Airlines want retroactive exemption on compensation claims

Airlines want the Israeli government to declare a 'special situation' so they need not pay passengers accommodation and other expenses, when stranded abroad.

Some Israeli and foreign airlines and tour operators have asked Minister of Transport Miri Regev, Minister of Finance Bezalel Smotrich, and Minister of Economy Nir Barkat, to exempt them from the need to compensate passengers whose flights were canceled or changed due to Israel's operation against Iran. The airlines insist that the exceptional circumstances during the fighting does not allow them to meet the requirements of Israel's Aviation Services Law, and they are asking the government to intervene and ease the situation.

The main demand is a retroactive exemption from the obligation to provide assistance services to passengers such as financing accommodation, food, communications and transport, as well as offering an alternative flight, in cases where this was not possible. The companies are asking that they only be required to refund passengers the fare of canceled tickets, and claim that rescue flights approved by the state should be considered alternative flights. If the exemption is not granted, the companies demand that the state compensate them for the expenses they incurred during this period, including empty flights, loss of revenue, and compensation claims from passengers.

Alternatively, the companies propose activating Section 9A of the law, an emergency mechanism added after October 7, which allows the Minister of Transport to declare, with the approval of the Knesset economy committee, a "special situation" in aviation. Such a declaration allows for the temporary suspension of some of the passengers' consumer rights, including restricting accommodation to two nights, shortening advance notice of flight cancellation from 14 days to 3 days, and exemption from payment of financial compensation. In such a case, the companies demand that the state bear the cost of the assistance services. This solution, according to the demand, should also apply retroactively from June 13.

The International Air Transport Association (IATA) representative in Israel also appealed to Miri Regev, with an urgent request to declare a retroactive exemption from the obligations imposed on airlines under the Aviation Services Law for flights canceled or changed from June 13, 2025 due to the Iran operation. If an exemption is not granted, IATA requests that the state compensate the companies for these costs. The request is being made on behalf of all IATA's member airlines, both Israeli and foreign, saying this was an exceptional security situation justifying regulatory flexibility.

As of now, a 'special situation' has not been declared, and the companies are still required to comply with the full provisions of the law, including providing an alternative flight and accommodation services without a time limit, even when they did not have the option of operating flights to Israel.

RELATED ARTICLES

Thousands of passengers are already suing the airlines

About a week ago, the Consumer Protection Authority sent a letter to the Israeli airlines, in which it addressed claims that arose during the Iran operation, when passengers whose flights to Israel were canceled only received an offer of a refund, without being given the opportunity to choose an alternative ticket, as required by law. According to the Consumer Protection Authority, this is a consumer violation. Real-time fares were significantly higher than the amount passengers were refunded, which led to financial loss and in many instances leaving them unable to return home. The Consumer Protection Authority stressed that the law requires offering passengers a choice between a refund and an alternative flight, and the decision in this matter should be in the hands of the consumer, not the airline.

The practice is not limited to Israeli airlines. "In recent weeks, Israeli and foreign airlines have denied passengers rights without telling them," explains Goni Letzter, founder and owner of Righty, an online platform that allows passengers whose flights have been canceled to exercise their rights without having to do so directly with the airlines. In recent weeks, Righty has received requests from over 1,000 passengers, and according to estimates, the numbers are expected to increase significantly as more passengers who were stranded abroad return to Israel. "There is currently regulatory uncertainty, and airlines are pinning their hopes on a possible change in the law, which may allow them to avoid payment or assistance in the future."

According to the Aviation Services Law, there are three main rights for passengers: statutory compensation, an alternative flight ticket or refund, and assistance services (accommodation, food, communication). Since the closure of airspace, the statutory financial compensation obligation is not valid (since the flight cancellation was not under its control), but the right to an alternative flight ticket and refund remains in effect. Passengers are forced to spend significant amounts on accommodation, food, and communication, and there are also Israelis who are unable to return to Israel because they are not offered an alternative flight. In many cases, airlines did not even notify passengers about this or provide them with an alternative ticket.

Letzter says, "Although the companies can and are able to offer alternative flights or flights to nearby destinations, in most cases they simply did not do so. In only a few cases were passengers proactively offered a hotel voucher, but even then, no one informed the passengers that this was their right. In practice, many passengers paid and are still paying large sums out of pocket. The law, in its current form, does not limit the scope of assistance either in time or in money. Unless the Minister of Transport declares a "special situation" according to the amendment to the Aviation Services Law from last February - then the rights are reduced: passengers receive assistance services with a limit of only two nights. The amendment made in the past was proportionate to the circumstances, and it is hoped that this will also be the case in the current plan."

"Flight organizers (travel agents and travel agencies) also have full responsibility towards their customers. In practice, many agencies have abandoned their customers. There have been cases of organized trips where the tour guide simply abandoned the passengers at the end of the trip, without assistance or response. Some agencies have switched to "emergency" mode and started offering paid rescue flights. There are also those that have charged illegal handling fees, in complete violation of the law. According to the law, passengers are entitled to a full refund, and the agent is obliged to assist them if they request it."

Will European regulation protect Israeli passengers?

The Aviation Services Law was enacted as part of an Israeli commitment as part of the EU Open Skies agreement. Israeli law is similar in many ways to European regulation EC 261/04. In Europe, there is no limit on assistance services even in extreme events. When a flight departs from the EU, or is operated by a company that has signed the agreement, it is subject to dual regulation, both European and Israeli, and the Israeli passenger also has the option of suing in Europe. The absurdity is that Israeli passengers benefit more from the protection of European regulation than from that of Israel itself.

Letzter believes that despite the magnitude of the aviation crisis in Israel, this is not a unique or unprecedented case in its scope. "There is an attempt to depict the current situation as an unprecedented aviation crisis, but from a global perspective this is not unusual. The CrowdStrike incident, for example, affected 4% of global aviation, but passenger rights were not affected. Hurricane Debbie in Florida, cybersecurity attacks, strikes and fires, all caused many cancellations worldwide, but did not lead to a change in regulation. No country or airline has denied basic service or prevented fair compensation from passengers, even when it was a case of force majeure or unforeseen circumstances. Now, Israel is considering another amendment to the law, even though companies, especially Israeli ones, still benefit from the situation and do not bear the costs. If it is amended, it will create a situation in which Israelis will be better off suing airlines in European courts."

For example, the McDonagh v. Ryanair ruling issued by the European Court of Justice in 2013 states that even when a flight is canceled due to extraordinary external circumstances beyond the airline's control, such as a volcanic eruption, the company is still required to provide passengers with all the assistance services stipulated by law: accommodation, food, transport, etc. The court stressed that the duty to provide assistance remains in effect indefinitely, even when there is a long waiting period, as the passengers are in a state of helplessness and have no other way to return home. The ruling constitutes an important precedent in Europe, and it strengthens the protection of passengers' rights in times of crisis.

Published by Globes, Israel business news - en.globes.co.il - on July 1, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.