Supreme Court Bans Travel Agencies From Deducting Fees on Canceled Flights

A landmark Supreme Court ruling has brought clarity to a question affecting thousands of travelers: what happens when you book a flight through a travel agency, the airline cancels the flight, and part of your refund disappears under the guise of processing fees?

The Supreme Court has ruled unequivocally that when an airline cancels a flight, travel agencies are not permitted to deduct handling or processing fees from the passenger's refund, explains attorney Oded Bitton from the Rappaport Levin Bitton law firm, which specializes in class actions and is currently suing Lastmintis. In the ruling regarding Issta Israel, a passenger paid 1,087 shekels for a Wizz Air ticket. After the airline canceled the flight, Issta deducted $30 as a processing fee from the refund. Following losses in both the small claims and district courts, the Supreme Court sustained the passenger's appeal, ruling that the deduction is unlawful.

What You Are Owed When a Flight Is Canceled

The primary and most critical rule is to determine who initiated the flight cancellation. If you personally decided not to fly, the new ruling does not automatically mean that cancellation or handling fees are prohibited. Your rights in such scenarios depend, among other factors, on consumer protection laws, the timing of the cancellation, and the transaction terms, notes Bitton.

However, when the airline cancels the flight, the Aviation Services Law grants passengers the right to choose between a full monetary refund or an alternative flight ticket. The refund must encompass the full amount paid for the ticket, including airport fees, levies, taxes, and other mandatory payments, he emphasizes.

Booked Through an Agency? Do Not Contact the Airline Automatically

One of the most vital takeaways from the verdict concerns the role of the travel agency. Anyone who purchased a ticket through an agency is entitled to request its assistance in securing a refund. Section 15 of the law obligates travel agencies, upon the customer's request, to contact the airline or tour operator to realize the passenger's entitlements.

In other words, the agency cannot simply tell the customer that the matter is strictly between them and the airline, thereby evading responsibility. The significant innovation of the Supreme Court's ruling is that even if the agency invested time and labor into processing the refund, it has no right to withhold a portion of the passenger's funds as a service fee for that assistance, Bitton stresses.

What If You Agreed to Processing Fees in the Terms of Service?

Here too, the Supreme Court established a crucial precedent. In the contested case, Issta's terms of agreement included provisions allowing for the collection of handling fees. Nevertheless, the court ruled that the provisions of the Aviation Services Law cannot be contracted around to the detriment of the passenger. Consequently, the mere fact that a customer clicked "I agree to the terms" does not grant an agency the legal right to diminish the statutory refund owed to the traveler.

When Should You Expect Your Money?

According to the law, the operating airline or tour operator must issue a full refund within 21 days from the date the passenger or their designated travel agency submits a written request.

One simple rule holds immense importance: put everything in writing, Bitton stresses. Do not settle for a telephone conversation. Send an email, an online form, or a documented request, and be sure to retain screenshots and delivery confirmations.

Five Practical Steps to Protect Your Rights

1. Save the flight cancellation notice received from the airline or agency.

2. Preserve your booking confirmation and invoice to clearly establish the amount paid.

3. Demand a full cash refund in writing, explicitly noting that the cancellation originated from the airline.

4. If any amount was withheld under the label of handling fees, refund commissions, service charges, or similar headings, request a written explanation detailing why the deduction was made.

5. Should the agency insist on the deduction, direct them to the new Supreme Court ruling: LCA 58313-09-25 Doron Ben Simchon v. Issta Israel Ltd., dated October 5, 2026. If they refuse, you retain the right to file a small claims lawsuit for the withheld refund amount.

What About Those Who Already Paid Processing Fees in the Past?

This is perhaps the most compelling question arising from the verdict, Bitton observes. The Supreme Court's decision does not merely dictate how agencies must conduct themselves moving forward; it clarifies how the law must be interpreted retroactively regarding handling fee deductions enacted during airline-initiated cancellations.

Consequently, consumers whose flights were canceled by the airline and who nonetheless suffered deductions from their refunds should review their transactions, correspondence, and actual refund amounts. While individual sums might total only $20 or $30 per customer, when the exact same practice is applied across thousands of passengers, the cumulative amounts become profoundly significant.

Ultimately, the new ruling delivers a vital consumer message: financial refunds owed to passengers do not constitute an opportunity to skim commissions along the way. If your flight was canceled by the airline, demand your full money, execute your requests in writing, carefully scrutinize your refund amounts, and never assume that every deduction listed in terms of service is inherently legal.