IMCO Committee study on the Package Travel Directive

14 November 2023: This week, the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO) published a study on the Performance of the Package Travel Directive and broader consumer protection issues in the implementation of passenger rights produced by the Policy Department for Economic, Scientific and Quality of Life Policies. It will serve as a basis for the Committee's work once the final text has been adopted by Commission.

The study is based on quantitative and qualitative research methods, including interviews with consumer authorities, Alternative Dispute Resolution bodies and stakeholders in the tourism ecosystem (including OTAs and their respective associations). Ten Member States were selected to carry out the study: the Czech Republic, Finland, France, Germany, Greece, Italy, the Netherlands, Poland, Romania and Spain.

Main findings

1/ PTD Substantive Law

• Update definitions (in particular, Package Travel Services and Linked Travel Arrangements) because it has been observed that consumers find it difficult to understand when they can rely on each type of protection.
• Develop comprehensive pre-contractual information forms (including key information documents, visual aids and infographics).
• Provide clear and user-friendly pre-contractual information.
• Re-evaluate the full pre-payment business model and explore alternative payment structures, like reducing the amount of the pre-payment.
• Rules on vouchers, since the evidence shows that there are still different approaches between countries.
• Mandatory insurance schemes or public funds to prevent insolvency risks.

2/ PTD Enforcement

• Enhance enforcement mechanisms at both national and regional levels.
• Improve the effectiveness of private enforcement and collective redress mechanisms.
• Enhance ADR mechanisms and consider mandatory and specialised ADR.
• Co-ordination with the Air Passenger Rights Regulation.

The PTD allows consumers to cancel their package and receive a full refund “in the event of unavoidable and extraordinary circumstances”. Currently, this right does not exist in EU261. According to the study, this creates a disparity regarding the right to reimbursement depending on the service booked (package vs single air service).

If an unavoidable and extraordinary circumstance is to occur, under the PTD the consumer can cancel their package and the organiser of the package must reimburse the consumer. However, if the flight takes place, the airline is under no obligation to refund the airfare to the organiser.

The study mentions the example of the COVID-19 pandemic where airlines were flying to destinations, even if restrictions were in place in that area. In this instance, because the flight could technically go ahead, the package organiser will obtain no refund for the price of the flight, meaning they must take on the cost of that refund which has contributed to prices rising in the market.

The study provides examples of many instances in which package travel organisers are unable to receive refunds for flight tickets, whilst they must reimburse consumers under the PTD within 14 days and stresses that this puts significant cost pressure on package travel organisers and creates a financial risk for SME operators.

It also highlights that redress options are not robust enough to oblige the travel service providers to repay the advance payments (e.g., the airline) to the package travel organiser.

Industry experts (interviewed in the context of the study) have agreed that a solution to this issue is the alignment of the legal frameworks and financial protection requirements between package travel organisers and airlines. Such an alignment will have – according to representatives of OTAs – positive impacts on costs and, in turn, consumer prices.

The study suggests some possible improvements, including:

• Aligning the definitions and terminology used in both the PTD and APR can promote clarity and consistency.
• Develop clear guidelines and communication materials that outline the rights and obligations of travellers under both provisions.
• Enhance co-operation and communication between the national authorities responsible for enforcing the PTD and EU261.

Please note that ERA was not part of the group of stakeholders interviewed by the authors of this study.

31 October 2023: Last week, the Tourism Task Force (TTF) of the European Parliament met to discuss with the European Commission DG JUST and tourism stakeholders some aspects of the revision of the Package Travel Directive (PTD.

During the meeting, some MEPs pointed out that the PTD could not be examined without considering the air passenger rights regulation and that DG JUST and DG MOVE have different perspectives. They also questioned the timing of the initiative, stressing that the right time to present the proposal was immediately after the COVID-19 crisis. With the end of the mandate approaching, it would be very difficult to get a parliamentary position on this revision in such a timeframe.

The representative of the European Commission DG JUST stressed that the Commission had addressed these issues immediately after the COVID-19 pandemic (for example, the recommendation on vouchers in May 2020). However, any change to the PTD required an impact assessment along with a public consultations process. He stressed that the Commission's proposal would be based on a solid impact assessment.

In-depth deliberations are currently ongoing within the Commission on the content of the proposal, including limitations on pre-payments, binding rules on vouchers and refunds, insolvency protection rules to include refund and voucher rights as well as a potential a B2B refund right and a crisis fund to ensure rapid refunds for cancelled packages.

As a reminder, the revision is due to be formally adopted on 29 November, as part of the Mobility Package along with the revision of Regulation 261/2004. ERA is continuing to closely follow any policy developments regarding these two revisions and will inform its Industry Affairs representatives as soon as more information on the content is available.

22 February 2023: The European Commission (DG JUST) in currently in the process of reviewing the Package Travel Directive (EU) 2015/2302. Recently, DG JUST commissioned consultants Ricardo to conduct the Impact Assessment study which should be submitted by May 2023. A proposal is expected by the end of this year.

The revision of the Package Travel Directive (PTD) started at the beginning of last year. ERA responded to the EC public consultation in May 2022, focussing on insolvency schemes and pre-payments. It emerged from the consultation process that travellers face difficulties in recovering pre-payments for cancelled packages in the event of a major crisis, e.g. the COVID-19 pandemic, and that there are difficulties in implementing the overall PTD due to the role of the different parties involved.

ERA understands that both initiatives on consumer rights (revision of EU261 as part of the 'Better protection for passengers and their rights' initiative and the revision of the PTD) are being conducted in parallel with DG MOVE and DG JUST co-ordinating very closely.

Here below are the policy measures that are currently being assessed:

1. Establishment of a B2B refund right for package organisers against service providers, to enable organisers to make timely refunds to travellers.
2. Limitation of pre-payments to 20 per cent at booking and 80 per cent at the earliest 28 days before departure, only for package organisers (at the moment).
3. Simplification of the main concepts through abandoning LTAs and adjusting the definition of packages.
4. Insolvency protection (establishment of a guarantee fund).

ERA is currently drafting a feedback note which will be sent to the consultants in the coming weeks, in which we will raise our concerns about the establishment of B2B refund rights and limitations on pre-payments.

We will also raise concerns about the need for co-ordination between the PTD revision and the ongoing review of EU261, highlighting the need to clarify the process for refunding passengers when booking through intermediaries to avoid any overlap.