Coronavirus mini-series: (1) package travel industry

This blog is by Christopher Fleming of 12 King’s Bench Walk. It is the first in a new mini-series considering the impact of the coronavirus pandemic on the international travel industry from a litigation perspective. Christopher considers the following issue:

The restrictions on travel arising from attempts to halt the spread of COVID-19 pose an existential threat to the package travel industry. What obligations do tour operators have to provide refunds or alternative arrangements following cancellations in these circumstances?

On 23 March, Dominic Raab urged the 1 million Britons overseas to return to the UK immediately. This followed on from the Government’s announcement on 17 March advising against all non-essential travel abroad.

It is estimated that two million overseas package holidays were scheduled to depart between 17 March and 16 April. These have all had to be cancelled or postponed, representing what has been estimated as a £1bn loss for the travel industry.

Given the increasingly stringent measures being adopted to halt the spread of the virus, it seems unlikely that any comparable arrangements or price reductions will be able to be offered by package travel providers (as provided for by reg. 15(8) Package Travel, etc. Regulations 2018 (‘PTR’). Under the PTR, companies are required to refund customers in the event of a cancellation within 14 days. However, the Association of Travel Agents (ABTA) has warned that holidaymakers should not expect refunds for cancelled holidays within the statutory time limit.

In line with the European Commission’s (‘EC’) recommendation, ABTA is urging customers to accept credit notes instead of refunds, thereby deferring repayment to a later date. ABTA have confirmed that any credit notes will benefit from the same statutory protections as standard holiday booking.

In light of the financial difficulties households will have to face in the coming weeks and months, many customers will likely baulk at this proposal. The offer of credit could be seen as an interest free loan from customers helping to prop up a travel industry in desperate need of liquidity to stay afloat. Jet2 have sought to make the offer of credit somewhat more appealing by giving customers £100 off any new booking.

Despite the EC’s recommendation, the government has yet to provide guidance to customers and travel operators. As such, there is still a great deal of uncertainty with regards to the position of customers seeking a refund rather than a credit note, as the PTR is still in force at the time of writing. The Government will effectively have to balance the interests of cash strapped customers, and those of package travel companies facing unprecedented cancellations and a complete drop off in new bookings.

In the meantime, Dominic Raab last night announced a government scheme to repatriate tens of thousands of Britons stranded abroad under a new arrangement between the government and airlines.

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