Analysis: Package Travel Directive – key changes to refund rules

The EU’s revised Package Travel Directive includes a new right for package organisers to claw back money from suppliers, albeit the directive is not due to come into force until 2029.

 

It introduces a new rule requiring travel suppliers such as airlines and hoteliers to refund organisers promptly where a service forming part of a package is cancelled or not performed.

 

In these cases, the supplier must refund the organiser within seven days – counted from the day after cancellation or the date that the service was due to be performed, whichever is earlier.

 

More: Part one - What you need to know about EU reform of the Package Travel Directive

 

This addresses a major practical issue exposed during the Covid-19 pandemic when organisers were required to refund customers within 14 days but were often left waiting significantly longer to recover funds from suppliers. 

 

The new rule is intended to align those timelines and reduce the cashflow pressure on organisers when things go wrong.

 

The revised PTD also introduces a harmonised framework governing the offer and use of vouchers.

 

The widespread use of these in place of cash refunds during the pandemic led to legal uncertainty as to travellers’ rights, particularly in relation to insolvency protection.

 

Vouchers: detailed rules to protect travellers 

The key requirements relating to the use of vouchers are as follows:

 

• Voluntary nature: vouchers may be offered by an organiser, but travellers are not required to accept them and remain entitled to a cash refund.

 

• Mandatory information: travellers must be clearly informed they are entitled to a cash refund and are under no obligation to accept a voucher.

 

• Minimum value: the voucher must be at least equal to the refund to which the traveller would otherwise be entitled, although organisers may offer additional value as an incentive.

 

• Explicit consent: acceptance of a voucher must be express and recorded in a durable medium (for example, by email). Silence or inaction cannot be treated as consent.

 

• Validity period: vouchers must be valid for up to 12 months from acceptance, with a single extension of up to a further 12 months permitted where both parties expressly agree.

 

• Scope and use: vouchers may be used for any travel service offered by the organiser and can be redeemed in stages.

 

• Transferability: vouchers must be transferable to another person one time, free of charge.

 

• Equal treatment: travellers using vouchers must not be treated less favourably than those paying by other means.

 

• Automatic refund of unused balance: any unused balance must be refunded automatically within 14 days of the end of the voucher period, without the need for a request.

 

• Insolvency protection: the underlying refund value represented by the voucher must be protected under the organiser’s insolvency protection arrangements. This protection applies to the refund amount only and does not extend to any additional promotional uplift.

 

Insolvency protection strengthened

The rules on insolvency protection are being tightened and clarified. The key changes are:

 

• Expanded scope: insolvency protection has always covered payments for unperformed travel services but will be expressly extended to include refund claims and vouchers.

 

• Adequacy of cover: member states are obliged to ensure insolvency protection will be sufficient at all times, including during peak periods. This is likely to require changes to some of the EU’s insolvency protection schemes.

 

• Refund timelines: where insolvency occurs, customers should receive refunds within six months of submitting a claim, extendable to a maximum nine months only in exceptional circumstances.

 

• Transparency requirements: member states must maintain online registers of travel companies with compliant insolvency protection, enabling customers and business partners to verify coverage.

 

New complaint-handling obligations

From 2029, organisers will be required to follow a more structured approach to handling customer complaints. These must be acknowledged within seven days and a reasoned written response provided within 60 days. 

 

Where a complaint is rejected, the organiser must inform the customer about available alternative dispute resolution options.

 

Some additional changes will affect day-to-day operations, including:

 

• The standard ‘key rights’ information which currently must be provided before booking, must from 2029 be provided as part of the contract.

 

• Accessibility information must address the needs of all travellers with reduced mobility, regardless of the underlying cause.

 

What should businesses do now?

There is a significant period of time before these reforms take effect, but early planning will be important.

 

For organisers, a priority will be to consider how best to align compliance across the reformed UK Package Travel Regulations and revised EU Directive. A joined-up approach for businesses operating across both markets should be more efficient than treating the regimes separately.

 

Businesses should keep an eye on how insolvency protection regimes evolve at member state level. 

 

Some countries are already reviewing their models and this may influence where travel companies choose to base their EU operations. It may be sensible to revisit whether existing EU hub structures remain optimal in light of the changes.

 

Rhys Griffiths is a partner and head of travel at Fox Williams LLP.

 

More: Part one - What you need to know about EU reform of the Package Travel Directive