European Commission supports voluntary travel vouchers but what are the implications for the UK travel business?

The Recommendation comes as the UK Competition and Markets Authority issued an update about its Covid-19 taskforce, in which it revealed that it has received over 60,000 complaints on coronavirus-related issues.  Holidays and airlines accounted for almost 27,000 complaints, and as a result the CMA has decided to add package holidays to its focus.

The EU’s Recommendation is part of a package of guidelines and recommendations to help member states gradually lift travel restrictions and allow tourism businesses to reopen, after months of lockdown, while respecting necessary health precautions. The package also aims to help the EU tourism sector recover from the pandemic.

The package includes:

• A recommendation which aims to make travel vouchers an attractive alternative to cash reimbursement for consumers;

• An overall strategy towards recovery in 2020 and beyond;

• A common approach to restoring free movement and lifting restrictions at EU internal borders in a gradual and coordinated way;

• A framework to support the gradual re-establishment of transport whilst ensuring the safety of passengers and personnel;

• Criteria for restoring tourism activities safely and gradually and for developing health protocols for hospitality establishments such as hotels.

Travel vouchers

This article considers the implications of the Recommendation for the issue of travel vouchers, which have been the subject of much debate and were covered in our article on cancellation rights and the pandemic.

Under Article 8 of Regulation 261/2004, travellers have the right to choose between vouchers or cash reimbursement for cancelled transport tickets (plane, train, bus/coach, and ferries) or package travel.

In relation to coronavirus cancellations, many tour operators and airlines have refused to offer refunds outright, or made it very difficult for consumers to claim refunds, and have offered vouchers instead.

The Commission is upholding consumers’ legal rights to refunds.  However, it wants to encourage consumers to accept vouchers to prevent airlines and other operators from becoming insolvent.

Therefore, it wishes to ensure that voluntary vouchers become a viable and more attractive alternative to reimbursement for cancelled trips in the context of the current pandemic.

The vouchers should be protected against insolvency of the issuer, with a minimum validity period of 12 months, and be refundable after at most one year, if not redeemed. The Recommendation says “such protection could be set up by the private or the public sector, and should be sufficiently effective and robust” and says member states could set up dedicated guarantee schemes.

Vouchers should also provide passengers sufficient flexibility: They should allow the passengers to travel on the same route under the same conditions or allow them to book a package travel contract with the same type of services or of equivalent quality. They should also be transferable to another traveller.

However, it is worth highlighting that this would only apply where the airline cancels, and not when a consumer chooses not to travel.

The European Parliament’s Transport and Tourism Committee has welcomed the Commission’s latest package saying

“On passenger rights...we welcome the recommendation on vouchers and reimbursements. Consumers cannot be doubly victimised by this crisis and have to be able to choose freely between reimbursements and attractive vouchers”.

Implications for the UK

The UK remains subject to European law during the current transition period, due to expire on 31 December 2020. However, as the European Commission notice is a Recommendation, it does not have legal force, so the UK is not bound to accept it.  However, UK businesses have been encouraging consumers to accept vouchers and ABTA has been lobbying the UK government to take similar action.  ABTA is already recommending that consumers accept so-called Refund Credit Notes (RCNs).  ABTA has said that for bonded holidays, the protection that attached to the original booking, under ATOL bonding and/or ABTA bonding, will attach to RCNs, but neither the UK government nor the Civil Aviation Authority (CAA) have confirmed this. The CAA’s own website states that ATOL protection is intended to protect travellers against the insolvency of the operator either before they travel or while they are on holiday  There is no clear basis for maintaining that it will also protect travellers against the insolvency of the company which sold you the holiday if that then renders an RCN worthless.

In any event flight-only bookings are not covered by ATOL protection and ordinary vouchers enjoy no protection at all. It remains to be seen where insolvency protection for RCNs could come from if the government does not underwrite them.  Which? is currently advising consumers not to accept RCNs or vouchers until there is more clarity about how they will be protected, whether by bonding, a deposit scheme or insurance.

Therefore, businesses may offer vouchers but not in a way that misleads consumers about their legal rights.  Consumers continue as before to be entitled to a full cash refund within 14 days of their holiday being cancelled as a consequence of lockdown measures, and nothing should be done which misleads them in relation to that entitlement. That could be an offence under the Consumer Protection from Unfair Trading Practices Regulations 2008, and eventually incur the wrath of the CMA.