Suggestions for reform focus on issues arising from Thomas Cook failure and Covid, says Fox Williams partner Rhys Griffiths
The European Commission has launched a formal consultation on revising the Package Travel Directive (PTD), with a particular focus on issues which have arisen from the failure of Thomas Cook and the coronavirus pandemic.
The consultation will be of interest to all travel companies selling holidays to consumers in the European Economic Area (EEA). Its implications are potentially significant and no issue appears to be off the table. One of the first questions asks whether the ‘package’ definition should be narrowed in order to put certain sales models, such as online travel agents’, outside the scope of the PTD.
These are some of the more significant issues under consideration:
Obligations upon travel suppliers to pay refunds to travel companies and customers
When package holidays are cancelled, the customer’s right to a refund lie against the travel company and not the travel supplier (such as airlines and hotels). In fact, the customer has no right to a refund against the airline under Regulation 261 [on air passenger rights] in these circumstances.
This has proved problematic for travel companies which have found it difficult to refund customers for cancelled packages where travel suppliers have not refunded the travel company. The EC is seeking views on what, if anything, should be done about this.
The consultation floats various ideas on how this issue might be resolved, such as:
- Introducing direct refund rights for customers against travel suppliers. This would mean customers could claim refunds against airlines and hoteliers, with the proviso that the travel supplier would be released from this obligation if it refunds the travel company.
- The PTD already contains a right for travel companies to bring claims against the travel suppliers for refunds (amongst other matters); the consultation suggests this could be changed to impose on travel suppliers an obligation to refund the travel company within a specific deadline.
Recognition of the right to issue vouchers for cancelled holidays
The pandemic led to the widespread practice of customers being issued with vouchers instead of cash refunds. The EC is seeking views on whether the PTD should recognise this and specify that travel companies may issue vouchers instead of refunds, but only on condition that the customer agrees, receives a refund if the voucher is not used by its validity date and the voucher is financially protected.
Making FCDO (Foreign Office) advice relevant to refund rights
Many in the industry have been surprised to learn that advice from the FCDO against travel to a destination does not automatically trigger full refund rights for the customer.
The PTD does not mention official travel advice at all but makes the customer’s right to a full refund dependent on the circumstances meeting a three-stage test set out in the directive. The EC is seeking views on whether the PTD should incorporate a reference to government advice and specify how this affects the customer’s refund rights.
Establishment of a crisis fund
One of the difficulties of the PTD is that, at times of major crisis, its rules are impossible to comply with. Nobody could have foreseen the pandemic and very few large travel companies had the liquidity available to meet the 14-day refund rule for all customers.
The EC recognises this and is interested in the idea of creating a ‘crisis fund’ which would provide travel companies with access to the liquidity they need to comply with their refund obligations in the event of ‘unavoidable and extraordinary circumstances’ such as the pandemic.
The EC also seeks views on how this crisis fund should be funded and whether it should be funded by travel companies, customers (through a mandatory levy), travel suppliers or member states.
Removing accommodation and other tourist services from the PTD
The sale of accommodation and other tourist services, such as spa treatments, is currently defined as a package holiday if the value of the other tourist service amounts to 25% or more of the total price. The EC wants to know whether these sorts of combinations ought to be excluded from the PTD no matter the value of the other tourist service.
Travel companies have until May 10 to submit responses.