We set out below a short summary of a recent Israeli District Court decision in the field of aviation law, which may be of interest to you. In a nutshell, the Israeli court approves an application to certify a NIS 30.5 million class action against an airline which did not refund taxes collected from no-show Customers.
On September 10, 2019, one of the District Courts in Israel approved a motion to certify a NIS 30.5 million class action against El-Al Israel Airlines.
The basis of the action is the allegation that El-Al does not refund no-show customers airport taxes collected from them at the time the flight ticket is purchased, despite the fact that El-Al does not transfer these taxes to the aviation authorities.
In its decision to approve the class action, the court identified two relevant types of airport taxes (a third type was mentioned but was not relevant to the decision):
- Fees with respect to passengers – These are fees with respect to its passengers for which an airline is liable to the airport authority and which are collected by the airline from the passengers, e.g. porter fees and incoming passenger services fees.
- Outbound passenger in international aviation fees – These are fees for which the passenger is liable to the airport authority, and are collected by the airline and transferred by it to the airport authority.
The court ruled that in both cases El-Al was obliged to refund the taxes collected from its customers.
As to the first type of tax (imposed on the airline), it was held that since El-Al, when selling its tickets, specified the cost of the ticket separately from the amount of the tax (as distinct from a single inclusive sum), the amount of the tax is held by the airline in trust and must be refunded to the passenger if not eventually transferred to the airport authority. (The effect of the court’s rationale may be to encourage airlines to charge passengers a single global amount (without reference to the tax), but there is some doubt in our mind as to the effectiveness of such action -SH).
As to the second type of tax, (imposed on the passenger but transferred to the authority by the airline), it was held that El-Al serves as a “conduit” in the tax collection system of the airport authority and, therefore, holds the funds in trust. If the flight is cancelled or a passenger does not show up for the flight (and therefore is not obliged to pay the fee), the funds are held in trust for the passenger and must be returned to him or her.
The court clarified that, as a matter of law, the passengers’ right to a refund of airport taxes arises even if they have not yet contacted El-Al with a request for such refund.
It was also clarified that El-Al is obliged to refund passengers who purchased the tickets through travel agencies and not directly from the airline. The reason is that once the flight ticket is issued, a direct contract is established between the airline and the passenger and, hence, the airline cannot ignore the passenger’s right to refund because the ticket was purchased through a third party.
An issue which remained undecided is whether or not El Al has an obligation to inform customers who have not boarded their flights, as to their right to refund of airport taxes. The court noted that there may be such a duty deriving from EL-AL’s status as a trustee of its passengers with respect to the taxes held, as well as by virtue of the obligation of good faith, which gives raise to obligations of disclosure in the relationship between a service provider and its customers, especially in view of the small costs involved in informing the passengers of their rights.
In addition to the class action approved against El Al (CA 15049-01-15), numerous similar cases are pending in Israeli courts against various airlines, includingDelta, United Airlines, Swiss Airlines, Turkish Airlines, Air France, EasyJet, Pegasus Airlines, Wizz Air , Austrian Airlines, Air Europa, Transavia Airlines and Israir Airlines.