Israeli Supreme Court: Airlines Must Offer Refund or Alternative Flight – or Face Punitive Damages
A landmark ruling clarifies that airlines must actively offer cancelled-flight passengers a choice between a refund and an alternative flight – and face exemplary damages if they don’t
By Eyal Doron, S. Horowitz, Israel
On June 4, 2026, the Israeli Supreme Court held (LCA 17685-01-26) that airlines bear an affirmative obligation to offer passengers whose flights have been cancelled a choice between a full refund and an alternative flight. Failure to do so constitutes a denial of statutory benefits under Israel’s Aviation Services Law, exposing carriers to exemplary (punitive) damages – though courts should exercise restraint and reserve such damages for particularly egregious conduct or cases involving additional statutory violations.
The Facts
The case arose from the cancellation of flight IZ 776, scheduled to depart Grenoble, France, for Tel Aviv on January 29, 2022. The flight was postponed to the following day with no advance notice to passengers. Following the cancellation, Arkia – the flight’s organizer and operator – provided only partial support services (food, beverages, and accommodation) and, critically, failed to offer passengers any choice between a ticket refund and an alternative flight.
Ninety-seven passengers filed claims. The Magistrate Court awarded each passenger statutory compensation of NIS 2,120 plus exemplary damages. The District Court partially accepted Arkia’s appeal, reducing the exemplary damages by NIS 1,500 per passenger but affirming that the failure to offer a choice independently justifies exemplary damages. Arkia sought leave to appeal to the Supreme Court, arguing that a conflicting District Court decision – Arkia v. Kukia (2025) – held that no exemplary damages could be awarded for this type of violation absent proof that the passenger would have chosen differently.
The Legal Questions
The Supreme Court identified two sub-questions:
- Does an airline bear an affirmative duty to inform a passenger whose flight was cancelled of his right to choose between a refund and an alternative flight?
- If so, can exemplary damages be awarded for breach of that duty?
The Court’s Reasoning
On the duty to offer a choice: Writing for a unanimous panel, Justice Alex Stein held that Section 6(b) of the Aviation Services Law – which refers to an operator that “offered the passenger an alternative flight… and the passenger accepted” – clearly presupposes an active obligation to present the choice. A construction requiring passengers to affirmatively demand their rights would hollow out the statute’s language and contradict its consumer-protection purpose.
The Court reinforced this reading by invoking the presumption of conformity with international norms, noting that Israel’s Aviation Services Law closely tracks EU Regulation 261/2004, which explicitly mandates that “passengers shall be offered the choice between” reimbursement and re-routing.
On exemplary damages: The Court rejected the position adopted in Kukia, which conditioned exemplary damages on proof that the passenger would have chosen differently had the choice been offered. Justice Stein reasoned that the right to choose is inherent in the statutory “benefits” package; denying that choice is ipso facto a denial of benefits under Section 6, triggering the court’s authority to award exemplary damages under Section 11(a)(1)(b). The harm, the Court emphasized, lies in the violation of the passenger’s autonomy – being forced into an outcome not of their choosing.
On restraint: Nevertheless, the Court cautioned that exemplary damages for breach of the duty to inform should be reserved for particularly serious cases – where the carrier’s conduct was especially egregious or where the failure to offer a choice was accompanied by additional statutory violations. The Court noted that excessive use of exemplary damages would ultimately raise ticket prices, harming consumers.
Outcome
The Supreme Court granted leave to appeal, heard the appeal on its merits, and dismissed it. The exemplary damages awarded by the lower courts were upheld, and Arkia was ordered to pay NIS 15,000 in costs.
Practical Implications for Airlines
Proactive disclosure is mandatory. Airlines operating flights to or from Israel must actively offer passengers a choice between reimbursement and re-routing upon cancellation – waiting for passengers to ask is insufficient and constitutes a statutory breach.
Exemplary damages exposure. Failure to offer the choice can trigger exemplary damages of up to NIS 12,240 (approximately €3,668 or $4262) per passenger, without proof of actual loss.
Aggravating factors matter. Courts will look at whether the failure to inform was accompanied by other breaches (e.g., inadequate support services) when calibrating the amount of exemplary damages.
Alignment with EU standards. The Court explicitly relied on EU Regulation 261/2004, signaling that Israeli courts will interpret domestic aviation-consumer law in harmony with European norms.