In recent years, airlines have been operating in an exceptional and prolonged environment of uncertainty, including the COVID-19 pandemic, wars, airspace closures, and other disruptions. One consequence of this reality has been widespread flight cancellations, which have triggered a wave of passenger claims against airlines.
In many of these claims, plaintiffs do not limit their demands to reimbursement of expenses for assistance services, statutory compensation, and similar relief. They also seek “exemplary damages” — in amounts that may reach thousands of shekels per passenger — arguing that the airlines’ alleged breaches of the law were committed knowingly.
A familiar challenge for airlines is that aviation law case law is, for the most part, developed in the lower courts and is not always consistent. Even with respect to the circumstances in which exemplary damages should be awarded, and the amount of such damages, it is not always possible to identify a clear guiding principle. Against this background, attention should be given to a recent decision of the Supreme Court in LCA 75225-12-25 Bondarevsky v. Arkia International (1981) Ltd. (May 11, 2026).
The case began as a claim filed in the Magistrate’s Court following a cancelled flight. The plaintiffs sought statutory compensation and alleged various breaches of the law by the airline which, according to them, were committed knowingly — including the airline’s refusal to pay statutory compensation — and on that basis also claimed entitlement to exemplary damages.
For its part, the airline argued that the “special circumstances” exemption under the Aviation Services Law applied in the circumstances of the case, exempting it from paying statutory compensation. The airline further argued that, in any event, its position on the matter was genuinely held and advanced in good faith. Accordingly, even if it were ultimately held liable to pay statutory compensation to the passengers in this case, this should not be treated as a knowing breach justifying an award of exemplary damages.
The Magistrate’s Court largely accepted the claim and held that the airline was required to pay the plaintiffs statutory compensation, as well as exemplary damages, based on its finding that some of the breaches had been committed knowingly.
The airline appealed to the District Court, which held that although the evidence presented by the airline was insufficient to establish its claim to an exemption from statutory compensation, the airline had established that it genuinely held the position that no payment obligation applied. Accordingly, the District Court reduced the amount of exemplary damages awarded by the Magistrate’s Court.
The plaintiffs filed a motion for leave to appeal to the Supreme Court. The motion was denied. Justice Stein clarified that awarding exemplary damages against airlines is the exception rather than the rule, and confirmed that where there is a genuine and bona fide dispute as to the very existence of liability for statutory compensation, the justification for awarding exemplary damages is weakened.
This is an important decision from which practical conclusions may also be drawn going forward. Airlines that decline, in good faith, to pay statutory compensation, and that are careful to document matters in real time, may improve their ability to argue that a genuine dispute existed. This may reduce their exposure to exemplary damages, even if the court ultimately determines that their position was mistaken and that they were not exempt from paying statutory compensation to the passenger in the case at hand.
The above content is a summary provided for informational purposes only and does not constitute legal advice. It should not be relied upon without obtaining further professional legal counsel.
