A recent ruling of the Israeli District Court clarifies that rerouting passengers to an alternative flight departing within less than eight hours does not constitute a “cancelled flight” under Israel’s Aviation Services Law — and shields carriers from disproportionate damages claims.

By Eyal Doron with S. Horowitz, Israel

A dispute between two passengers and Israeli charter carrier Israir Airlines recently made its way from Jerusalem’s Small Claims Court to the Jerusalem District Court on appeal (LSC 32334-04-26). The case turned on a deceptively simple question: when an airline cancels a flight but promptly offers an alternative departing just 5.5 hours later, does this amount to a “cancelled flight” triggering statutory compensation? The District Court’s answer — a resounding “no” — carries significant practical implications for carriers operating to and from Israel.

Facts

On August 15, 2025, two passengers purchased tickets through a travel agency for Israir flight 723 from Tel Aviv to Budapest, scheduled to depart on September 2, 2025 at 11:15. On September 1, 2025 — one day before departure — Israir notified the passengers that flight 723 was cancelled due to operational constraints, and that they had been reassigned to flight 727, departing the same day at 16:45, a delay of 5.5 hours. The passengers declined the alternative flight and, through their travel agent, requested a full refund. Israir cancelled the booking and issued a credit to the travel agency on September 3, 2025. The passengers subsequently filed a small claims action seeking approximately NIS 29,000 in compensation, including statutory damages and exemplary damages under Israel’s Aviation Services (Compensation and Assistance for Flight Cancellation or Change of Conditions) Law, 5772-2012 (the “Aviation Services Law”).

The Legal Question

The core issue was whether the reassignment of passengers from a cancelled flight to an alternative flight departing 5.5 hours later constitutes a “cancelled flight” as defined in Section 1 of the Aviation Services Law. Under the statute, a “cancelled flight” means either (1) a flight that did not take place, or (2) a flight that departed with a delay of at least eight hours from the time stated on the ticket. Crucially, the law specifies that a mere change in flight number, by itself, shall not be deemed a cancellation.

The Rulings

The Small Claims Court sided with the passengers, holding that flight 723 was cancelled outright and that the alternative flight was a separate, pre-existing service rather than a continuation of the original booking. It found multiple violations of the Aviation Services Law, including failure to refund the fare within the statutory 21-day period and failure to pay statutory compensation. The court awarded the passengers a total of NIS 16,070.5, including NIS 10,000 in exemplary damages, plus NIS 5,000 in costs payable to the State Treasury.

On appeal, the Jerusalem District Court reversed the judgment in its entirety. The court held that where passengers are offered an alternative flight departing within less than eight hours, the situation does not meet the statutory definition of a “cancelled flight”. The court reasoned that this conclusion follows both from the statutory language — which excludes a mere change of flight number from the definition of cancellation — and from the purpose of the compensation scheme, which is designed to protect passengers who are effectively denied the ability to fly at or near their scheduled time.

Rationale

The District Court emphasized that the Aviation Services Law sets a clear eight-hour threshold: a flight departing with a delay below that benchmark simply does not qualify as a cancelled flight for purposes of statutory compensation. The court further noted that the overall award of approximately NIS 21,000 — nearly eighteen times the ticket price of NIS 1,190 — was neither reasonable nor proportionate. It also criticized the lower court’s imposition of NIS 5,000 in costs to the State Treasury, observing that such sanctions are reserved for extreme and exceptional circumstances that were not present here.

Key Takeaways

This ruling offers meaningful guidance for airlines operating flights to and from Israel. First, the eight-hour threshold in the Aviation Services Law is a bright-line rule: rerouting passengers to a substitute flight departing within that window will generally not be treated as a cancellation triggering statutory compensation. Second, Israeli appellate courts are prepared to intervene where small claims tribunals impose damages that are grossly disproportionate to the value of the underlying transaction. Third, carriers should nonetheless ensure that refunds are processed promptly and directly to passengers — the lower court’s criticism of Israir’s failure to respond to multiple passenger inquiries, while ultimately overtaken by the appellate reversal, remains a cautionary note on customer-facing compliance practices. Airlines would be well advised to document every step of the rebooking and refund process to defend against similar claims.

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