THE BOTTOM LINE
- Risk of Double Payment: Refunding an intermediary like a travel agent for a cancelled service does not discharge an airline’s obligation to the passenger if the agent becomes insolvent. The airline may be forced to pay a second time, directly to the customer.
- Direct Duty to Passenger: Under EU Regulation 261/2004, the legal duty to refund for cancelled flights is owed directly to the passenger. Payment to an agent is only valid if the passenger has given explicit authorization for the agent to receive the funds.
- Intermediary Insolvency Risk: This ruling places the financial risk of a travel agent’s bankruptcy squarely on the airline, not the consumer. Businesses using intermediary sales channels must reconsider their refund processes.
THE DETAILS
In a case with significant implications for the travel industry, the District Court of North Holland has ordered Turkish Airlines to refund passengers for cancelled flights, even though the airline had already paid the same refund to the passengers’ travel agent. The agent, D-Reizen, went bankrupt before passing the money on to the customers. The passengers, represented by their legal insurer ARAG, successfully sued the airline for direct payment, forcing the carrier to effectively pay twice for the same cancelled tickets.
The court’s decision rested on two key legal arguments. For the outbound flight from Amsterdam, it applied the EU’s powerful Air Passenger Rights Regulation (EC 261/2004). The court emphasized that the Regulation creates a direct obligation between the operating airline and the passenger. The airline’s argument that it had fulfilled its duty by refunding the travel agent was rejected. The judge clarified that for such a payment to be valid, the airline would need to prove the passengers had explicitly authorized the agent to receive the refund on their behalf. Simply booking the ticket through the agent was not sufficient authorization, meaning the airline bore the risk of the agent’s insolvency.
For the return flight originating in Indonesia, the EU Regulation did not apply because it involved a non-EU carrier departing from a non-EU airport. Here, the court turned to fundamental Dutch contract law. It determined that a direct contract for transport existed between the airline and the passengers. By cancelling the flight, the airline failed to perform its side of the contract. This breach gave the passengers the right to dissolve the agreement and demand the return of their payment. This secondary line of reasoning reinforces the core principle: regardless of the sales channel, the ultimate service provider remains accountable to the end customer when the service is not rendered.
SOURCE
Source: Rechtbank Noord-Holland
