The protection available to holidaymakers needs clarifying

Continental holidays are still very popular, despite the difficult economic times. The essence of a package holiday is an arrangement covering transport and accommodation booked in advance at an inclusive price (Keppel-Palmer v Exsus Travel Ltd [2003] EWHC 3529 QB; R (ABTA) v CCA [2006] EWCA Civ 1356). Unfortunately over the years there have been some serious failures and collapses by companies in the travel and holiday business; for example, Clarkson 1974, Laker's 1982, International Leisure Group 1991, XL 2008. Recession increases the risk.

The statutory protection for the package holidaymaker has improved considerably. On the European Union EU level there is the Directive on Package Travel 1990, 90/314/EEC (which covers air travel, coach and ferry). For the UK, deriving from the UK directive, there are the Package Travel, Package Holiday and Package Tours Regulations 1992 SI 3288. Money paid under the contract is held in trust until performance (regulation 20). The Department of Business, Innovation and Skills has issued guidance.

Under the Civil Aviation Act 1971, the Civil Aviation Authority CAA in conjunction with the industry set up the Air Travel Organisers Licence ATOL scheme, a financial protection scheme for holidaymakers. Under the Air Travel Reserve Fund Act 1975 there is the Air Travel Trust, a fund, including bonds, to guarantee any shortfall in the ATOL scheme. The Air Travel Insolvency Protection Advisory Committee (ATIPAC) advises.

Naturally the consumer should seek to deal with a reputable company; for example, one belonging either to the British Travel Agents Association ABTA or the Association of Independent Tour Operators AITO.

Although the overall protection for the package holidaymaker is therefore legally sound, the problem that has arisen is that the consumer pays in advance to the holiday company, but the holiday company often does not pay the hotel until after the holiday, i.e. in the autumn and early winter. If the company goes bust in the summer, and has not observed the trust requirement, the hotel demands payment in cash from the holidaymaker for the stay, or continued stay, and the stand-in airline, whichever airline is able and willing to carry the holidaymaker home, demands cash for the flight home.

The consumer will worry that they may have in effect to pay twice for the hotel and the flight; though in fact under the protection scheme they will eventually be able to recover the additional money, albeit after some administrative hassle. The amount recovered may, however, end up by being less than actually paid out. Also, the consumer may not have cash or other monies readily available, and may end up stranded, dependent upon the goodwill and assistance of others.

NCF has for many years campaigned for the principle of the trust fund, namely that, where the consumer pays in advance for goods and services, money should be set aside in a trust fund to be paid over, as the consumer intended, only to the airline and hotel, and not be available for general use by the company. If the company was to go bust during the summer the money for the airline and hotel would be available, and all parties would be secure. The hotels and airlines would not need to seek the additional payments from the consumers.

The DIY holiday

Increasingly today the consumer is not going for the package holiday, and is instead going online to arrange their own travel and accommodation, DIY, to suit their particular wishes. The statutory package regulations do not cover them, so they must ensure that they take out appropriate and adequate insurance cover. There may, in the small print, be all kinds of exclusions and exemptions and limitations. For example, consequential loss is often excluded. Dealing with established and reputable airlines and hotels is therefore most important. A big gap in consumer protection in the law is still not rectified; the application of the concept of the trust fund again would be of real significance.

It is not always clear whether a holiday is or is not a 'package'. The substance of the transaction must be investigated. The essence of a package is an element of organisation or combination, e.g. travel and ?accommodation, put together by a company or agent, albeit acting on instructions from the holidaymaker, at an inclusive price. Invoicing for separate components will not suffice to escape being a legal package if in reality the arrangement is a package. Or was everything done exclusively by the holidaymaker booking everything themselves online with no outside commercial assistance?

The air traveller may find that they are denied access to the aircraft, e.g. 'bumping off', because of overbooking; or the flight is cancelled, and an alternative flight offered; or one way or another he is delayed. He must be given appropriate meals, accommodation and transportation. He is entitled to compensation for delay exceeding three hours. The carrier has a defence if the delay was due to exceptional circumstances, a concept to be strictly construed. The situation must be unavoidable, beyond control, not inherent in the nature of air travel activity, not a mere technical fault (see Sturgeon v Condor Flugdienst GmbH [2010] 2 All ER (Comm) 983, C-402/07 and C-432/07; European Parliament and Council Regulation (EC) 261/2004; and Halsbury's Laws fifth edition, volume 21). Sturgeon is again currently before the ECJ, but most unlikely to be changed.

The great advantage using a credit card for payment over £100 is that the card issuer is liable in the event of default by the holiday company, at home and abroad (see OFT v Lloyd's TSB Bank plc [2006] EWCA Civ 268).

So, enjoy your holiday. But make sure beforehand that so far as possible you are fully protected against any company collapse, and that you will not be suddenly confronted with a demand for additional payment, even if that additional payment is, or may be, recoverable in due course.

Review and reform

The European Union is considering review and reform. Consultation has taken place since 2009, and the publication of proposals is expected in 2012. The consumer wants clarity over the booking arrangements and the charges, especially the extra or hidden charges. In the UK the government has consulted on those extra or hidden charges, euphemistically described as administration charges, surcharges, booking fees, or credit or debit card charges, and action is expected in due course. It is sometimes difficult for the consumer to judge what is fair competition in the market. As the DIY online option increases in popularity, the need for clarity and improvement on the degree of protection available to the consumer will intensify.