aviation law Archive - Weisenheimer

Over the last years, consumer protection agencies throughout the European Union have made continued efforts to prevent the use of so called No-Show Clauses, which are commonly used by airlines in their general conditions of carriage. In Austria, this led to several court proceedings in which rulings effectively restricting the use of No-Show Clauses were issued. This, in turn, prompted many airlines to adapt their clauses in order to comply with the court practice. This article seeks to give a brief overview of the topic and the future of No-Show Clauses in Austria against the backdrop of the most recent ruling of the Austrian Supreme Court in case 4 Ob 63/21z.

What is a No-Show Clause?

Airlines use complex pricing systems to allocate specific ticket fares to individual passengers. The ticket fare a passenger is charged depends, inter alia, on the specific itinerary he or she chooses. This is because, on the one hand, passengers are willing to pay higher fares for direct flights; on the other hand, fares are generally dependent on the respective place of departure. As a result, the ticket fare for a flight booked e.g. from Warsaw to New York with a stopover in Vienna will probably be offered for a lower fare than a direct flight from Vienna to New York. Another example would be roundtrips (e.g. with the flight legs Vienna – New York – Vienna), which are often offered for a lower price than one-way tickets.

However, airlines experienced some passengers using the pricing system to their advantage by e.g. booking a flight from Warsaw to New York with a stopover in Vienna instead of a (more expensive) direct flight from Vienna to New York despite their residence in Vienna and their intention to only be transported from Vienna to New York. Other passengers book a roundtrip and intentionally “miss” the second flight leg. Some travel agencies even specialize in getting the cheapest ticket fares possible for their customers by circumventing the pricing system in this way.

As a reaction, airlines implemented so called No-Show Clauses in their general conditions of carriage stipulating that passengers will be denied boarding or have to pay an adapted fare when they do not use all flight legs (i.e., in our examples: when the passenger does not board the flight from Warsaw to Vienna or misses his or her second flight leg from New York to Vienna).

How are No-Show Clauses challenged by consumer protection agencies?

Since No-Show Clauses are usually implemented in an airline´s general conditions of carriage, several organizations have the right to challenge them according to Austrian consumer protection provisions. Especially the “Verein für Konsumenteninformation, VKI” and the “Bundesarbeitskammer” are quite active in this regard.

These two organizations are regularly screening general terms and conditions used by several companies including general conditions of carriage used by airlines operating flights to or from Austria for clauses which they deem to be unlawful, especially by arguing that such clauses are surprising and disadvantageous for consumers or grossly disadvantageous. If a clause is deemed to be unlawful, the airline usually receives a letter from the consumer protection body or its lawyer demanding that the airline in question immediately refrains from using the “unlawful” clause, together with a cease and desist declaration secured by a contractual penalty.

One aspect that is often criticized by our clients is that normally the consumer protection agencies are neither willing to discuss the lawfulness of the respective clause nor to work together to find a solution that takes into account the positions of both the consumer and the airline. They rather only give airlines the options to either sign the cease and desist declaration within (usually) 14 days or be confronted with court proceedings.

How are No-Show Clauses viewed by Austrian courts?

Austrian courts regard No-Show Clauses to be void especially when they are deemed to be either surprising and disadvantageous for the consumer or grossly disadvantageous. While the “surprising” character of a No-Show Clause may be avoided by implementing certain measures in the booking process to ensure that passengers are duly informed, it is rather challenging for airlines to formulate No-Show Clauses that are not regarded as grossly disadvantageous but are still effective.

The Austrian Supreme Court first had to deal with No-Show Clauses in 2012 (4 Ob 164/12i, a case in which our partner, Martina Flitsch, was directly involved). While the Supreme Court explicitly acknowledged the airline´s legitimate interest to implement and protect its pricing system, it regarded the No-Show Clause the airline used to be too extensive and, therefore, grossly disadvantageous. This view was adopted and further developed in several other Supreme Court rulings with the latest one being 4 Ob 63/21z from 2021.

As a reaction, several airlines operating flights to and from Austria adapted their conditions of carriage in order to comply with the criteria set forth by Austrian court practice. Therefore, nowadays the consequence of not using all flight legs is usually a recalculation of the ticket fare or a lump sum that must be paid. Additionally, many No-Show Clauses now explicitly state that they do not apply in cases of force majeure, illness or, in general, when the reasons for the passenger not using all flight legs are not attributable to him or her.

What does the future hold for No-Show Clauses in Austria?

The latest decision of the Austrian Supreme Court (4 Ob 63/21z) dealt with a No-Show Clause that has obviously been designed to comply with the Austrian court practice. However, despite careful drafting, the clause was finally regarded as grossly disadvantageous to the consumer and, therefore, void. The Supreme Court emphasized the necessity to differentiate between passengers that are deliberately circumventing the pricing system and passengers that are not using all flight legs for any other reason.

In practice, it is foreseeable that it will be particularly challenging for airlines to successfully determine on a case by case basis if a passenger is circumventing the pricing system, especially when this decision must be made very quickly before boarding is denied. Especially with regard to the Regulation (EU) 261/2004 and the organizations specialized in representing passengers in cases of denied boarding, the risk of lawsuits and court proceedings, in which airlines have to prove that the denied boarding has been justified, is rather high.

Despite the many challenges airlines face when it comes to No-Show Clauses in Austria, it is, in our opinion, rather unlikely that airlines will refrain from using them. As explained, No-Show Clauses are an essential tool to ensure the functioning of an airline´s pricing system, which is a vital part of an airline´s business model.

Therefore, airlines must remain vigilant and keep an eye on ongoing developments such as new court decisions in order to avoid being confronted by consumer protection agencies or finding themselves in court proceedings which, while causing substantial workload and legal fees, have limited chances of success. In such cases, it is certainly not a mistake to engage a reliable legal advisor who is experienced in dealing with consumer protection agencies and handling passenger claims.

For several years now, we have been assisting our clients in handling claims related to Regulation (EC) 261/2004, better known as “Passenger Claims”. With our many long-established connections to the aviation sector, we specialize in providing first-class support to our airline partners.

Which cases are we mostly handling?

Normally, passenger claims are mainly for compensation under Article 7 of Regulation 261/2004. However, in the wake of the Covid-19 pandemic and the resulting massive increase of flight cancellations, the number of ticket refunds cases increased substantially. This being said, we represent airlines in connection with other claims, too, such as passenger claims for damages under the Montreal regime and claims arising from the provisions of Austrian law.

What is challenging about passenger claims?

Although the claimed amounts are usually rather low, the complexity of the cases and the effort required of airlines defending them is often quite substantial. While it is often difficult to explain the very specific procedures and terms (e.g. Oplogs) to the courts, it is necessary to do so, in order to convince judges that the airline took all reasonable measures to avoid cancellation or delay. Recently, we’re observing a trend among Austrian judges – undoubtedly encouraged by the rather strict preliminary rulings of the ECJ – to demand increasingly detailed explanations of the extraordinary circumstances and, above all, of the reasonable measures taken by the airline in each case.

As legal representatives of airlines, our task is to identify missing information and to try to obtain it not only from our clients, but also through our own active research of the METAR and flight data, for example. In addition to that, we of course continuously monitor the newest developments of the case law in the area of Passenger Claims and constantly improve our argumentation.

How do we cooperate with our clients?

Bearing in mind the special challenges posed by Passenger Claims, we usually offer a customized fee agreement for each client. Such agreements may cover all Passenger Claims (for a monthly lump sum) or be limited to handling individual cases (for a lump sum per case). Lastly, some clients choose to request our advice on individual issues on the basis of an hourly rate.

Especially at the beginning of the cooperation with a new client, we make sure to determine which claim handling procedure would be most suitable and efficient for the client and we are also happy to organize workshops for our clients’ claim handling team. This is because a well-trained team and optimized processes are the basis of successful and efficient claim handling.

Based on our cooperation in the area of Passenger Claims, our clients also regularly seek our assistance in other areas as well, including baggage and cargo claims, aircraft damage, matters of labor law as well as residence and work permits. We offer customized fee agreements also with regard to these issues.

What are the chances of succeeding from the airlines’ point of view?

As an airline, you are always fighting an “uphill battle” when it comes to Passenger Claims. For this reason, we recommend fighting only in those cases where it is really worth your while – not least in order to create as many positive precedents as possible and to avoid creating negative precedents in Austria.

If – based on the available evidence – a case must be classified as “weak”, reacting too slowly or incorrectly will only cause unnecessary costs, which often exceed the claimed compensation itself. With an experienced and agile legal team at your side, such costs can easily be avoided.

How do we efficiently handle “mass claims”?

Our experience shows that a combination of speed, flexibility and know-how is essential, especially when it comes to Passenger Claims. It is often necessary to decide very quickly how to proceed in a large number of cases. Quickly handling these cases is especially crucial in order to avoid unnecessary legal proceedings and the costs associated with them.

In order to be able to handle the cases in a high-quality and yet efficient manner, you need a specialized and well-coordinated team. At Weisenheimer, we rely on a young and very committed team with established and well-proven procedures, who make sure to keep constant and close contact with our clients’ claim handling teams. Lawyers and paralegals work closely together and use automated processes in order to handle cases as efficiently as possible, not unlike many claim agencies such as Flightright and Fairplane. Of course, with the difference that the representation of airlines is associated with significantly more effort compared to the representation of passengers.

Our Passenger Claims team is supervised and supported by Weisenheimer partner Martina Flitsch, who has been following the development of Passenger Claims for more than 25 years, first as in-house counsel and later as head of the legal department of an airline and subsequently as an attorney. Based on her long experience, Martina is very familiar with the airlines´ needs and thus can ensure that the cooperation between our team and the airline meets the highest standards.

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Is there a future for No-Show Clauses in Austria?