A German appeals court on Tuesday ruled that it could not prevent Kuwait Airways from banning Israeli passengers, even though it believed the policy amounted to discrimination.
The case was brought by an Israeli student living in Germany, who in 2016 bought a ticket online to travel from Frankfurt to Bangkok with Kuwait Airways.
The state-owned airline canceled the ticket soon after saying Kuwaiti law prohibits all commercial relations with Israelis and Israeli companies.
The higher regional court in Frankfurt ruled that because the flight required a stopover in Kuwait City, which is under Kuwaiti jurisdiction, it was "factually impossible" for the airline to transport the passenger.
The finding was similar to a ruling reached by a lower German court last year.
In a statement, the court acknowledged that the outcome was "unsatisfying" for the plaintiff but said it had no choice but to dismiss his demand to be able to book a new journey to Bangkok with Kuwait Airways.
A request for financial compensation was also denied.
The judges nevertheless slammed Kuwait's Israel boycott as discriminatory and "incompatible with German values", but said changing it was a matter for politicians.
The non-profit Lawfare project, which is representing the Israeli passenger, said it was considering a further appeal.
"This is a tragic day for German law," said Lawfare's executive director Brooke Goldstein.
"Rather than be held accountable before the law, the court has rewarded Kuwait Airways for its anti-Semitism."
In 2015, Kuwait Airways opted to scrap all its flights between New York's JFK airport and London Heathrow after US authorities threatened legal action over its refusal to sell tickets to Israelis.