Consultation on the Package Travel Directive

The European Commission (EC) has launched its formal consultation on revising the Package Travel Directive (PTD) in its root-and-branch review to assess whether the PTD is still fit for purpose – with a particular focus on some of the issues which have arisen out of the failure of Thomas Cook and the onset of the coronavirus pandemic.

The consultation will be of interest to all travel companies selling holidays to consumers in the EEA. Its implications are potentially very 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 outside the scope of the PTD, such as online travel agents.

The consultation is available here. Travel companies wanting to have the opportunity to make their views known, and to share their experiences of the pandemic, have until 10 May 2022 to submit their responses. Following this process, the EC is expected to publish its proposals on revising the PTD at the end of 2022.

This article sets out what we see as some of the more significant issues under consideration.

Obligations upon travel suppliers to pay refunds to travel companies and customers

The consultation explains that, when package holidays are cancelled, the customer’s right to a refund lies 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 in these circumstances.

This has proved to be problematic for travel companies, which have found it difficult to refund customers for cancelled packages where the 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 into the PTD direct refund rights for customers against the travel suppliers. This would mean that customers could claim refunds against airlines and hoteliers, but with the proviso that the travel supplier will be released from this obligation if it refunds the travel company.

• Whilst the PTD already contains a right for travel companies to bring claims against the travel suppliers for (amongst other matters) refunds, the consultation suggests that this could be changed to impose upon travel suppliers an obligation to refund the travel company within a specific deadline. If this deadline was, say, seven days, it would allow travel companies to meet their 14 day deadline to refund customers.

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 that the voucher is financially protected.

Making the Foreign, Commonwealth and Development Office (FCDO) 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 the three-stage test set out in the PTD (see here). The EC is seeking views on whether the PTD should incorporate a reference to government advice such as the FCDO 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, for instance, 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 altogether and no matter the value of the other tourist service.