European Commission consults on changes to the Package Travel Directive: All change or business as usual?

9th March 2022 by Tom Collins

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Just when we’re starting to tell our ‘packages’ from our ‘linked travel arrangements’ and our ‘traders’ from our ‘retailers’, the European Commission (EC) has launched a formal consultation on revising the Package Travel Directive (EU) 2015/2302 (PTD). Whilst any revisions will not automatically become part of our law, following the UK’s departure from the EU at the end of January 2020, UK legislators have indicated a willingness to follow suit and UK companies trading in Europe will need to comply in any event.

The public consultation was launched on 15^th February 2022 and follows a combined evaluation and Inception Impact Assessment Roadmap, published in August 2021. Whilst the EC invites comment on perennial issues such as the definition of a ‘package’, it focuses on recent challenges to the industry; in particular, those arising out of the Covid-19 pandemic and the failure of Thomas Cook.

Some of the key proposals under discussion (and our view on their likelihood of coming to fruition) are as follows:

 

Creation of a ‘crisis fund’

In the early days of the pandemic, airlines found themselves entirely unable to meet the avalanche of demands for refunds for cancelled flights within 14 days (or at all) after they were effectively grounded. The EC is considering creating a ‘crisis fund’ in order to give travel companies access to liquidity in the event of ‘unavoidable and extraordinary circumstances’.

Likelihood of happening: Nil

The obvious question is: who would fund it and how. It is very unlikely that state actors would be prepared to provide (in effect) an overdraft facility to private companies, or that cash-strapped travel companies would be willing to act as a mutual. Likewise, such a fund would not be sufficient where, as happened with Covid, the entire sector found itself in need of liquidity at the same time.

 

Approval of the use of vouchers for cancelled holidays

In response to the issues above, it became widespread practice for customers to be issued with vouchers instead of cash refunds (as required by law). The EC is considering whether to revise the PTD to sanction this practice provided certain conditions are met. Namely, that (i) the customer agrees, (ii) a refund is automatically issued if the voucher is not used within a given period and (iii) the voucher is financially protected.

Likelihood of happening: Evens

The significant benefits to the travel industry in being permitted to issue vouchers are self-evident and the conditions likely to be attached to their use mitigate the potential for unfairness. But the right to a prompt, cash refund is a crucial aspect of consumer protection in this area and the EC will be wary of diluting this, particularly given the unequal bargaining position between consumers and travel companies.

 

Writing foreign office advice into refund rights

It comes as something of a shock to many (if not most) consumers that advice from the Foreign Office not to travel – either to a specific destination or generally – does not confer an automatic right to a refund if that consumer then cancels their holiday. The PTD is currently silent on the relevance of government advice and the EC is considering making express reference to the same.

Likelihood of happening: Too early to say

Any proposal enlarging the consumers’ right to cancel and receive a refund will meet with stiff resistance from the travel industry. As things stand, it is too early to say either what kind of government advice would fall within the scope of the PTD or how it would translate into rights to a refund. One would not expect a change in advice against travel to Brazil due to an increased risk of contracting malaria to attract a refund. But where travel is all but forbidden, for instance because of a substantial terrorist threat, it is hard to see why the consumer should bear the entirety of the financial risk of cancelling.

Travel companies are invited to submit responses on the above and other issues by 10^th May 2022.

Tom Collins is a barrister at 1 Chancery Lane, London
He can be contacted at [email protected]

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