Latest news on the impact of COVID-19 on the Package Travel Industry

25 Mar 2020

Written by Matthew Ford, BLM partner and head of travel, and Sarah Prager, 1 Chancery Lane.

In the first of a series of weekly bulletins, Matthew Ford and Sarah Prager examine the latest travel law news.

It is now clear that the travel industry faces a considerable challenge in responding to the worldwide COVID-19 pandemic. Following the Government’s announcement on Monday evening, we are in the midst of near-total lockdown, and airlines, cruise operators and tour operators face a short and medium term future of unprecedented difficulty.

The British government has promised a package of assistance to all businesses, including the tourism and leisure industries; but it has also recognised that the travel industry is uniquely affected by the inability of consumers to use its services.

In what some will see as a surprising move, the government has announced the suspension of the requirement under the Package Travel, Package Holidays and Package Tours Regulations 1992 that in the event of cancellation of a package holiday the consumer is entitled to a refund. Although perhaps surprising, this announcement was, in retrospect, inevitable; in the first month of the Foreign and Commonwealth Office’s announcement that consumers should avoid all but essential travel abroad, some two million overseas package holidays were due to take place. All were cancelled, at an estimated cost to the industry of £1 billion. Clearly, with bookings in negative figures (because no holidays are being booked, and millions are being cancelled), this could not continue. On 20 March the European Commission updated its guidance on the regulatory position, encouraging holidaymakers to accept vouchers instead of immediate refunds. Very shortly the British government is expected to provide further guidance allowing package holiday providers to offer consumers the choice between an immediate refund and credit against future travel taking place within the next two years. The scheme will be underwritten by the government, meaning that if the provider becomes insolvent within the next two years, the consumer is entitled to a full refund from the state. The ultimate choice between reimbursement and credit remains with the consumer, however.

ABTA has welcomed the news, commenting:

“This new guidance will give customers the essential assurance that they will either get a holiday or their money back, as well as providing a much needed helping hand to travel companies through these difficult and unprecedented times.”

For some, the concession will not go far enough; the Italian government has already implemented similar measures, but has left the choice of whether to refund or provide credit with the package provider. For others, of course, it should not have been made at all; with consumers facing an uncertain financial future, the immediate reimbursement of the cost of a non-essential expense would no doubt have been very welcome.

It appears that with this move the government is attempting to strike a difficult balance between the interests of individual consumers, and confidence in the industry, on one hand; and the needs of holiday providers and their employees, on the other. One thing is certain: much, much more will need to done for the industry in the coming weeks and months. Early indications are that the political will is there to do it, but the proof is in the funding, and time is short.

About the authors

Matthew Ford has led BLM’s travel team, which consists of over 30 lawyers across 6 offices, since 2006. The firm advises numerous leading tour operators, insurers and brokers on various travel issues, including claims, regulatory and risk management solutions.

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade.

 

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Matthew Ford

Matthew Ford

Partner,
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