Agency fees should not be reimbursed as a flight ticket by the airline – long-needed and industry-appropriate correction by the Düsseldorf Court of Appeal – Commentary
Düsseldorf District Court
Düsseldorf Court of Appeal
The covid-19 pandemic has posed various problems for airlines regarding the interpretation of EC Regulation 261/2004 and the case law of the Court of Justice of the European Communities (ECJ). Airlines have been inundated with requests for ticket refunds, while government restrictions have forced them to send employees home or furlough them. Millions of transport contracts had to be cancelled.
Airlines have also encountered difficulties in situations involving travel agencies. Travel agencies add their own fees (i.e. agency fees) to the cost of tickets. This fee covers agency fees and may also include other special services. Often it is not clear to passengers that these charges are extra and have nothing to do with the contract of carriage.
In this respect, the question arises as to how to interpret the concept of “ticket” costs in the light of the case law of the CJEU.(1) The CJEU had ruled that an agency commission had to be reimbursed if it was responsible for the knowledge and approval of the airline, a “provision payment”.
This legal issue has now been discussed in detail in the courts of Düsseldorf.
The International Air Transport Association (IATA) is an association of over 250 airlines operating worldwide and is the primary representative of airlines in the industry. Leaving IATA is therefore not an option for the majority of airlines.
IATA’s mission is to simplify the sale, issuance and payment of airline tickets for airlines. To this end, it grants IATA agencies the power to directly issue airline tickets for IATA-affiliated airlines. Contracts entered into by IATA bind its members. The subsequent settlement of air tickets issued by IATA agencies is carried out within the framework of the Billing and Settlement Plan.
There are currently over 2,000 IATA offices in Germany. Each IATA agency is authorized to issue and sell IATA-affiliated airline tickets in accordance with the fare conditions set by IATA and to add an individually determined service charge to the net fare.
Since 2004, many airlines have changed their pricing model to a “net price model” (ie a commission-free system). Prior to 2004, IATA agencies acted as commercial agents of the airlines under Sections 84 et seq. of the German Commercial Code (HGB) and acquired a commission claim against the airline when selling air tickets . Due to the switch to the net price model, the IATA agencies lost their commercial agent status. Since then, therefore, service fees have been charged for brokerage flights with bookers.
The claimant booked a flight through an online travel agency (an IATA approved ticket consolidator). The flight was canceled due to the covid-19 pandemic. Under the net price model, the passenger sued and demanded full reimbursement of the ticket price, including agency fees. The defendant refunded the ticket price, but argued that the agent’s service fee was not part of the airfare.
Düsseldorf District Court
According to the Düsseldorf District Court(2), Article 8 of EC Regulation 261/2004 stipulates that the full price of the ticket must be reimbursed. Agency commission should only be paid if it was set without the knowledge and consent of the air carrier.
The CJEU ruled in this regard that a balance had to be found between the high level of passenger protection, on the one hand, and the interests of the airlines, on the other. In that regard, it must be assumed that a commission charged by the travel agent when a passenger purchases a ticket must, in principle, be considered part of the price of the ticket.
However, there must be certain limits taking into account the interests of the airlines concerned. The definition of the term “ticket” in article 2 point f) of EC regulation 261/2004 stipulates that the various elements of a ticket, even if it is not issued by the air carrier itself, must any event be approved by the air carrier and therefore cannot be determined without its knowledge. Therefore, the difference between the amount paid by the passenger and the amount received by the air carrier, corresponding to the commission of a company which acted as intermediary between them, is in principle covered by the passenger’s right to reimbursement. Exceptionally, this is not the case if the commission was set without the knowledge of the air carrier.
The Court interpreted the judgment of the CJEU in the form of a rule-exception relationship according to which the commissions charged by intermediaries are in principle covered by the passenger’s right to reimbursement, unless the decision has been taken without the knowledge of the air carrier. In a mass activity such as the sale of air travel, the Court held that it was not important that the airline approved or knew the specific amount in each individual case, or that it paid itself commissions to the intermediary travel portal. It only matters that the airline generally knows that a certain agent charges commissions. Air carrier’s knowledge that such commission is incurred indicates air carrier’s authorization.
As a result, the passenger’s claim for full compensation for the paid ticket price was granted, including the flight booking fee (i.e. agency fee). The Court held 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. However, if the air carrier authorized reservations in different ways and knew that commissions were generally charged for such reservations, claims for reimbursement under Article 8(1)(a) of Regulation (EC) No 261/2004 would generally also include the commission incurred.
Düsseldorf Court of Appeal
The decision was appealed by the defendant. The defendant argued that the assertion that a contractual relationship existed between the travel agency and the airline in relation to the contested booking was erroneous as it failed to take into account the actual economic circumstances.
The Düsseldorf Court of Appeal indicated, in its judgment of March 24, 2022(3), that it considered the appeal to be well founded. The following considerations were decisive in this regard.
The invoicing of a commission by an IATA agency had also taken place “without the knowledge” or “without the authorization” of the airline within the meaning of the case law of the ECJ. The airline had sold tickets to the agency and knew that the agency usually added a commission in the form of a service charge to the price of the ticket itself. However, she did not know whether and for what amount such a fee had been charged in the specific case; therefore, the service charge was not part of the airfare and could not be subsumed under the legal terms of “knowledge” and “consent”. Otherwise, the airlines would run an incalculable financial risk.
The Court further found that the statements of the ECJ supported this legal opinion, according to which there is an exception to the fundamental obligation of reimbursement if the commission was determined without the knowledge of the airline. Further, the airfare, including commission, could not be said to have been approved by the airline or fixed to its knowledge if the airline had only known that some sort of commission would be charged by the airline. agency but had not been aware of the specific amount.
If airlines (especially with regard to the many IATA agencies) were obliged to always reimburse the service charge to the passenger in the event of a flight cancellation, this would lead to a significant financial burden. This burden would result in an unfair balance between the interests of passengers and those of the airlines. It should also be clear to the average passenger that when a flight is booked through an agency portal, it is of course not free. Therefore, agency fees should be claimed from the travel agency itself and should not be borne by the air carrier.
Even a high level of consumer protection does not justify the reimbursement of the air ticket including a commission levied without the knowledge of the airline. The obligation of the airline to reimburse the price of the net air ticket plus the commission should therefore be limited to cases in which the travel agency is still acting as commercial agent of the airline under Articles 84 et seq. of the HGB and is entitled to a commission claim against the airline under Section 87 of the HGB.
The comments of the Court of Appeal in this 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 appreciate the fact that an increased level of consumer protection does not always prevail. To the extent that judges are willing to deal with a case and apply dogmatic principles, fair decisions consistent with applicable law are rendered. District court case law, on the other hand, leads to strict liability of airlines. This is foreign to the German legislator, at least to such an extent, so that the corrective judgment of the Court of Appeal is very welcome.
The final decision in this case is expected soon.
For more information on this, please contact Stefan Weckenmann at Arnecke Sibeth Dabelstein by phone (+49 69 97 98 85 0) or by e-mail ([email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.
(1) ECJ, C-255/15, Mennens vs Emirates and CJEU, C-601/17, Harms v Vueling Airlines S.A..
(2) Düsseldorf District Court, 230 C 406/20.
(3) Düsseldorf Court of Appeal, 22 S 555/21.