The Travel and Leisure Law People

Package Travel Directive – Consultation Update

Package Travel Directive – Consultation Update

In this, the latest serious of our “Thought Leadership” articles, Travlaw’s Farina Azam walks us through the key points of the recent consultations regarding the imminent Package Travel Directive implementation…

The Department for Transport, DBEIS and CAA recently published consultations on proposed changes to the ATOL Regulations as a result of the PTD 2015. We, he Travel Industry, have until 23rd March to reply. The key points raised from this consultation are:

  • The ATOL Regs will be updated to adopt the new, broader definition of a package from the PTD. This will result in a widened scope of protection and may mean that some companies who are currently outside the scope of the ATOL scheme, are now brought within the ATOL scheme.
  • In keeping with the above, Flight-Plus will be abolished, with the majority of Flight-Plus products now falling within the broader definition of a package, or Linked Travel Arrangements (LTA) so these business models will continue to be regulated in some way.
  • You’ll be aware that the PTD is bringing in a new type of travel arrangement, calling Linked Travel Arrangements (LTAs). This will apply to multi-contract sales which don’t fall within the definition of a package, for example “click throughs” where no data is passed but the customer is directed to another website and makes a booking on the second website within 24 hours of their first booking. the first trader has facilitated that booking and therefore arranged a LTA and will need protection for their own insolvency. The consultation confirms that Insolvency protection for LTAs will be implemented through the new PTD, i.e. through insurance, trust account or a bond, and not through ATOL. Although where the LTA includes a flight-only booking as the first element, ATOL protection may still apply and may be sufficient for the purposes of insolvency protection required by the first trader, under the PTD. So, there may be some overlap, but otherwise LTAs will remain outside the scope of ATOL protection.
  • ATOL protection will be extended to sales from UK businesses when they sell packages to customers in Europe. This means that UK companies will be able to sell across Europe without the need to comply with different insolvency protection regimes. However, this may also result in increased sales for some companies, and ATOL limits may need to be revised as a result.
  • It follows that EEA Traders will be able to sell packages to consumers in the UK without an ATOL, provided they comply with the PTD 2015 using measures in their own Member States. There are of course some very obvious issues with this, what if the requirements in that Member State are lower than those of ATOL within the UK? Whilst all Member States will need to comply with the requirements of PTD 2015 and this will mean everyone has a minimum level of cover, not all Member States have a regime as robust as the UK’s ATOL regime, which could already result in a lower level of protection offered to UK consumers when purchasing from EEA traders. The CAA has also confirmed that it will no longer grant ATOLs to companies who are based within the EEA but selling to UK consumers. These companies will now need to comply with their own Member State requirements, or rearrange their business model so they have a place of establishment in the UK.
  • The current exemption under the ATOL Regs for “flight only use of a consumer’s credit or debit card” will be widened to cover travel companies who sell confirmed airline tickets where the airline has been paid in full at the time of booking, regardless of how that payment was made, and provided the customer receives a confirmed airline ticket as part of the same transaction.
  • Companies who procure flights whilst acting as an agent for the consumer (as opposed to acting as an agent for the travel supplier) will now be brought within the scope of ATOL. This provides clarity on what was previously a grey area within the current ATOL Regs.
  • Business travel arrangements sold under a “general business travel agreement” will be exempt from ATOL to make this consistent with the new PTD exemption for these sales. However, the CAA has suggested that they may publish a schedule of terms which must be included in any such general agreement in order for the exemption to apply.
  • Agents for ATOL Holders: the ATOL Regs will be amended to clarify that “Agents for ATOL Holders” will not be exempt from the requirement to hold an ATOL if they’re organising packages in their own right.
  • The Schedule of Agency Terms will remain a requirement of acting as an agent for an ATOL Holder, but will be amended to reflect the additional information provisions required under PTD 2015. This will mean that all ATOL Holders and agents will need to update and re-issue agency agreements when the new terms are published. Those companies acting as agent for EEA Traders will be exempt from the requirement to hold an ATOL, to avoid there being double protection in place (i.e. both ATOL and the EEA Trader’s own insolvency protection) for the same booking. It’s likely the CAA will publish mandated agency terms which must be included in agency agreements with EEA Traders for this exemption to apply.
  • The CAA proposes additional enforcement provisions, which will include civil sanctions against those not complying with the ATOL scheme.
  • The ATOL Certificate will remain but in an amended form to reflect the changes being made to the ATOL scheme. The CAA has also suggested that they will introduce an online ATOL licensing system. This means that ATOL Holders or their agents will have to submit the booking data via the online system and the CAA will then issue the ATOL Certificate to the consumer. This would prevent fraudulent ATOL certificates being issues and provide the CAA with access to real time data which can then be used to refund/repatriate customers in the event of an ATOL holder financial failure.

Next steps

The CAA/BEIS and DfT are inviting the industry’s thoughts and comments on the consultation by the 23rd March 2018. We are of course in the process of preparing a response. If you have any concerns or questions regarding any of the above points, please do let us know and we’ll see if we can provide further advice, or if needed, include your concerns in our response. Please contact Farina Azam on for further information.

March 2018

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Travlaw LLP is a limited liability partnership registered in England & Wales (Reg. no. OC342402) and is authorised and regulated by the Solicitors Regulation Authority.

Members include: Stephen M Mason* MA, Rivka Hawley ACILEx (Non-Lawyer Member), Matt Gatenby BA (Hons), Farina Azam LLB (Hons). *Holding Higher Rights (Civil) qualification **CEDR accredited mediator.

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