The Commission is consulting on extending the basic cover provided by EU’s 1990 Package Travel Directive – on information, liability for sub-standard services and protection for insolvency - to the next generation of ‘dynamic packages’ where consumers make up their own packages, often online, through one website or different partner websites. 23% of EU consumers, and over 40% in countries like Ireland, Sweden are now booking "dynamic packages", many of which currently fall outside EU protection rules (67% mistakenly think they are protected). Following the recent spate of airlines going bust, the paper also considers extending basic insolvency protection for consumers beyond package and dynamic packages across the board, including for stand alone airline tickets.
EU Consumer Commissioner Meglena Kuneva said: "We need tough protection that gives all consumers booking a package holiday the peace of mind they deserve, and we need a level playing field so businesses compete on equal terms. I am particularly concerned about the issue of insolvency. Anyone who saw the TV pictures of thousands of holidaymakers stranded at airports after bankruptcies from Sky Europe to XL, Futura and Zoom, knows that now is the right time to ask tough questions about extending basic insolvency protection to consumers across the board."
The current rules
The EU Package Travel Directive (PTD), dates back to 1990 when the most common type of holiday was a two week package booked through a travel agent using a brochure. The PTD covers pre-defined package holidays combining at least two of the following: (1) transport, (2) accommodation (3) other tourists services such as sightseeing tours (sold at an inclusive price).
The Directive provides protection covering: information in brochures, rights to cancel without penalty, liability for services (eg sub-standard hotels) and protection in the case of a tour operator or airline going bust.
6 priority areas for review
The 1990 PTD is no longer suited for today’s travel market. The internet and low cost airlines have transformed business models and changed consumer behaviour. Increasingly large volumes of bookings are made by consumers putting together their own packages, often online.
6 priority areas have been identified for review:
1. The scope of the Package Travel Directive: The paper considers which types of new package holidays should be covered by the PTD. These could include:
(1) Packages put together by the consumer on the internet from the same website in one go eg Expedia, Opodo.
(2) Packages put together by websites linked through partnership agreements. For instance, a consumer may book a flight online and then be redirected to a partner website offering hotel stays or car rental.
(3) Other travel arrangements, currently not covered, such as cruises or transportation which includes accommodation (eg overnight boat or train trips) and others. See MEMO/09/523 for details.
2. Information: The paper consults on the information to be provided to consumers, when and in what format. The current PTD focuses on brochures and does not mention other media, such as websites.
3. Liability for substandard services and assistance for consumers: The paper consults on who should be liable for the performance of services and for assisting the consumer with problems during the holiday. Today, the old distinctions between carriers, tour operators and travel agents are often blurred. It can be unclear who is responsible when things go wrong.
4. Contract Changes: The PTD allows consumers to cancel a contract without penalty if "essential elements" eg overall price, change in carrier, are changed. The paper considers if there is a need to exchange existing rules on price revision.
5. Insolvency: The PTD requires the tour operator or travel agent to provide security for the refund of all money paid by the consumer and for the repatriation of the consumer in the event of bankruptcy. The risk of insolvency has increased recently. Following a recent spate of airlines going bust, the paper considers whether basic insolvency protection should be extended to cover buying standalone airline tickets (i.e independent travel arrangements not part of any package) so that passengers would be reimbursed for money paid over or repatriated if the airline went bankrupt.
6. Travel Protection Label: The paper considers a “Travel Protection Label” at EU level to indicate which travel products and/or combination of products were protected under the legislation.
What happens next?
- The Commission intends to bring forward concrete proposals to review the Package Travel Directive in Autumn 2010. - The Commission is also in the process of preparing a review on air passenger rights which will deal with a wide range of consumer issues, including the insolvency of airlines.
Key developments in the package travel sector:
Europe is the world's largest regional travel market with sales of €246 billion in 2008. Traditional packages (pre-packaged deals containing several elements such as travel and accommodation) account for 40% (€ 98.4 billion) of the total travel market, while dynamic packages for 33% and other travel arrangements for 25% of the market.
Nowadays, a majority of the EU citizens (56% of holidaymakers across the EU, organise their holidays themselves, rather than purchase pre-defined packages (traditional holiday package covered by the Package Travel Directive).
Increasingly large volumes of bookings are made by consumers who have put together their own packages (dynamic packaging), where travellers themselves put together two or more services, such as flight and accommodation from one supplier or from commercially linked suppliers eg websites such as Opodo or Expedia or websites offering packages with partner websites. For instance, a consumer may book a flight online and then be redirected to a partner website offering hotel stays or car rental.
It is important to note that genuinely separate bookings where the consumer buys different components from different sellers /websites that are not linked or co-branded are generally not covered by the review. These "independent travel arrangements" are not considered part of the Package Holiday Sector.
The number of consumers booking ‘dynamic packages’ is increasing dramatically. 23% of EU citizens have used dynamic packages in the past 2 years, but the figure is over 40% in countries such as Ireland (46%) or Sweden (44%), and very high also in countries such as Slovenia (42%) and Italy (36%).
Many dynamic packages are currently not covered by EU Package Travel Protection. As a consequence an increasing number of consumers booking package holidays are falling outside the scope of the Directive. To illustrate the extent of the change, in 1997, 98% of passengers travelling from the UK on leisure flights were protected by the EU’s Package Travel Directive, whereas in 2005 this number is less than 50%.
It is also clear that consumers are not aware that their legal protection differs depending on how the arrangements are purchased – even though the package of travel components can be identical. 67% of consumers surveyed who used a "dynamic package" that was not covered by the Directive wrongly believed that they were protected. On average, a dynamic package which goes wrong means a loss of almost €600 for the consumer.
Over 50% of consumers believe that they are protected in case of airline bankruptcy when purchasing dynamic packages or independent travel arrangements. In many cases they are currently not covered.
Bankruptcy has become a more pressing concern for consumers, since the risk of insolvency has grown recently. Between November 2005 and September 2008, 29 airlines went bankrupt. In France, for example, there were also 125 bankruptcies of tour operators in 2008, affecting over 9,000 consumers, compared with 95 bankruptcies (affecting just over 2,500 consumers) in 2006. Their effects on holidaymakers varied depending whether tickets were bought as part of a package holiday. As the travel trends have change significantly since the adoption of the Directive in 1990, it is important, particularly, to ask the question whether there should be different protection for insolvency for air tickets sold in a package and those sold as stand alone products.
By: N. Peter Kramer
