Why the Package Travel Directive
need reform
The objective of the Package
Travel Directive was to create a level playing field across
the EU for the sale of the standard package holiday. By definition,
a package includes a combination of any two components from transport,
accommodation or other services. This has to be purchased on a pre-arranged
basis, at a single price. If someone sells, or offers for sale,
one of these ‘packages’ they are an ‘organizer’
for the purposes of the legislation.
The Directive covers:
• the contents of brochures, information for clients and terms
of the contract
• consumer remedies in the event of a failure to deliver
• compulsory refund and repatriation in the event of insolvency
The financial security is provided by a bond, insurance or trust
fund. These are usually established through national trade associations,
such as ABTA.
In the UK there is an additional requirement to have an Air Tour
Operator’s License (ATOL). If held it counts towards the financial
security obligation.
The Package Travel Directive is now out of date. It has numerous
problems associated with it:
1) It does not consider consumers self packaging their holidays.
2) It does not cover consumers based in one country purchasing from
suppliers based outside the jurisdiction of the EU.
3) It does not cover scheduled airlines. If an airline goes bankrupt,
consumers will be protected only if they purchased their flight
from a consolidator – if they purchased directly through an
airline website, then they are exposed to the risk of total loss.
Over the past few years, the proportion of holidays that are ‘protected’
has fallen from about 90% to about 60%.
4) It acts as an effective block on cross border trade. Consumers
do benefit from financial protection if they purchase from an organizer
in another country of the EU, as the company would have to have
bonding. But as their recourse in the event of financial collapse
is to that organizer’s bond in its country, the practicalities
of doing so are onerous. Thus Europe has the least integrated market
for travel services of any major trading block on earth. Consumer
demand follows consumer protection, sitting neatly in silos through
each member state.
5) There is considerable confusion as to who accepts liability for
what, and when a customer is covered an when they are not. For instance
additional security can be obtained by someone using a credit card
(but not if the billing is taking place in the Republic of Ireland).
This is not extended to those using a debit card.
Whilst there is a clear consensus that the Package Travel Directive
is out of date and in urgent need of reform, there is difficulty
in agreeing what the reform should be. Although it is slated for
revision in 2007, it is not a high priority and is unlikely to happen
before 2009.
A proposal by the Civil Aviation Authority in the UK to charge
a £1 levy on every flight to create a fund to bond airlines
in the event of financial collapse was rejected by the UK government.
There are concerns about the desirability of dropping the current
requirement for package holidays to be bonded, moving towards a
more general system of insurance as underwriters may be reluctant
to underwrite such commercial risks as operating an airline or running
a tour operator.
Source Documents
Package Travel Directive 1990
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