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Impact – Financial protection under the New Package Travel Directive

The implications for financial protection under the new Package Travel Directive for travel companies selling ‘new’ packages don’t depart significantly from the current regime under the 1992 Package Travel Regulations: traders will still be required to financially protect their packages using either a trust account, insurance policy or bond. Similarly, the effect of the ATOL Regulations will not change, meaning that many traditional tour operators will not need to re-visit their existing financial protection arrangements under the new Package Travel Regulations. The only companies that are exposed to new requirements to protect forward payments are those that are currently taking advantage of the non-package ‘shopping basket’ approach to selling multiple single elements at a total but not inclusive price that was made possible following the Travel Republic case.

The implications for companies selling Assisted Travel Arrangements are more significant however:  as is not the case currently, traders will under the new regime be required to financially protect Assisted Travel Arrangements, again using either an insurance policy, trust account or bond. Those traders that are currently selling what will eventually amount to an ATA which includes flights with accommodation or self-drive car hire are likely to already hold an ATOL supported by a bond, trust account or insurance policy. However, those that are currently avoiding that licencing requirement by excluding flights from their portfolio will need to be financially protecting their sales under the new regime.

The new legislation requires that for the insolvency protection to be effective, it should cover the foreseeable amounts of payments affected by a trader’s insolvency and, where applicable, the foreseeable cost for repatriations. Arguably therefore in the case of Assisted Travel Arrangements where the trader acts as an agent for the supplier of the service, protection need only be in place until the supplier has been paid.

Financial protection requirements under the new Package Travel Regulations will require traders to state clearly and prominently using a standard form of wording whether they are offering a package or an assisted travel arrangement, and of the corresponding level of protection, before the traveller agrees to pay. Failure to do so will result in a trader selling an ATA being treated as a package organiser subject to more onerous liabilities and obligations.