Partner Sydney
"Proposed amendment to the PTD is part of the EU’s wider approach to improving passenger rights, which includes passenger rights regulations."
We have prepared an update on developing regulatory issues within the travel sector in the EU and EEA, focussing on implications for “organisers” as defined under the Package Travel Directive. Below are the key points, which are addressed in more detail in this article:
- the EU’s bundle of proposals to strengthen passenger rights, including a proposed amendment to the Package Travel Directive (the “PTD”), Regulation 261/2004 (Air Passenger Rights Regulation) and Regulation 1107/2006 (Mobility Rights Regulation);
- the EU ran a consultation between February and May 2022 on proposed revisions to the PTD, the outcome of which has been the adoption of a proposal by the EU Commission (the “Commission”) which includes amendments targeting the simplification of the application of the PTD (such as the less workable aspects of the definitions of “linked travel arrangement” and “package”) and a new B2B refund right between travel service providers and organisers which would help organisers meet their 14-day refund obligation to travellers and prevent organisers being out of pocket; and
- the proposed amendment to the PTD is part of the EU’s wider approach to improving passenger rights, which includes passenger rights regulations such as the Air Passenger Rights Regulation) and the Mobility Rights Regulation. The Commission’s proposals include an introduction of new obligations for organisers and, in relation to the Air Passenger Rights Regulation in particular, have further implications for the relationship between air carriers and organisers when there is a problem with a flight that forms part of a package.
1. Proposed Amendment to the Package Travel Directive
In 2019, the Commission issued a report on the PTD and its application to online bookings. The report recognised developments in the market (increasing digitalisation), drew on stakeholders’ practical experience in the application of the PTD and discussed the failings of the PTD during COVID-19, which concluded that the PTD does not fully meet consumer needs.Three main problem areas were identified in this report:
a) Refunds for cancelled travel packages, especially in major crises i.e. COVID-19:
i. there is a practice of advance payments, lack of liquidity of organisers when faced with concurrent refund requests and legal uncertainty in relation to use of vouchers which act as key drivers of this problem (i.e. organisers use down payments received from consumers to pay in advance for travel services in package, but then depend on refunds from service providers to be able to reimburse travellers);
ii. this was a particular issue during the COVID-19 pandemic when airlines and hotels did not swiftly reimburse travellers and therefore travellers were getting refunds outside of 14-day PTD window;
iii. the PTD does not contain B2B rules on refunds. It also lacks rules governing the issuance of vouchers in place of a refund; and
iv. most business consultation responses indicated that they would welcome a new EU rule that requires service providers to repay organisers within a specific timeframe, shorter than 14 days.
b) Advance payments made by travellers are not sufficiently protected against an organiser’s insolvency:
i. insolvency protection for vouchers and refund rights stemming from cancellation varies between member states, as well as there being differences in national insolvency protection systems.
"Travellers are not always clear about the various roles played by parties involved in their booking, including in relation to refunds."
c) Difficulties in implementing the PTD:
i. its provisions are not clear enough, are complex or create gaps, leading to divergent levels of consumer protection;
ii. click through packages and linked travel arrangements have been highlighted as two problematic areas for application; and
iii. travellers are not always clear about the various roles played by parties involved in their booking, including in relation to refunds.
Updates and timing
Following the consultation on the proposed revisions to the PTD between February and May 2022, the Commission adopted a proposal for an amendment Directive to the PTD (the “Proposed Amendment”)¹. The feedback period on the Proposed Amendment is in place until 6 February 2024. It would also need to be reviewed and adopted by the European Parliament and European Council, each of whom may have amendments and negotiations may be required. Once adopted by all three institutions, it would enter into force 20 days after being published in the Official Journal of the EU and member states must transpose the amendment Directive 18 months after it enters into force. We do not as of yet have an indication of when the proposal would progress to the European Parliament or the European Council, but we will continue to track and provide updates throughout the approval process.
Content of Proposed Amendment
Key changes that will be of note, if passed, will include:
- change to the definitions and scope of “packages” and “linked travel arrangements” aimed at simplifying their application and clarifying their distinction, which has been identified as an issue in practice;
- improved clarity that the organiser is responsible for the provision of refunds;
- the insolvency protection of the organiser must cover refunds and vouchers issued as compensation or a refund, rather than just the package being affected by the organiser’s insolvency;
- a limitation on requesting a down payment of more than 25% of the total price of the package, which can be increased where necessary to ensure the organisation and performance of a package (i.e. expenditures present at the time of concluding the contract) or to meet higher advance payments to service providers. The organiser can demand the remaining payment four weeks before the start of the trip;
- a potential second layer of insolvency protection may be imposed by member states, which will also have increased supervisory obligations over organisers; and
- a prescribed seven-day period within which an organiser must be refunded by its travel suppliers to allow it to meet its 14-day refund obligations to travellers.
2. Further EU relevant regulations under review
Mobility rights: Regulation 1107/2006 (the “MRR”)
The MRR protects the rights of disabled persons and persons with reduced mobility when travelling by air and contains direct obligations for tour operators (organisers) to provide assistance leading up to the journey, as well as for air carriers during the journey and for airports before and after the journey at departure and arrival airports.
The Passenger Rights Proposals would also seek to amend the MRR, which would include the following amendments:
- introduction of an obligation on tour operators, air carriers and their agents to ensure that an accompanying person travels free of charge and sits next to a person with a disability or reduced mobility, where practicable: when handling requests from persons with a disability or reduced mobility as part of its PTD obligations, an organiser would need to ensure that it passes such information to the air carrier and that the air carrier has the responsibility to comply with such obligation if the organiser is not capable of facilitating this arrangement; and
- development of a risk-based approach to monitoring of compliance: tour operators will be monitored alongside air carriers and airport managing bodies by national enforcement bodies in Member States for their compliance with the MRR.
"The MDMSR is intended to make it easier for travellers to plan, compare and buy tickets digitally for journeys that combine different modes of transport in the EU, facilitating greener travel."
At this stage, the likely focus is on the companies providing the travel services and the MRR already direct obligations with which organisers much comply. Whether these obligations will apply more broadly will depend on the proposals to update the PTD, which are currently under consideration by the Commission.
3. On our radar
- In November, the Commission released proposals to improve passenger rights, particularly in relation to air passenger rights in Regulation 261/2004. This will be one of the Commission’s priorities for 2024 and we anticipate that Commission’s focus will include:
- reimbursement when a ticket is booked through an intermediary;
- standard form for reimbursement and compensation claims;
- passenger rights to information; and
- a risk-based compliance monitoring.
- The Commission issued a consultation on a proposal for a Multimodal Digital Mobility Services Regulation (“MDMSR”)². The MDMSR is intended to make it easier for travellers to plan, compare and buy tickets digitally for journeys that combine different modes of transport in the EU, facilitating greener travel and tying in with the EU’s objectives under the EU Green Deal. The MDMSR would facilitate the ability for digital platforms to combine air, rail, ferry and other ground transportation in a single trip. The proposal is significantly delayed, with the proposal adoption planned for Q1 2023. Particularly given the growing body of regulations for digital platforms, this proposal is on our radar.
[1] Proposed Amendment can be found here.
[2] The consultation can be found here.
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