01 Jun

Thomas Cook and COVID-19 spur EU review of the Package Travel Directive

The following article appeared in ABTA's issue of Travel Law Today - Spring 2022.

In November 2020, the European Commission signalled its intention to look again at travel-based consumer protection when outlining next steps on the New Consumer Agenda. This year’s Commission Work Programme, published in October 2021, confirms that updated legislative proposals to revise the Package Travel Directive (PTD) are expected by early next year.

The Commission has acknowledged that the revised PTD, adopted in late 2015, significantly extended the level of consumer protection compared with its predecessor (Council Directive 90/314/EEC). However, in the wake of serious disruptions to the travel marketplace over the last few years, the Brussels-based institution has promised to examine ‘whether the current regulatory framework for package travel, including as regards insolvency protection, is still fully up to the task of ensuring robust and comprehensive consumer protection at all times, taking into account also developments in the field of passenger rights’.

The fact the directive is up for revision within just a few years is notable, given the previous one operated for a quarter of a century. The above statement indicates a starting position driven by a desire to improve consumer outcomes, which is perhaps little surprise given the commitment came just over a year on from the failure of Thomas Cook, and still relatively early in the COVID-19 pandemic, against the backdrop of many months during which consumers struggled to obtain refunds for cancelled travel arrangements.

The variety of different approaches taken by EU Member States, as they have sought to balance the competing demands of consumers seeking redress and businesses struggling for survival, makes clear the complexities involved and there are sure to be heated debates to come as policymakers get to work.

One area that will come under scrutiny is the extent and consistency of insolvency protection schemes across the EU. The Thomas Cook failure affected millions of consumers across Europe and unveiled a patchwork of different approaches to protection as well as uncovering some serious shortcomings in existing schemes. For example, the German scheme of insolvency protection applied caps on the financial liability of the insurers backing the scheme, which would have left German consumers out of pocket were it not for the decision of the federal government to step in to bridge this gap.

The COVID-19 crisis also shone a light on the disparities between insolvency protections in the package travel space and those elsewhere across the travel supply chain. The concurrent revision of EU Air Passenger Rights Regulation (261/2004) will provide opportunities for legislators to look again at airline insolvency, as well as wider rights and obligations and how these interact.

The need for consistency and better coordination across different areas of consumer law was a theme of the European Court of Auditors Report, which was published on 29 June 2021 and examined air passenger rights during the COVID-19 crisis. The Commission was asked to consider the introduction of: airline insolvency protection for stand-alone tickets; restrictions on pre-payments for air tickets and packages; insolvency protection for vouchers; and the creation of a guarantee fund for reimbursements in relation to cancelled flights and packages in times of crisis.

Meanwhile, throughout the pandemic, consumer groups such as the European consumer organisation BEUC have argued loudly for better enforcement of existing consumer rights, especially regarding refund timelines with the PTD specifying that refunds should be made within 14 days (seven days under the Air Passenger Rights Regulation). Industry figures such as ECTAA, the European trade body of which ABTA is a Member, have pointed out the impossibility of meeting those timelines when the industry is closed globally and industry suppliers delay returning monies that have been paid to secure travel services for consumers.

The European Commission recommendation, issued in May 2020 in response to the growing tensions between the needs of business and consumer rights, sought to reinforce the obligation for refunds but also gave backing to voucher schemes as a means of deferring refunds where the customer explicitly agreed to accept those.

This approach bought time and offered consumers reassurance, but the Commission will now want to bring forward clearer proposals to ensure the legislation is on firmer footing for potential future pandemics.

The fallout of the refunds crisis means that not just the timelines but also connected matters such as the definitions of unavoidable and extraordinary circumstances, as well as the role of national travel advisories, will come under the spotlight as the Commission and then the co-decision makers, the European Parliament and Council, seek to reach a durable solution. Given that global health bodies, including the World Health Organisation, have said they expect the next global pandemic to occur within a matter of decades, doing so will be vitally important.

While responding to the twin crises of the Thomas Cook failure and COVID-19 has doubtlessly acted as the major spur to put the PTD back in the in-tray of policymakers, once the directive is re-opened there are several parts of the legislation that will require attention. There is widespread agreement among both consumer bodies and industry representatives that the area of Linked Travel Arrangements (LTA) requires a rethink and clearer definitions.

The 2015 PTD also sought to create a functioning single market in insolvency protection, with mutual recognition of insolvency schemes and closer cooperation between national consumer bodies, but there remain many barriers that prevent companies from operating effectively across the EU from a single place of establishment. Meanwhile, the effectiveness of consumer information provision and the concept of click-through packages have also come under scrutiny.

Although a review of the Package Travel Directive will not affect UK law directly, the scope for change is broad and UK companies selling holidays to customers in the EU will be affected by new rules. The UK Government will also be watching carefully with the outcome of recent consultation on the UK’s retained Air Passenger Rights legislation outstanding, the next phase of ATOL reform due, and tentative steps being taken to review the UK Package Travel Regulations too. Watch this space.

Luke Petherbridge, ABTA – Director of Public Affairs