Flight cancellations, the collapse of holiday firms – are holidaymakers returning to traditional “package holidays”?

by Rachel Mills

Recent years have seen the collapse of travel companies, the failure of airlines, and, more recently, Ryanair’s cancellation of thousands of flights. There have also been troubling stories of holiday scams and fraudsters deceiving money from holidaymakers by posing as bogus villa owners for a villa that does not exist. Is all of this changing the way consumers book their holidays and are package holidays really a safer option?

Most people will have been seduced by low-cost airline tickets and the thought of a good deal by cutting out the travel agent. As accessibility to the internet increased, huge numbers of consumers turned away from traditional package holidays booked at their local travels agents and become independent travellers with access to thousands of flights, accommodation and excursions online. Booking direct can be cheaper and easier but if something goes wrong with your travel plans where do you look for assistance and support?

Ryanair caused confusion when they cancelled flights as it was alleged by the Civil Aviation Authority that they failed to fulfil their obligations to customers by rerouting them on alternative flights and/or with alternative airlines. They have now been forced to do so which is set to cost the Company millions of pounds. Despite that, customers who booked travel and accommodation separately have, in some situations, found themselves out of pocket for wasted accommodation costs when their flights have been cancelled. This is because most travel insurance policies will not cover accommodation costs where flights are cancelled. This leaves consumers with no form of redress.

The Package Travel Regulations (“PTR”) came into force in December 1992 pursuant to a European Council Directive. The intention was to promote European travel by harmonising consumer protection across the Member States.  The PTR imposes obligations on the “organiser” or “retailer” of a holiday or both. Traditionally this would mean obligations imposed on Tour Operators and/or Travel Agents. The PTR applies to leisure and business  travel.

A package is defined as “the pre-arranged combination of at least two of the following components, sold or offered for sale, at an inclusive price, and when the service covers a period of more than 24 hours or includes overnight accommodation:

i.  Transport

ii.  Accommodation

iii. Other tourist services not ancillary to transport or accommodation and accounting for a significant proportion
of the package”

It seems obvious that a 7 night holiday in Spain where the flights and hotel are booked together would be defined as a package holiday. It becomes more complicated when flights and accommodation are booked through one operator at a combined price but involve a selection of different components by the consumer. Is this a regulated package under the PTR? That will depend on a specific analysis of the booking process.

The PTR deals with many issues of consumer protection including but not limited to:

1.    Ensuring that descriptive materials are not misleading. That covers brochures, web-sites and mailshots;

2.    No price revision on package holidays once booked, except for surcharges if specific conditions are satisfied;

3.    Procedures for responding to significant alterations to an essential term of the contract or where a significant
proportion of services are not provided;

4.    Provision for  substitutions, refunds, and/or compensation in particular situations;

5.    Security in the event of insolvency

The PTR ensures that if flights are booked with an airline that later collapses, there are usually obligations on the operator or travel agent to make alternative arrangements to fulfil that package (Regulation 12). That does not mean that replacement flights would have to be exactly the same but they would have to ensure the consumer could get to their destination within a reasonable period. That would depend on the length of the holiday. If they were unable to fulfil that obligation, they would have to offer a full refund of the total holiday cost, a substitute holiday and in some cases compensation.

The reason that package holidays are considered a “safer” option, particularly in recent turbulent times is that by law, package holidays sold through UK travel companies are required to be protected by the government-backed ATOL scheme. ATOL, (“Air Travel Organisers’ Licence”), covers flight-based holidays and is a government-run financial protection scheme operated by the Civil Aviation Authority (CAA). This means that if a travel company goes bust or an airline fails, customers who have future travel will be refunded and those already abroad will be entitled to hotel costs and/or flights home. ATOL does not apply to flights booked directly with an airline.

Not all package holidays are ATOL protected and consumers should take care to check who they book with. When “Low Cost Holidays” went into administration in 2016 it left 140,000 holidaymakers with very little protection as the Company had moved its headquarters and registered the Company in Spain in 2013. That made it exempt from ATOL protection.

In contrast, “All Leisure Holidays” went bust in January 2017 but as it was ATOL protected, full refunds were provided for cancelled holidays and those stranded abroad were brought home.

ABTA is the Association of British Travel Agents. It is the UK’s largest travel association, representing travel agents and tour operators and sells £32 billion of holidays and other travel arrangements each year. All packages that have been sold in the UK by ABTA Members are protected financially in the event of a company failure. This means that in the event a travel company goes out of business, there is a process to follow to rearrange a holiday or receive a refund.

As set out above, difficulties have developed in recent years with the increase in on-line bookings using a variety of different websites. This confuses the definition of a “package” as set out in the PTR.

“Dynamic packaging” is a term used to describe a type of package holiday booking which enables a consumer to build their own package of flights, accommodation, and car rental instead of purchasing a pre-defined package. This type of “package” may or may not be governed by the PTR and will require a Court to look at the way in which individual components are purchased.

As a result of the changes to the way in which holidays are booked, a new Package Travel Directive came into force in December 2015 and will apply to Package Travel from July 2018 if incorporated into domestic law. It remains to be seen whether that will happen in the UK as a result Brexit.

The aim of the new Directive is to broaden the scope of the current Regulations. A new definition is introduced which abolishes the terms “consumer” as defined in the PTR. The new Directive applies to “packages offered for sale by traders to travellers and to linked travel arrangements facilitated by traders to travellers”. It is anticipated that this broader definition will capture more individuals booking travel components online in a variety of ways.

It remains to be seen whether recent events will encourage consumers to return to their travel agents to book a traditional package holiday or whether the lure of independent travel or a bargain break will win. The future may see more of the travel booked by individuals on-line covered by new legislation if it is incorporated into UK law.

For more information on the Package Travel Regulations or travel law issues generally, please contact Rachel Mills, whose details appear below.

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About the contributor

  • Rachel Mills Partner

    Rachel has experience in all aspects of commercial litigation and dispute resolution involving contractual issues, insurance disputes and personal injury and fatality claims.

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