European Court of Justice: Airlines are obligated to refund agents' commissions upon cancellation
In a legal move that strengthens consumer protection in the 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 closes a legal loophole that some airlines were exploiting to avoid 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.
Details of the case against KLM Royal Dutch Airlines
The reasons for this decision stem from a legal dispute in Austria, where passengers booked flights from Vienna to Lima on KLM Royal Dutch Airlines using an online travel platform. When the flight was canceled, the airline agreed to refund the passengers the base fare but refused to refund approximately €95 (around $110) representing the service fee charged by the intermediary platform.
The dispute reached the Supreme Court of Austria, which in turn decided to refer the case to the European Court of Justice in Luxembourg to obtain a binding interpretation of European passenger rights laws, specifically regarding the extent of the air carrier’s liability for additional charges imposed by third parties.
Developments in the legal interpretation of passenger rights
This ruling represents a significant shift from a 2018 precedent, in which the court ruled that airlines were only obligated to refund commissions if they were "aware" of their value. However, Thursday's ruling overturned this requirement, asserting that it is irrelevant whether the company knows the exact amount or not.
The judges based their decision on a legal principle that considers the commission an “integral and indispensable” part of the final ticket price paid by the consumer. The court explained that as long as the airline has granted the agent or online platform the authority to issue and sell tickets on its behalf, it bears full responsibility for the financial components of that ticket.
Economic importance and expected impact
This decision is of paramount importance to the travel and tourism market, especially with the increasing reliance on online travel agencies (OTAs) and price comparisons. In practical terms, this ruling provides a financial safety net for travelers who prefer booking through intermediaries to secure better deals, guaranteeing them a full refund without getting caught in a blame game between the airline and the travel agent.
On the economic front for airlines, this ruling may prompt carriers to revise their contracts with travel agents to ensure transparency in commissions, or to put in place technical mechanisms that allow them to know the final price paid by the customer accurately in order to avoid unforeseen losses when they have to refund tickets.
The European Union is a world leader in the field of air passenger rights, particularly through Regulation (EC) No. 261/2004, which guarantees financial compensation and care for passengers in cases of cancellation, long delay, or denial of boarding. Today’s ruling reinforces these rights and prevents their erosion in the face of the complexities of modern booking systems.
