On March 20 2018 the Federal Supreme Court issued a decision (X ZR 25/17) regarding the right to a refund of the ticket price following the cancellation of non-refundable tariffs. The full reasoning of the verdict has not yet been published; however, the main arguments have been summarised.

Facts

The plaintiff claimed a refund of the full ticket price after terminating his contract of carriage.

In November 2014 the plaintiff booked return flights for May 2015 from Hamburg to Frankfurt, with a connecting flight to Miami and Los Angeles, for the total price of €2,766.32. The German leg of the flight was booked for economy class and the intercontinental leg was booked for premium economy. The defendant's conditions entailed that:

  • cancellation of the tickets was not possible;
  • unused tax was refundable; and
  • the international and national surcharge was not refundable.

The plaintiff cancelled his flight on March 20 2015 due to illness and claimed a refund of the ticket price. The defendant refunded the tax to the amount of €133.56 for each ticket. The plaintiff since claimed a refund of the remaining difference of €1,249.60 for each ticket, as well as pre-trial lawyer fees.

The local court dismissed the claim and the plaintiff's appeal was unsuccessful.

Decision

The appeal to the senate responsible for travel-related questions was not justified. The regional court justly denied the plaintiff's right to cancel. Contrary to the defendant's belief, the regulations regarding contracts for work apply to contracts of carriage. A passenger can thus terminate his or her contract at any time according to Section 649 of the Code of Civil Procedure (Section 648 as of January 1 2018). However, in this case, the regulation was waived by the defendant's conditions of carriage.

This waiver of the right to terminate (cancel) was not made in bad faith and did not disadvantage the passenger in an unreasonable manner. Further, it was compatible with the basic principles of the regulations regarding contracts for work. The right to terminate according to Section 649 is not decisive in relation to mass transportation. The termination of a contract of work by a customer results in the omission of the contractor's performance obligation. This should not leave the contractor in a worse position than if it had performed its duties; therefore, it maintains the claim for payment. Nonetheless, the contractor must consider expenses saved in such circumstances, as it can employ its workforce in another capacity. Saved expenses exceeding certain charges are unusual for air carriers, as a carrier's costs are mainly fixed. These costs do not change when a passenger cancel his or her flight, as the flight is still expected to operate. Any other use of the carrier's workforce would occur only if the flight was fully booked and another passenger would have been rejected if the original passenger had not cancelled. It is unlikely that such a scenario would lead to any chargeable gain, especially in cases where the number of passengers who have terminated their contracts exceeds the number of passengers who could not have been transported without the cancellations. A cancelling passenger would not know whether he or she had a justified refund claim or whether he or she would have to pay the full ticket price despite the termination. If the passenger did not wish to pay the higher price (which typically includes a flexible booking with a refundable ticket), the passenger could purchase insurance to cover illness, as in the present case. Considering these facts, the waiver of a cancellation right and a simplified contract execution does not entail an unreasonable disadvantage for the passenger.

Comment

The decision overrules several regional and local courts that have adopted the practice of granting refund claims even in non-refundable tariffs. It highlights that a passenger can waive his or her right to cancel a ticket so long as that passenger makes an informed decision. This secures an air carrier's flexibility in offering a wide range of different ticket prices (depending on the cancellation and refund policy) and ensures lively competition.

Air carriers must bear in mind that conditions of carriage and booking websites must be clear on which refund policy is included in the respective tariff. It is not known how high the bar is set for customer protection, as the reasoning of the verdict has not yet been published. However, the verdict has already provided a strong incentive to review conditions of carriage and booking processes to ensure that they comply with the Supreme Court's guidelines in order to save air carriers from high refund claims.

For further information on this topic please contact Sophia Iwantscheff at Arnecke Sibeth by telephone (+49 69 97 98 85 0) or email (siwantscheff@arneckesibeth.com). The Arnecke Sibeth website can be accessed at www.arneckesibeth.com.

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