The European Commission (“EC”) published its proposed reforms to the Package Travel Directive (“PTD”) and passenger rights regulations at the end of 2023. The changes are significant and will make a real difference to those travel companies selling to customers in the EU. This note provides an overview of the main changes that will interest travel companies.
Why is this happening?
The EC has carried out a review of the PTD to understand how it can be improved, particularly taking into account issues which arose following the failure of Thomas Cook in 2019 and the Covid-19 pandemic. This review has highlighted three broad problems with the PTD:
- Refunds for cancelled packages: the 14 day deadline to refund customers is not feasible at times of significant disruption, mainly when package organisers have passed on customer payments to the travel suppliers, and those suppliers have not refunded the package organisers.
- Scope of insolvency protection: it is unclear whether vouchers and outstanding refunds are covered by the insolvency protection mechanisms of the PTD.
- Confusing nature of PTD: some aspects of the PTD are unclear, leading to customer confusion and inconsistent implementation across the EU.
What is the EC proposing to do?
The EC has published the text of its proposed amendments to the PTD, the key elements of which are set out below.
Limitation on advance payments
The EC suggests that package organisers should not be allowed to take more than 25% of the price of the package at the time of booking, with the balance taken no earlier than 4 weeks before the start of the package.
However, there is an important exception to this rule. Package organisers will be allowed to take a higher payment at the time of booking if this is necessary to cover the costs of organising and performing the package holiday. This exception specifically includes sums paid to the travel suppliers at the time of booking. Therefore, if the package organiser has to pay, say, 40% of the price of the package to the airline at the time of booking, it will be permitted to take a deposit of 40% at the time of booking.
Refunds from travel suppliers
The “right to redress” set out in the PTD is to be clarified in order to make it clear that if a travel supplier cancels or fails to provide the travel service, the supplier will have to refund the package organiser within 7 days. This will thus aid the package organiser in rebooking the customer or else refunding the customer within 14 days.
Vouchers
The EC proposes to introduce controls over the issuance of vouchers to customers in lieu of refunds. Specifically, the PTD will make it clear that customers must be offered a choice between a voucher and a cash refund. The validity period of such vouchers will be capped at 12 months, although this can be extended by a further 12 months with the written agreement of the customer. Upon expiry of the voucher, a cash refund must be paid. Finally, vouchers must be transferrable to other travellers, thus creating a secondary market for such vouchers.
Expanded definition of a “package”
The EC proposes to expand the already extensive definition of what is a “package” in a significant way. Any website (or retail store) on which it is possible to purchase two different travel services will now be within scope. It is even possible for a package to be formed where the customer buys the travel services from different websites. Specifically, the expanded definition will include the following situations:
- The customer books a travel service (e.g. a flight) and then returns within 3 hours to the same point of sale (i.e. website/store) to book a different travel service (e.g. hotel) for that same trip. This will be a package.
- As above, except the customer was invited to book more travel services before the first booking was made. If, in this situation, the customer returns within 24 hours to book an additional travel service, this will be a package.
- The customer books a travel service on one website, is then linked through to another website and buys a second travel service. If the first website passes on either the customer’s name, payment details, email address or other personal data to the second website, then this will be a package.
Linked travel arrangements (“LTA”)
As a consequence of the extended definition of a package, the first type of LTA will be deleted as it is now subsumed within the new package categories described above.
This will leave only the second type of LTA, but this has been modified so that it only captures the travel suppliers. An LTA will only now exist where a travel supplier (e.g. an airline) cross-sells the customer to another trader to buy an additional travel service (e.g. a hotel), and the customer books with that second trader within 24 hours. Rather curiously, the airline in this situation must ask the customer to take screenshots to prove that they have booked an LTA and then inform the airline of this fact within 24 hours (by email or some other online facility).
Crisis fund
The EC proposes to make it clear that Member States may set up a fund to help ensure that customer refunds are paid within 14 days, for instance, during times of major disruption where the package organisers might not be able to do so. However, save for exceptional circumstances, this must be funded by package organisers and not the Member State.
Insolvency protection
The proposals aim to clarify that vouchers and outstanding refunds must be covered by insolvency protection.
Customer’s right to cancel due to unavoidable and extraordinary circumstances
The EC proposes to significantly extend the customer’s right to a full refund where there are unavoidable and extraordinary circumstances (“UEC”). Currently, this refund right only arises if the UEC significantly affect travel to the destination, or the performance of the package in the destination itself. UEC at the place of departure are not relevant, which during the pandemic meant that this right was not triggered when customers had to quarantine upon returning home.
The EC proposes to change this so that the customer’s full refund rights will be triggered whenever it is reasonably expected that UEC will significantly affect the package. This may include UEC occurring at the destination, place of departure, place of customer residence or on the way to the destination if they significantly affect the package.
However, despite this broadening of the customer’s full refund rights, the EC does not propose giving customers automatic rights to a full refund whenever official travel advice is not to travel to a particular destination (such as FCDO advice). Rather, as is currently the position, the official travel advice will simply be an “important element” to take into account. Similarly, any serious restrictions (e.g. quarantine) imposed on the customer at the destination or after returning will be another “important element” to take into account in assessing whether refund rights are triggered. The EC has emphasised the importance of maintaining “a case-by-case assessment” on each occasion.
Denied Boarding Regulations
The EC has proposed reforms to passenger rights regulations, which will mainly affect the operators of transport services. However, important changes to the Denied Boarding Regulations will affect travel companies.
If the customer has purchased a flight through an intermediary (such as a travel agent or package organiser), the EC proposes to allow (but not require) airlines to pay any refunds due under the Denied Boarding Regulations via the intermediary. This is an issue which is likely to affect mainly flight only sales given that, where the customer has a right to a refund against a package organiser, there is no right to a refund from the airline under the Denied Boarding Regulations.
In addition, where flights are purchased through intermediaries, the intermediary must provide the customer’s contact and booking details to the airline (as opposed to the intermediary’s own contact details). The airline must only use this information to perform its regulatory obligations towards the customer and must ordinarily delete this data within 72 hours of completion of the flight.
For intermediaries acting as an agent for the customer in booking the flight, the intermediary will be obliged to inform the air carrier at the point of booking that it has booked the ticket as an intermediary. The intermediary must also provide the airline with its own postal and e-mail address. The intermediary will also be entitled to require the airline to provide it with a copy of correspondence sent to the customer (as described in the paragraph above) so that the intermediary can perform any obligations it might have towards the customer.
