Flight cancellation compensation: New European ruling requires companies to refund commissions

In a significant legal move that strengthens consumer protection in the air travel sector, the European Court of Justice , the highest judicial body in the European Union , issued a landmark ruling on Thursday, requiring airlines to compensate passengers for the full amount paid, including commissions charged by travel agents and intermediary platforms, in the event of flight cancellations.

This decision sets a legal precedent that closes loopholes that some companies were exploiting to evade paying full compensation, as the ruling stipulated that payment must be made even if the airline was unaware of the exact value of the commission added by the agent.

Case details and background

This ruling stems from a legal dispute in Austria, where passengers purchased tickets for a flight from Vienna to Lima with KLM using an online platform belonging to a travel agency. When the flight was canceled, the airline refunded the passengers the base fare but refused to reimburse them for the approximately €95 (around $110) service fee charged by the online platform.

The dispute reached the Supreme Court of Austria, which decided to suspend the case and request a binding legal opinion from the European Court of Justice to interpret the European regulations governing the rights of air passengers, specifically regarding the extent of the air carrier’s liability for additional charges imposed by third parties.

The legal context has evolved and gaps have been closed

This ruling represents a significant development compared to previous cases. In 2018, the European Court of Justice issued a similar ruling requiring companies to refund commissions, but stipulated that the airline must be "aware" of the commission amount. Many companies exploited this condition to refuse payment, claiming ignorance of the financial details between the passenger and the agent.

However, today's new ruling completely overturned this requirement, with the court affirming that "it does not matter whether the airline is aware of the exact amount of the commission." The court based its decision on the principle that the commission is an "indispensable" part of the total ticket cost, and as long as the airline has authorized the agent to issue and sell tickets on its behalf, it bears full responsibility for the amounts paid by the passenger.

Importance and expected impact on the travel sector

This decision is of paramount importance at both the European and international levels due to several factors:

• Strengthening digital consumer rights: With the increasing reliance on online booking platforms (OTAs) and travel applications, this provision ensures that travelers' rights are not lost in the labyrinth of shared liability between the air carrier and the intermediary.
• Unifying compensation standards: The ruling imposes a unified standard that prevents unequal treatment of travelers based on how they booked their tickets, whether the booking was direct or through a third party.
• Pressure on airlines: This decision will push airlines to review their contracts with travel agents to ensure transparency in pricing, as they can no longer evade financial responsibility towards passengers in cases of cancellation.

This move is part of a series of measures taken by the European Union to ensure the rights of travelers, especially in light of the turmoil in the global aviation sector, making Europe one of the strictest regions in enforcing laws protecting air travelers.