The Package Travel Regulations

  • Introduction to the new Package Travel Regulations

    The roots of the current UK Package Travel Regulations trace back to the 1960s when UK tourists started to venture to Spain and the Mediterranean and the packaged travel industry picked up. During the 1970s there were various high profile failures, such as Court Line, with thousands of passengers left stranded abroad at airports and significant sums of money owed to people yet to travel. Public pressure following the case and other failures forced the UK Government to put in place a set of regulations to protect consumers. The Government subsequently set up the ATOL scheme in 1973, run and administered by the CAA and in 1992 formal UK legislation was put in place to protect consumers purchasing travel packages which were non-flight packages.

    The Package Travel and Linked Travel Arrangements Regulations 2018
    ** coming into force – 1st July 2018

    What is the Package Travel Directive (PTD)?

    The Package Travel Directive 2015 is the new Directive set by the European Union. The UK is required to adopt and incorporate the directive into local legislation and this is achieved through the Package Travel Regulations. Implementing the new regulation will ensure that UK travellers are better protected when buying different travel combinations online and in store from a high street travel agent.

    What are the Package Travel Regulations and am I required to comply with the new PTRs?

    Who do these regulations apply to?
    (1) These Regulations apply to –
    (a) packages (defined below) offered for sale or sold by travel organisers to travellers, and
    (b) linked travel arrangements (LTAs) (defined below), which are concluded on or after the commencement date of 1 July 2018.

    (2) These Regulations do not apply to –
    (a) packages and linked travel arrangements covering a period of less than 24 hours, unless overnight accommodation is included;
    (b) packages offered, and linked travel arrangements facilitated, occasionally on a not-for-profit basis for a limited group of travellers;
    (c) packages and linked travel arrangements purchased on the basis of a general agreement

    All travel organisers, both those acting as principle or agent selling package holidays in the UK and EU have to comply with these regulations. These rules are in place in the UK to implement a European Directive which now also affects all member states.

    Linked Travel Arrangement

    What is this type of sale?
    The New Package Travel Directive introduces essentially a new type of regulated holiday package, which will be called Linked Travel Arrangements (“LTA”). The LTA is created to capture business models which are not packages but which often compete closely with packages. It is therefore thought that some obligations should be imposed on the sale of LTAs, but not all of those applicable to packages.

    Essentially, an LTA will be formed where the consumer purchases two different types of Travel Services (with different travel providers) which does not therefore fall under the definition of a package. An LTA is formed where the travel organiser facilitates:

    • The separate selection and payment of each Travel Service; or
    • In a targeted manner, the purchase of at least one additional Travel Service from another travel organiser and that Travel Service is purchased within 24 hours.

    The consequences of a travel organiser facilitating the sale of an LTA is that it will be obliged to provide financial protection for the refund of payments it receives when a Travel Service is not performed as a consequence of the travel organiser’s insolvency. If it is responsible for the carriage of passengers, the insolvency protection must also cover the travelers’ repatriation. However, one very significant difference is that the New Directive does not impose liability on a facilitator of LTAs for the negligence of its suppliers; neither does it impose the same requirements concerning the provision of information to the traveller and the terms of contracts with the traveller. The real focus of LTAs is to provide financial protection for travel arrangements which are not quite packages.

    The Regulations also apply to travel packages which are not holidays, for example, business travel arrangements, conference arrangements, educational weekends, school trips etc.

    Package holidays could also include holidays where the accommodation and the flights are supplied by two different suppliers, but organised or put together by the same party.
    A holiday will not necessarily be a package if it’s made quite clear to you that you have two separate contracts, one with the airline and one with the accommodation provider.

    ABTOT is an approved body of the Department for Business, Energy and Industrial Strategy (BEIS) and therefore we are authorised to hold travel bonds on behalf of organisers in order to provide financial protection for customer prepayments, as dictated by these regulations.

    ABTOT also now has an ATOL franchise with the CAA, which opens the door to cover for both licensable (flight-inclusive) and non-licensable (non-flight) turnover. ABTOT’s total protection reduces duplication and saves you time. From enquiry to approval, we provide a service that’s comprehensive, straightforward and cost-effective. Our knowledgeable, helpful staff will assist you, making the process simple and straightforward, with one application, under one association, giving you total protection.

    Civil Aviation Authority (CAA) (ATOL)

    By law, every UK travel company which sells travel including flights and flights only, is required to hold an ATOL, which stands for Air Travel Organiser’s Licence. If a travel organiser with an ATOL ceases trading, the ATOL scheme protects customers who had booked holidays with the firm. It ensures they do not get stranded abroad or lose money. The scheme is designed to reassure consumers that their money is safe, and will provide assistance in the event of a travel company failure.

    ATOL was first introduced in 1973, as the popularity of overseas holidays grew. After a number of travel company failures left people stranded, the UK Government realised consumers required holiday protection should firms in the unregulated travel sector fall into difficulties.

    The scheme was designed to cover charter flights and package holidays, and functioned well for years. However, the holiday market has changed considerably and a rise in online booking and low cost airlines means many people now book the components of their holidays separately.

    As a result, changes were made to the ATOL scheme in April 2012. It now covers all overseas air holidays where a flight and accommodation have been booked together. It also covers some flights booked separately, and applies in some other circumstances too.

    ABTOT also now has an ATOL franchise with the CAA, which opens the door to cover for both licensable (flight-inclusive) and non-licensable (non-flight) turnover. Benefits include:

    • Single point of contact – which means you generally don’t need to liaise with both the CAA and ABTOT;
    • Simple and straightforward process;
    • Discounted APC payments;
    • Discounted ATOL fee;
    • No additional financial criteria test with the CAA;
    • No additional ATOL application form to complete.

    Financial Conduct Authority (FCA)

    Travel & General Insurance Services Limited is the sole provider of insurance backed travel bonds for ABTOT. Travel & General is an independent intermediary, entirely focused on the travel industry. The company underwrites financial protection products through binding agreements with Hiscox Insurance Company Limited. Travel & General also brokers travel insurance, combined liability insurance and other travel related insurances that clients require. Travel & General also has a number of Appointed Representatives who sell travel insurance to their customers. Travel & General is authorised and regulated by the Financial Conduct Authority (FCA) as an intermediary

    The FCA regulates the financial services industry in the UK. They have rule-making, investigative and enforcement powers. The FCA came into force on 1 April 2013 through the Financial Services Act 2012. Prior to this the financial industry was regulated by the Financial Services Authority (FSA).

    The Prudential Regulation Authority (PRA) also came into force on 1 April 2013 and is part of the new system. The PRA works alongside the FCA and is responsible for the prudential supervision and regulation of banks, building societies, credit unions, insurers and investment firms.

    The FCA’s key aim is to ensure financial markets work well so consumers get a fair deal. To do this, the FCA follows 3 statutory objectives:

    • Protect consumers;
    • Enhance the integrity of the UK financial system;
    • Help maintain competitive markets and promote effective competition in the interests of consumers.

    Their statutory objectives were set up under the Financial Services and Markets Act 2000 as amended by the Financial Services Act 2012.

    As an intermediary, Travel & General are accountable to the FCA for its actions.

    What’s important to SME travel organisers/what do they want?

    SME travel organisers are looking for simplicity with a more straightforward and cost-effective solution to complying with the PTRs. Travel organisers want one body for licensable and non-licensable travel that can cover their total turnover.

    Unfortunately, it’s expected that the new regulations will only make the process more complex. We’re working hard to make sure the industry is aware of the needs of SME travel organisers and that their voices are heard, as well as helping members to understand how the changes will affect them.

    What do the changes to the PTRs mean for the travel industry overall?

    For some, the changes may have very little affect whereas others, such as online travel organisers and travel agents, it has been more significant. The Government isn’t proposing to do as much as it could to simplify the process; it appears to be doing just enough to implement the PTD requirements. For example the flight and non-flight inclusive package protection regime is not expected to be simplified, which is what the industry is crying out for.

    From a consumer perspective the new changes seem to be a positive step forward, with more protection being put in place as the definition of what makes up a ‘package’ is extended.

    As already described above, the Package Travel Directive 2015 maintains the requirement that organisers of package holidays must provide financial failure insurance to their customers. The security must provide for the refund of all payments received in relation to forward bookings and the repatriation of travellers who have already departed. However, the new Package Travel Directive adds a significant new twist.

    The Package Travel Directive 2015 provides that all member states of the EU must recognise the insolvency protection regimes of other member states. To be more precise, a member state cannot impose its own insolvency protection regime on a foreign company selling to travellers who live in its country, if that company is established in another member state and complies with the insolvency protection rules of that other member state. In practice, what this will mean is that a company based in, say, France, but selling into France, Netherlands, Switzerland and the UK, will not have to comply with the insolvency protection rules of each of those member states. It will only have to comply with the French rules.

    This is just one of the practical issues which will have to be worked through before the New Package Travel Directive can effectively be implemented.

    We expect detailed guidance from BEIS and the CAA in relation to these anticipated problems in the near future and ABTOT is working closely with both regulators to ensure practical and complete compliance for its members with the Regulations,

    Bank bonding

    ABTOT’s preferred method of bonding is a travel bond with Travel & General. However, we will accept bank bonds too where this is felt more convenient by clients. The main difference between the two is that banks generally require security before they will issue a travel bond e.g. cash to be put aside or the financial guarantee secured against property such as the travel organiser’s home. In the past banks were able to offer lower rates than insurance backed bond providers due to the security requirement. However, in recent years insurance backed travel bond pricing has come much more in line with bank rates. Additionally, as insurance bonds still generally have no security requirements, they can provide a much more attractive deal for travel organisers.

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