As we approach the summer, the ongoing risks and restrictions caused by the Coronavirus pandemic have meant that many of us have seen our dreams of a foreign holiday melt like a dropped ice-lolly. Consequently, the rights of would-be travellers to refunds and/or compensation for now redundant pre-booked holidays and cancelled flights continue to be a hot topic.

Understandably, holiday makers’ attention is now focused upon refunds, offers of postponement and travel vouchers. Whilst this article will discuss a traveller’s general rights, it will also consider whether the rights of the consumer are likely to be eroded in favour of protecting the financial stability of the travel companies and airlines.

Package holidays

There is no doubt that traveller’s with package holidays booked before 11 March 2020, the date upon which Covid-19 was categorised as a pandemic by the World Health Organisation, have the most protection under the Package Travel and Linked Travel Arrangements Regulations 2018 (“the Regulations”).

The Regulations allow for termination of the holiday by the traveller or the tour organiser where there are ‘unavoidable and extraordinary circumstances’ occurring at the place of destination or its immediate vicinity and which significantly affect the performance of the package, or the carriage of passengers to the destination. In such circumstances, the traveller or tour operator may terminate before the package begins, without a termination fee becoming due, and is entitled to a full refund, but not to additional compensation from the tour operator.

Liability for the performance of the package and thus, a refund, is placed explicitly on the organiser, regardless of whether the services are in fact performed by third parties and the refund is due within 14 days of termination.

Nevertheless, there have been reports that tour operators are offering customers a 20% “booking incentive” if they accept a voucher instead of a refund. Whilst ultimately it is a matter for the customer whether they accept an offer for such an “incentive”, it is worth bearing in mind that not only does the customer have an express right to a refund, but there is also the risk of tour operators collapsing under the current pressure or future bookings also being cancelled due to the Coronavirus.

That said, there is also the additional, potentially very important, protection in place for package holidays by way of the ATOL scheme. So, in the circumstances where the tour operator collapses before the trip, there will still be protection for travellers. In the circumstances where the future of many tour operators and airlines looks uncertain, this could provide vital protection to travellers.

ABTA have called upon the Government to amend the Regulations due to the current crisis, by extending the window for refunding credit notes, as a short-term alternative to cash refunds, however, other lobbying groups have opposed this on the basis that travellers would be kept out of pocket for longer. The question is, how long will a reasonable extension of time be when there is no certainty as to when restrictions will be lifted? Is this the price to pay to reduce the risk of tour operators going under and is this a consequence, albeit a difficult one to swallow, of the risks involved in booking holidays in advance in the uncertain times in which we currently live?

Flight cancellations

 Non-essential flights were suspended from 23 March 2020 for an indefinite period[1] and as of 5 June 2020, the advice from the Foreign and Commonwealth Office continues to be that non-essential travel should be avoided. Thus, many thousands of airline customers have been seeking refunds for cancelled flights.However, reports in the media would suggest that airlines have, in the main, been offering and encouraging customers to accept a postponement and/or travel vouchers instead.

For example, one airline started by promising to refund customers within 20 working days, then amended this to once the “crisis has passed”, and they are encouraging customers to accept vouchers, which will be valid for 12 months, and will be refunded if it is un-used by their expiry. Another airline is currently allowing anyone who has a flight booked up until 31 July 2020, which has yet to be cancelled, to cancel it for free and claim a voucher for its value, but according to the airline, once this has been accepted, the passenger has forfeited their right to a refund. This is despite the fact that the passenger would be legally entitled to a refund if the flight was cancelled.

A passenger’s right to a refund in circumstances where their flight is cancelled is staunchly protected by EU Regulation 261/2004, which applies to passengers departing from any EU country, as well as Iceland, Norway, Switzerland and the UK. A full cash refund must be paid within 7 days. Should a refund not be forthcoming, the passenger may issue a small claim in the County Court – the authors of this article have already seen this starting.

The outcome of discussions with the Department for Transport to consider whether the 7 day refund period should be relaxed, remain to be seen. However, if this was to occur, there is no doubt that it would see a detraction from the consumer-focussed nature of the EU Regulation, which otherwise has the rights of the consumer at the heart. Again, there is no indication as to how long the refund period may be extended by and thus how long passengers will be out of pocket.

A further right that a consumer may have under EU Regulation 261/2004 (“Regulation 261”), is a right to compensation for a cancelled flight depending upon the date on which they are informed of the cancellation and/or whether they are offered re-routing (which is unlikely to be possible currently). It is anticipated that most passengers will find/have found that their flights have been cancelled long before the right to compensation accrued, although there will certainly be a cadre of passengers whose journeys in early-2020 were cancelled within this period.

However, airlines are not obliged to pay compensation if they can show that the flight was cancelled as a result of ‘extraordinary circumstances’ which could not have been avoided, even if all reasonable measures had been taken. Regulation 261 does not define ‘extraordinary circumstances’, and pandemic, epidemic or health emergency are not expressly included within the examples of ‘extraordinary circumstances’ listed in the Recital. Nevertheless, given the nature of the pandemic it seems likely that the airlines will be able to successfully argue that the Coronavirus pandemic constitutes extraordinary circumstances absolving them of any liability to pay compensation.

Support for this position comes from the European Commission’s Notice “Interpretative Guidelines on EU passenger rights regulations in the context of the developing situation with Covid-19”[2] issued on 18 March 2020. Paragraph 3.4 of the notice sets out a number of circumstances where the Commission considers that the ‘extraordinary circumstances’ defence is, or may be, made out and where no compensation is payable. Whilst not binding, these Guidelines provide welcome guidance to passengers and carriers in circumstances which few would attempt to argue could not properly be called extraordinary.

It remains to be seen precisely how this argument will play out in the courts, however in light of the Commission’s Notice (albeit such guidance is non-binding), the authors would be surprised if a) airlines accept passengers’ claims for compensation when requested or b) many claims will be successful in the various aviation ADRs schemes or in the County Court.

Alternatives: credit cards and insurance policies

In the scenario where an airline simply won’t refund a passenger, or the traveller has suffered consequential losses such as pre-paid car hire or booked hotel rooms, there are other options that may be available.

Firstly, claiming on travel insurance. This option should be available to a traveller if both the policy was incepted and the travel was booked before the 11 March 2020. It has also recently been confirmed by the Financial Conduct Authority, that a person with an annual policy purchased before 11 March who renewed with the same insurer after that, should still be covered for travel issues related to the Coronavirus. However, it appears that such cover will not be available to travellers who took out their insurance or made their booking after this date, and a significant number of insurers have temporarily suspended the sale of travel insurance or expressly excluded cancellation as a result of the Coronavirus pandemic. Further, insurers will not pay out where the tour operator or airline simply refuses a refund or offers vouchers instead. Consequently, the number of people able to claim under a travel insurance policy may be minimal.

Alternatively, a traveller may be able to claim through their credit card provider. Section 75 of the Consumer Credit Act 1974 protects most consumers if they have purchased a product or service which is not provided and they have paid more than £100 and less than £30,000 for it. This also applies to part payment, for example, if only a deposit has been paid it will still be protected if it was more than £100.

However, the terms and conditions of some airlines may allow them to change and cancel flights such that the cancellation of flights during the Coronavirus pandemic is not a breach of contract. Further, as the banks are also facing significant pressure on finances and resources, it appears, anecdotally, that some are either reluctant or slow to process section 75 claims during this turbulent period.

Concluding thoughts

The authors of this article have already seen claims coming through the small claims process for refunds and compensation from airlines, and there is no doubt that there will be an increase in such claims.

The regulations discussed above have the protection of the consumer at their forefront, but that protection is not absolute. The extent to which these protections may lawfully be derogated from remains to be seen and should be monitored carefully. Even with the defences open to carriers and tour operators, the media is full of articles detailing the torrid time that the sector is enduring.

It is clear that consumers are currently out of pocket and tour operators and airlines simply cannot keep up with the requests, so are not complying with the 7 and 14 day periods for refunds. There is no doubt that the current situation is dire for both operators and consumers and a quick resolution is, in the author’s opinion, unlikely. This is particularly so as travellers may be tempted to issue proceedings in the first instance, but the reality, regrettably, is that the Court Service is under extreme pressures and claims are unlikely to be listed for trial for a significant period of time. Thus, a more efficient and effective way forward may be for travellers to give careful consideration to the extent of their rights and to articulate those claims to the operators. This would allow for the focus to remain on the recoverable and merited heads of claim, which in turn, may lead to quicker resolution of claims.

It should be acknowledged that this article was accurate at the date of publication and its authors are not responsible for any amendments or changes to the law or guidance following its publication.

[1] Some flight operators have announced that they will begin operating flights again from 15 June 2020, however a 14-day quarantine period will be in place in the UK for an initial period of 3-weeks from 8 June 2020

[2] https://ec.europa.eu/transport/sites/transport/files/legislation/c20201830.pdf

This article Holiday rights in the Coronavirus Pandemic is written by Tim Salisbury and Alice Scott, for further information on either’s practice please contact our clerking team via email or through our switchboard on 020 7353 0711.