12 Jun
2019

Linked Travel Arrangements – a potential minefield?

This article was written by Zohar Zik, Partner, HFW for ABTA's seventh edition of Travel Law Today which can be downloaded here: abta.com/travellawtoday

The Package Travel and Linked Travel Arrangements Regulations 2018, which came into force on 1 July 2018, brought about the biggest overhaul of UK package travel regulations since the early 1990s. In particular, the Regulations enhance and extend the protection afforded to consumers to a more widely defined group of ‘packages’, and also introduce a new type of regulated holiday, known as a ‘linked travel arrangement’ or LTA.

The Regulations are not straightforward and have caused particular difficulties for airlines and other businesses who find their sales activities being regulated in this way for the first time. Such businesses may well struggle to understand what they need to do to comply and the implications if they don’t.

Linked Travel Arrangements
An LTA is not a package. They are instead holiday products that, while warranting some consumer protection, do not provide the same protection as is available for true package holidays.
LTAs can arise in two situations:

a) Firstly, where a trader ‘facilitates’ the separate purchase of two or more travel services (which can include flights, hotel, car hire or, in some instances, a tourist service such as show tickets) for the same trip by a consumer during a ‘single visit’ to the trader’s point of sale. Given that the length of the single visit is not defined, this creates ambiguity when dealing with internet sales in particular. Similarly, the term ‘facilitates’ is not defined but is potentially very broad. It could mean, for example, a trader making it possible for the additional service(s) to be purchased. So, if a consumer selects and pays for a flight from an airline website and then visits another page on the same website to separately book and pay for a hotel, that will likely amount to an LTA.

b) Secondly, where following the purchase of a travel service from a trader, that trader then facilitates ‘in a targeted manner’ the purchase of another travel service for the same trip from a different trader within 24 hours. The requirement to act in a targeted manner is again not defined, but will typically involve one trader providing links, in a booking confirmation, to another trader’s website. An LTA will, therefore, arise where a consumer purchases a flight from an airline website and then follows a link in the flight booking confirmation to a different supplier of, say, hotel rooms, and books a hotel with that supplier within 24 hours.

What are the regulatory requirements for LTAs?
As noted above, the obligations on traders facilitating LTAs are much reduced compared with those imposed for organisers of package holidays, and are instead:

a) to notify consumers (using prescribed standard templates) at the appropriate stages of the sales process that purchases may constitute an LTA; and

b) to obtain financial protection against the trader’s insolvency, to cover the costs of (i) refunds of any payments the trader receives for travel services that are not performed because of its insolvency; and (ii) if the trader is providing transport services, the costs of repatriation and associated accommodation necessitated by the insolvency.

What are the issues for airlines and traders?
Notwithstanding that the regulatory burden on LTAs is relatively limited, airlines (and other traders) need to beware of potential difficulties and risks associated with them. These include:

  • Extraterritorial effect

The Regulations, including the LTA requirements, apply to any trader selling or offering for sale an LTA in the UK, or who directs such activities at the UK, regardless of where the trader is established. As such, foreign airlines who target UK customers through their websites may well be subject to the LTA requirements.

  • Financial protection

Financial protection for package holidays including air travel has, in the UK, generally been provided through the ATOL scheme. However, that scheme is not open to airlines and therefore they must instead seek financial protection by other means. Non-EU airlines/traders selling LTAs in multiple EU jurisdictions face particular headaches, as they must obtain appropriate financial protection in each jurisdiction.

Airlines may find it difficult to assess the level of financial protection required, which is largely dictated by anticipated LTA revenues. Airlines and traders facilitating LTAs will often be reliant on secondary traders notifying them that an LTA has been concluded. If such notifications are not provided, projections may be distorted or inaccurate. While secondary providers are obliged to inform the facilitator of the conclusion of a contract with their customer, airlines should ensure that their contracts with such suppliers include specific obligations in this regard.

  • A package by the back door

A perceived LTA may, in fact, be a package if the first trader supplies to the second trader details of the customer’s name, payment details and email address, and the contract with the second trader is concluded within 24 hours of the first contract. Airlines and traders must therefore carefully consider what information flows to linked secondary traders and whether they need to change their sales processes to avoid the inadvertent creation of packages.

In addition, a failure to give the correct LTA notice will also result in the LTA effectvely becoming a package, with the trader being subject to many of the obligations imposed on package organisers (including obligations as to the performance of the whole LTA). That, in turn, could result in an increased risk of consumer claims, insurance coverage shortfall and negative publicity, to name but a few.

  • Risk of non-compliance

Non-compliance is a criminal offence and can potentially trigger prosecution by the CAA or trading standards and lead to fines, as well as breaches of unrelated obligations under financing or leasing arrangements with potentially grave consequences.

In summary, although LTAs may appear to be a relatively benign concept, and do not obviously give rise to considerable regulatory obligations, it is important that traders understand and comply with their LTA obligations in order to avoid more significant risks.