. The use of sustainable aviation fuel is expected to increase due to pressure from the EU Parliament and national governments.There were no developments regarding the prohibition of domestic flights in 2022, and the German government has not yet included the topic in its 2023 agenda. However, the German government has announced that it will not exclude the further development of the aviation industry in Germany in its programme to make sustainable tourism competitive again in Germany.(6)Relaxation of ownership and controlThe German reaction to the topic of the liberalisation of ownership and control clause in the EU Airline Operations Regulation may vary in 2023, after the recent corruption investigation in the European Commission. Overall, the German Ministry of Transport is in favour of liberalisation, especially to help the industry recover more quickly after the covid-19 pandemic.For further information on this topic please contact Sarah Joanna Haas or Ulrich Steppler at Arnecke Sibeth Dabelstein by telephone (+49 403 177 9756) or email ([email protected] or [email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.Endnotes(1) CJEU C-561/20, Q, R, S v United Airlines Inc, judgment from 7 April 2022, ECLI:EU:C:2022:266.(2) CJEU C-308/20, KU aO v SATA International – Azores Airlines SA, judgment from 7 July 2022, ECLI:EU:C:2022:533.(3) See:Düsseldorf Court of Appeal, Ref 22 S 555/21, order from 24 March 2022 and Düsseldorf Court of Appeal, Ref 22 S 475/21, judgment from 8 April 2022;Munich Higher Regional Court, Ref 20 U 885/21, judgment from 20 July 2022; andHamburg Court of Appeal, Ref 309 S 22/22, order from 29 July 2022.(4) Erding Local Court, Ref 104 C 2208/21, judgment from 5 May 2022.(5) CJEU C-597/20, Polskie Linie Lotnicze "LOT" SA v Budapest Főváros Kormányhivatala, judgment from 29 September 2022, ECLI:EU:C:2022:735.(6) "Nachhaltigen Tourismus wettbewerbsfähig gestalten", Nationale Tourismusstrategie – Arbeitsprogramm der Bundesregierung.