No-Show Clauses: Are They Abusive under European Law or a Necessary Evil

No-show clauses (NSCs) have been used for decades by airline companies. They are accepted by the International Air Transport Association (IATA) and are embodied in Articles 3.3.1 and 3.3.2 of Recommended Practice 1724. However, there is a growing concern by passengers, the European Union (EU) Member States, and their judges that these clauses contain terms that cause unfair hardship and unjustly penalise consumers. Airline companies argue that NSCs are of crucial importance to their pricing policy in a highly competitive air travel market and that banning NSCs would contravene the Open Skies Agreement between the United States and the EU. Despite all the airline rhetoric of NSCs protecting their pricing, it is, in fact, a forfeiture that would not be tolerated in any other kind of contract. First, it operates like a material breach, in that the no-show causes total loss of all further contract benefits. Second, the clause, in fact, works like a forfeiture. Third, it operates like a liquidated damage clause. However, it does not meet the justifications thereof, instead functioning as a forfeiture clause. Lastly, the law of mitigation of damages applies, even if the passenger’s no-show is deemed a breach. Under the doctrine of mitigation, damages cannot be recovered where reasonably or actually avoided. Thus, if the seat is sold, there should be a refund. Accordingly, this article demonstrates that NSCs constitute unfair terms well within the wording, meaning, and policy of the EU’s Unfair Contract Terms Directive.