EUROPEAN COMMISSION

Brussels, 29.11.2023

SWD(2023) 906 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

Proposal for a Directive of the European Parliament and of the Council

amending Directive (EU) 2015/2302 to make the protection of travellers more effective and to simplify and clarify certain aspects of the Directive

{COM(2023) 905 final} - {SEC(2023) 540 final} - {SWD(2023) 905 final} - {SWD(2023) 907 final} - {SWD(2023) 908 final}

Table of contents

1.Introduction: Political and legal context

2.Problem definition

3.Why should the EU act?

4.Objectives: What is to be achieved?

5.What are the available policy options?

6.What are the impacts of the policy options?

7.How do the options compare?

8.Preferred option

9.How will actual impacts be monitored and evaluated?

Annex 1: Procedural information

1.Lead DG, Decide Planning/CWP references

2.Organisation and timing

3.Consultation of the RSB

4.Evidence, sources and quality

Annex 2: Stakeholder consultation (Synopsis report)

1.Overview of consultation activities

2.Key results of the consultations

2.1 Key feedback on the evaluation

2.2Key feedback regarding the Impact Assessment

3.Use of stakeholder feedback

Annex 3: Who is affected and how?

1.Practical implications of the initiative

2.Summary of costs and benefits

3.Relevant sustainable development goals

Annex 4: Analytical methods

1.Methodology of the study to support this evaluation and impact assessment

2.analysis and processing of the results of the public and targeted consultations

3.Justification of Baseline estimates and methods used for calculations

4.Analysis of impacts and comparison of options

Annex 5: Competitiveness check

1. Competitiveness Check:

2. Synthetic assessment

Annex 6: SME Test

Annex 7: Problem Tree

Annex 8: Annex on price sensitivity for travel services

ANNEX 9: Impacts on Consumer Rights, Fundamental rights and related Sustainable Development Goals

ANNEX 10: Results of Benefits and costs analysis, scoring of options and the sensitivity analysis

1.Calculations, scoring and sensitivity analysis

2.Additional ranking of options

ANNEX 11: Presentation of the package travel directive

ANNEX 12: Linked travel arrangements

Annex 13: Evaluation

Glossary

0.Introduction: Political and legal context 

0.0.International and EU economic context

Tourism plays an increasingly important role in the global economy, accounting for over 10% of global gross domestic product (GDP) directly and indirectly. Driven rising incomes, falling travel-related costs and an increasing range of available tourism activities, the global number of tourists rose from 680 million in 2000 to over 1.5 billion in 2019. 1  The European Union, is the world’s No 1 tourist destination, 2  receiving approximately two-thirds of international tourist arrivals in 2022. 3  The tourism industry plays a key role in the EU economy, with some 2.3 million tourism businesses and 10.9 million people working in the industry in 2020. 4

European consumers use a range of ways to book travel services for the same trip or holiday. For instance, they can make separate bookings for transport and/or accommodation directly with service providers or via intermediaries. Alternatively, they can buy online, or offline pre-arranged or customised packages composed of different types of travel services. 5 They can use, for instance, the services of a tour operator, travel agency or any other trader offering packages. 6   Directive (EU) 2015/2302 on package travel and linked travel arrangements (‘the Directive’, ‘the Package Travel Directive’ or ‘the PTD’) 7   regulates such packages but does not apply to stand-alone services or the mere combination of different modes of transport. 

Between 2014 and 2017, the number of packages 8 accounted on average for 9% of the total number of trips for personal reasons in the EU27. 9 Considering that, at that time, the definition of package of the 1990 Directive still applied, this figure will likely not include dynamic packages. 10 In the same period, package travel accounted for some 23% of the total spending for travel for personal reasons in the EU-27. 11  Package travel was expected to represent 10.5% of the travel and tourism market in 2023 and 10.7% by 2027 in terms of “user penetration”. 12 As such, the market share of package travel remains relatively stable since 2014.

The COVID-19 pandemic starting in 2020, with lockdowns and other measures taken by the Member States, inevitably affected these trends. The contribution of tourism to the total GDP in Europe halved from 9.5% in 2019 to 4.9% in 2020. Following the re-opening of borders and easing of COVID-19 related measures, the World Economic Forum reported on signs of recovery in the tourism market, with a 27% rise in 2021 in nights spent in tourist accommodation in the EU, as compared to 2020. However, this remained 37% lower than in 2019. 13  For 2022 there were prospects that the region would recover 70% of the pre-pandemic travel demand. 14 This trend is confirmed by Statista based on January 2023 figures, with the EU-27 total package travel sector revenue expected to reach EUR 96.4 bn in 2023. Revenue is expected to show an annual growth rate of 1.02%, 15 resulting in a projected market volume of EUR 100.4 bn by 2027. The number of travellers using package holidays is expected to amount to 94.6 million by 2027. 16

0.1.The Package Travel Directive and related instruments or initiatives

A first directive on package travel, package holidays and package tours was adopted in 1990. 17 This Directive was replaced with Directive (EU) 2015/2302 on package travel and linked travel arrangements (‘the Directive’, ‘the Package Travel Directive’ or ‘the PTD’). 18  The Directive is part of the EEA acquis and thus applies in the 30 EEA-countries. 19  The PTD contains a broader definition of what constitutes a package than the 1990 Directive and introduced the new concept of linked travel arrangements (LTAs) for loser combinations of travel services. 20  Packages and linked travel arrangements are combinations of at least two different types of travel services (e.g., passenger transport, such as a flight, and accommodation or car rental, however not the mere combination of different modes of transport). Depending on the booking process such combinations can be packages, offering full protection, or LTAs, offering more limited protection. The protected party in the PTD is the ‘traveller’, encompassing consumers and certain business travellers. This report uses ‘traveller’ and ‘consumer’ interchangeably. Organisers of a package are responsible for the proper performance of a package and are subject to various other obligations under the PTD. Where packages are sold via a third party (intermediary), this trader is referred to as a ‘retailer’.

Package travellers enjoy the same comprehensive rights across the EU, 21 including in relation to pre-contractual information, the content of a contract, cancellations and contract changes, liability for improper performance, assistance, as well as protection against the insolvency of an organiser (refunds of pre-payments and repatriation).

The Directive started applying in July 2018. In June 2019, the Commission issued a report on the provisions of the Directive on online bookings made at different points of sale (‘click-through bookings report’). 22 , 23  

After the adoption of the first Package Travel Directive in 1990, five Regulations on passenger rights in different modes of transport were adopted at EU level. For example, Regulation (EC) No 261/2004 (the ‘Air Passenger Rights Regulation’ or ‘APRR’) 24 which provides for rights of air passengers in relation to flight cancellations, denied boarding or delays. This Regulation is complementary to the PTD, given that flights are often part of a package, and the relationship between both instruments is regulated in different provisions of the PTD and the APRR, aiming to achieve coherence between the two instruments. 25

Overall, the PTD is more comprehensive in terms of consumer rights and provides for a higher level of consumer protection. For instance, unlike under the PTD, there is no compulsory protection for passengers against the air carrier’s insolvency and no cancellation right for passengers due to unavoidable and extraordinary circumstances under the APRR. However, the Air Services Regulation 26  provides for a strict financial oversight regime for airlines. An overview of the key consumer rights under the PTD and of the APRR is provided in Annex 11. 

The outbreak of the COVID-19 pandemic led to mass cancellations of package holidays, while no new bookings came in. Due to the knock-on liquidity problems of organisers, many travellers did not receive refunds or only considerably later than the 14 days required under the PTD. In its Recommendation 2020/648 of May 2020 (’the 2020 Recommendation’), 27 the Commission set out principles on the use of voluntary vouchers and ways to make them more attractive for travellers, including by protecting them against the insolvency of the organiser. Uptake of the Recommendation has varied across the Member States. Several Member States even adopted legislation deviating from the Directive, extending the periods for refunds or making vouchers mandatory for travellers. In July 2020, the Commission therefore opened infringement proceedings against 11 Member States. 28  

The Commission’s report of 26.2.2021 (‘PTD Application Report’) 29 provides an overview of how the Directive has been applied since July 2018, and how it has been transposed by the Member States into national law. It highlights several challenges, including those emerging from the 2019 Thomas Cook bankruptcy and the COVID-19 pandemic. The difficulties in applying the PTD, highlighted in the report, include the complexity and uncertainty caused by the provisions on LTAs, difficulties in issuing refunds and effective insolvency protection in a major crisis, including the lack of rules on vouchers and uncertainty on insolvency protection cover for vouchers and refund claims for cancelled packages. Moreover, the Commission has conducted an evaluation of the Directive, which can be found in Annex 13 to this staff working document (‘SWD’).

The European Court of Auditors (‘ECA’) issued a special report on the non-respect of air passenger rights during COVID-19. 30  In its recommendations, the ECA asked the Commission to examine how, including through legislative changes, the rights of air passengers and travellers can be strengthened, including in a crisis, regarding refunds for cancelled trips and the insolvency of operators.

In parallel to this review, the Commission is reviewing the passenger rights regulatory framework, under the initiative ‘Travel – better protection for passengers and their rights’, 31  including also the APRR. 32 The review of the APRR comprises refunds for cancelled flights where intermediaries are involved. In addition, the review of the Air Services Regulation, which remains to be completed, could increase coherence between air passenger rights and the PTD. This review covers the financial resilience of air carriers, including the question of insolvency protection for air carriers, potential limitations of prepayments, possible cancellation rights for air passengers and price transparency.

Given the comprehensive character of the PTD, the purpose of the amendments considered in this IAR is to fill specific gaps and clarify specific issues in this legal act. Given that the scope and purpose of the other acts and initiatives is different, the need to tackle these issues in the PTD is independent of these acts and initiatives. The filling of gaps and the clarifications considered for the PTD are particularly important for the protection of travellers in a crisis but would add value to the PTD also at normal times. The targeted changes considered relate, for instance, to the absence of rules on vouchers, uncertainty on insolvency protection for vouchers and refund claims and specific aspects of the cancellation of packages due to unavoidable circumstances.

In as much as this can be done in the PTD, the envisaged revision will further improve coherence between the PTD and the APRR, e.g., through the introduction of rules on vouchers and a business-to-business refund right. 33 The measures on pre-payments, insolvency protection and crisis mechanisms, which are part of the preferred option, take into account the state of play regarding passenger rights.  Any further steps towards more coherence between the legislation on packages and transport services depend on developments in legislation managed by DG MOVE, for instance, in relation to the Air Services Regulation. 34  

The evaluation and review of the PTD is listed in the New Consumer Agenda of 13 November 2020, 35 where the Commission announced that by 2022 it would carry out a ‘deeper analysis into whether the current regulatory framework for package travel, including as regards insolvency protection, is still fully up to the task of ensuring robust and comprehensive consumer protection at all times, taking into account also developments in the field of passenger rights.’ Moreover, the initiative contributes to the Sustainable Development Goal (‘SDG’) SDG no. 10 – reduced inequalities, by facilitating better information provision by organisers and better protection of travellers’ rights. It further aims at reducing the number of travellers needing recourse to dispute resolution or legal procedures, thereby contributing to SDG no. 16 – peace, justice and strong institutions. Finally, it contributes to SDG No. 8 – decent work and economic growth, by promoting growth of SMEs, as most package organisers belong to this category.

The PTD is in the scope of application of the Consumer Protection Cooperation Regulation (‘CPC Regulation’) 36  and the Representative Actions Directive (‘RAD’). 37 Thanks to these instruments, its enforcement will become more effective. Already today, the CPC Regulation provides, inter alia, for joint enforcement actions against non-compliant traders. Furthermore, through the recent initiative on Consumer protection – Strengthened Enforcement Cooperation, 38 this system will be strengthened also in relation to large EU-wide infringements. The RAD applies from June 2023, and increases the level of protection of travellers’ and consumers’ collective interests, both at national and cross-border level, for example by seeking injunctive and redress measures. Since the PTD lays down substantive rules, whereas the CPC Regulation and RAD are procedural rules, the instruments are complementary without raising potential coherence issues. 

The recent Commission proposal on insolvency 39 aims to create more predictable conditions for cross-border investment in the EU by harmonising targeted aspects of substantive insolvency law. The PTD and the Insolvency Proposal aim at the proper functioning of the internal market but have a different purpose. Both instruments are complementary, and no potential conflict has been identified.

1.Problem definition

1.0.What are the problems?

In the EU, package travel is a highly regulated market. Indeed, the PTD contains detailed rules on aspects such as pre-contractual information requirements, contract changes, cancellations, liability for improper performance, alternative arrangements, assistance to travellers and insolvency protection requirements for package organisers. In this way, the Directive aims to ensure a high level of protection for travellers and to contribute to fair competition in the internal market.

This initiative seeks to address three main problems which have contributed to the fact that the Directive is only partially effective, as found in the evaluation and described in more detail below, along with their regulatory and practical drivers. These three problems are: Problem 1 – Travellers face difficulties in recovering prepayments for cancelled packages, in particular in the event of a major crisis, Problem 2 – Prepayments made by travellers are not sufficiently protected against insolvency of the organiser, and Problem 3 – Difficulties in implementing the Directive.

These three problems interact and have a cumulative impact on the effectiveness of the Directive. Problem 1, as well as certain aspects of problems 2 and 3 manifested themselves, in particular, during the COVID-19 pandemic, whereas certain aspects of problems 2 and 3 were identified already before or independently of COVID-19. Most aspects covered by the three problems concern regulatory failure in the form of legal gaps and uncertainty regarding certain provisions and concepts of the Directive. In addition, certain aspects of problems 1 and 2, i.e. the challenges posed by the pre-payment model in the face of mass cancellations and the limited availability of insolvency protection insurance in some Member States, relate to market failure, predominantly in a major crisis.

1.0.0.Problem 1: Travellers face difficulties in recovering prepayments for cancelled packages, in particular in the event of a major crisis

Traditionally, pre-payments are the standard payment model in the package travel sector. 40  However, prepayments imply that, in case of cancellation, the organiser must reimburse travellers under certain conditions.  41  

Under the PTD, travellers and/or organisers have the right to cancel packages free of charge ‘in the event of unavoidable and extraordinary circumstances’, travellers being entitled to a full refund of any payments made for the package within 14 days from the termination of the contract. 42  As explained further below, before the COVID-19 pandemic, although travellers experienced problems in recovering prepayments in the event of cancellations of package travel contracts due to ‘“unavoidable and extraordinary circumstances’”, the related refunds became problematic for travellers and organisers in particular during the COVID-19 pandemic.  

Before the COVID-19 period, the losses experienced by travellers related to the cancellation of packages can be estimated based on the annual consumer expenditures for package travel. In 2017, these were estimated to reach 58 billion EUR (762 EUR per trip) for trips within the EU and 36 billion EUR (1.756 EUR per trip) for trips to other parts of the world. 43 This corresponds to around 76.1 million trips within the EU and 20.5 million trips to countries outside the EU. Based on the PTD Application Report, around 4.4% of package travellers experienced financial loss, 44 a fact that may have an impact of 5.4 billion EUR on trip values (both within and outside the EU). It is unlikely that the losses suffered by the affected travellers would have amounted to the total value of their trips. Considering that the value of the affected services represents between 10-30% 45 of the total package price, the losses suffered by travellers are estimated at between 540 million to 1.6 billion EUR per year in a normal year. 46  

According to consumer organisations, travellers faced challenges in recovering prepayments, albeit to a lesser extent as during the COVID-19. 47 This suggests that there were certain compliance issues also at ordinary times, but, in the absence of more specific information, it must be assumed that, in terms of the volume of refunds and the extent of the delay of refunds, the problems were much smaller than during the COVID crisis.

‘To reinforce the enforcement and consumer protection’, BEUC calls for automatic refunds for clear cut cases. 48 , 49  The organisers have travellers’ data and ‘could simply transfer the money to them automatically without the need for consumers to complain first. […] Similar schemes already exist in several sectors, including rail, energy in the UK or public transport in Denmark.’ 50  

The outbreak of COVID-19 in 2020 was a severe public health emergency, which also caused a major economic shock with unprecedented pressure on the EU’s travel and tourism sectors.

To contain the COVID-19 pandemic, travel and other health-related restrictions were implemented since March 2020 at European and worldwide level. Those restrictions led to a vast number of cancellations of package travel contracts, impacting the tourism sector in all Member States and the EEA. For example, ‘according to the Bulgarian authorities […] the spread of COVID-19 in 2020 led to a collapse of the tourism sector’ 51  In Austria, ‘[d]uring the first lockdown […] in spring 2020, overnight tourist stays in the country dropped by almost 100%. Over the summer of 2020, despite temporary recovery, tourism activity remained clearly below 2019 levels. As of October 2020, another economic downturn in the Austrian tourism sector began due to the increase in the number of COVID-19 infections and the related travel warnings adopted in neighbouring countries. On 2 November 2020, a second lockdown was imposed during which accommodation establishments and restaurants had to close. […] overnight tourist stays in Austria dropped again by around 95% in November 2020. On 2 December 2020, the Austrian government announced that Austrian accommodation establishments would not reopen before January 2021. In January 2021, the website of the Federal Ministry for Agriculture, Regions and Tourism announces that accommodation establishments will remain closed also in February 2021.’ 52 , 53 The German authorities estimated ‘that revenues of the travel industry in Germany decreased by EUR 10.8 billion by the end of June 2020.’ 54 In Sweden, ‘the revenues for travel agencies and tour operators […] was in average 78% lower from May 11 to November 11 2020, compared to the years before the COVID-19 outbreak.’ 55  According to the French authorities, the COVID-19 gravely impacted the tourism sector ‘representing between 7.5 and 9% of Gross Domestic Product’ and the package travel market in particular, ‘representing between 20 and 30% of this percentage.’ 56

While it is not possible to arrive at a robust estimate of the value or number of cancelled packages, the data available for flights can give an indication on the magnitude of the cancellation also for packages. ‘The total reduction in passenger numbers was estimated at 346 million for the first six months of the year of 2020 by Eurostat, and at 800 million, or 67%, for the full year by the International Civil Aviation Organisation (ICAO).’ 57  According to the estimation of the European Court of Auditors (ECA), roughly 50 million tickets were cancelled between March and May 2020. 

In the Impact Assessment (IA) accompanying a proposal for a Regulation for common rules for enforcement of passenger rights, passenger rights for multimodal journeys, and reimbursements of airline tickets bought via an intermediary, 58 it is assumed that the percentage of tickets in terms of number of passengers 59 , 60 of scheduled and charter flights as part of package travel would be 1.5-3% each.  61

Between March and May 2020, at the beginning of COVID-19, the cancellation of approx. 50 million flight tickets, 62 triggered a decrease of flights of around 76% and a decrease of around 75% in expenditure on package trips in 2020 as compared to 2019. 63 Based on this data, and using the abovementioned estimate that the value of the affected flights included in packages would represent between 10-30% of the total package price, the losses could range from 500-1500 million during the first three months of the pandemic. 64

Travellers from all Member States faced major difficulties in recovering prepayments within 14 days for cancelled packages during the COVID-19 pandemic. 65  By December 2020, thousands of travellers had not yet received a refund in money for cancelled holidays, according to Bureau Européen des Unions de Consommateurs (BEUC). 66 , 67 , 68

More specifically, 85% (23 of 27) of national authorities indicated that refunds of prepayments were not provided within 14 days. 69  Organisers denied or postponed the refunds either by imposing vouchers/credit notes on travellers, 70 or extending the 14-day deadline for refunds by more than a month. 71  Travellers often received a refund only after filing a complaint to an enforcement body. 72  Travellers were often not informed on their right to refuse vouchers  73 and sometimes traders refused to reimburse money for expired vouchers. 74 Moreover, some travellers did not use the vouchers for alternative trips and were, between February and May 2022, still waiting for their money. 75  In addition, travellers were referred from one trader to another, as the organiser and the retailer could not agree on who was responsible for the refund, thus triggering delay or no reimbursement. 76  

Therefore, the problems faced by travellers in recovering prepayments caused loss in consumer welfare, including by impeding travellers to dispose freely of the prepaid amount, and personal detriment (e.g., time loss, hassle and other psychological detriment).

For organisers, it proved difficult to comply with refund rights triggered by the PTD. On the one hand, organisers had booked travel services in advance for travellers, by making partial or full payments to service providers, while, on the other hand, travellers were cancelling their trips, asking for reimbursement, without the possibility for organisers to recover prepayments from service suppliers. 77 Since the number of bookings also collapsed, companies were unable to generate new sources of revenue to execute refunds, which had an impact on their liquidity. 78 At the same time, if service providers became insolvent in the meanwhile, organisers might not receive refunds at all.

Article 22 of the PTD 79 refers to a right of redress of organisers against third parties. However, this provision does not specify that service providers are obliged to make a refund to organisers within a given period where a service or a package is cancelled.

The losses experienced by organisers during the COVID-19 period (2020 and 2021 combined) could be estimated at 15 billion EUR based on the macro-estimate of total reduction in value. 80  However, the loss continued after the immediate COVID-19 years and could arrive at up to 25 billion EUR until the end of 2023. Nevertheless, in order to arrive at a net loss figure, state support measures and lower operating costs (e.g., fuel not used) would need to be deducted. Based on a rough gap analysis, support measures could have cushioned up to 40% of immediate crisis losses suffered by organisers.

Organisers had to take out loans to cover the costs of refunds to travellers at least ‘to a moderate extent’. 81 In several, but not all Member States, there were aid schemes for package organisers and other travel companies.  82 , 83  

Several Member States adopted temporary rules deviating from the PTD, 15 of them giving package organisers the possibility to significantly extend the periods for reimbursements or make vouchers mandatory for travellers. In July 2020, the Commission opened infringement proceedings against 11 Member States. 84  The infringement proceedings were closed after the relevant Member States repealed the legislation deviating from the PTD or after the relevant measures had expired. On 8 June 2023, the Court of Justice of the European Union (CJEU) confirmed the Commission’s interpretation in the one remaining infringement case and in a preliminary ruling. 85  The CJEU confirmed that the PTD aims at full harmonisation 86 and that the term ‘refund’ in the PTD implies a refund consisting in an amount of money which travellers can dispose of freely and does not include the idea of a voucher. 87  The CJEU concluded that the Member States were not allowed to adopt national legislation releasing organisers temporarily from the obligation to reimburse prepayments to travellers within 14 days of the termination of the contract. 

Overall, these national measures and the infringement cases demonstrate that the rules on refunds of prepayments of the PTD were often not respected during COVID-19. This is also confirmed by the ECA report of 29 June 2021. 88  

The protection of prepayments is an area needing improvement as noted in particular by consumer organisations, with BEUC recommending that the Commission ‘consider amending the Directive to ensure that all European consumers benefit from a broader scope of financial protection of prepayments, including for cancelled travel in extraordinary circumstances and for respective vouchers.’ 89  

Many national authorities believe that the protection of prepayments should be increased, indicating that this can be best addressed through amendments to the PTD, 90 while some believe it can be best addressed through enforcement, 91 and a few believe that protection of prepayments does not require further action. 92  

Finally, most businesses pointed out that they would welcome a new EU rule that requires service providers to reimburse organisers where the cancellation is justified under the PTD, within a specific time-limit, 93 shorter than 14 days. 94  

Therefore, during COVID-19, market failures in relation to the prepayment model as well as payment and refund flows became apparent, while gaps and uncertainties in the legislation (regulatory failure), for instance, the lack of provisions on vouchers, made it more difficult for stakeholders to find appropriate solutions.

Purely market-based insurance solutions to tackle Problem 1 are not available. Under the PTD, travellers are legally entitled to a full refund if a package is cancelled due to unavoidable and extraordinary circumstances as well as to protection against the insolvency of an organiser. Therefore, there would be no need or demand for insurance policies for travellers to double these legal guarantees. Travel insurance policies available to travellers usually cover only certain personal risks (e.g., health care at the travel destination, including repatriation if the traveller has had an accident or is seriously ill, or cancellation because of the traveller’s illness, including or excluding illness due to COVID-19). By contrast, such insurance policies usually exclude cancellations because of unavoidable and extraordinary circumstances such as a pandemic or large-scale catastrophes or environmental disasters.

Therefore, it is necessary to examine what measures could be taken to make the PTD rules more crisis-proof to the extent this is possible for a shock caused by an event of the magnitude of COVID-19, while taking into account that measures affecting the rules and the market at normal times must be proportionate.

1.0.1.Problem 2: Prepayments made by travellers are not sufficiently protected against insolvency of the organiser

Travellers have been protected against the insolvency of the organiser or, where relevant, of the retailer, 95 for over 30 years. 96 , 97  Organisers must provide security for the refund of all payments made by or on behalf of travellers and, insofar as a package includes the carriage of passengers, for the traveller's repatriation in the event of the organiser's insolvency. Furthermore, the PTD introduced the principle of mutual recognition of insolvency protection among Member States and facilitated administrative cooperation between them, through a network of Central Contact Points. 98 , 99

The PTD leaves it to Member States to establish the details of their national insolvency protection systems, provided that the security to be arranged is effective, meeting the criteria of Article 17 and Recitals 39-40. 100  

Overall, the 2015 PTD has led to a significant improvement of the national insolvency protection systems compared to the situation under the 1990 PTD. 101  While there is no evidence that the national insolvency protection systems had general problems in covering refunds and the repatriation of travellers, there were certain challenges in some Member States, in particular during major crises. The evaluation found that: (i) the different insolvency protection systems across the EU could potentially affect the effectiveness of the PTD; (ii) there is uncertainty and there are different practices on whether refund claims and vouchers are covered where a package is cancelled before an organiser becomes insolvent; (iii) there appear to be insufficient insurance solutions in the market or insurance solutions offered only at prohibitive prices, in particular during a crisis. These findings are further illustrated below. 

Different insolvency protection systems

Member States have opted for different means to ensure that travellers are protected in case of insolvency. The vast majority of the Member States rely on private insolvency protection solutions, such as insurance policies to be taken out by organisers, provided either on a sole basis or in combination with other insolvency protection arrangements. Other private forms include bank guarantees. In some Member States there is a guarantee fund established as a public entity or a mixed system, where a form of private security is complemented by a publicly administered guarantee fund (double layer) or there are guarantee funds administered by private-public organisations.

Therefore, there is a landscape of diverse insolvency protection systems across the EU. 102 This does not necessarily imply that travellers are less well protected in some Member States than in other ones or that there is a potential distortion of competition in the EU that could lead companies to establish their businesses in Member States where insolvency protection requirements are less stringent. Indeed, organisers seem to use mutual recognition of insolvency protection only rarely. 103  Still, there are indications that different level of traveller protection and distortion of competition may have occurred or could occur in practice.

According to most consumer organisations and public authorities, 104  travellers in some Member States benefit from a higher level of protection than those in other Member States due to such differences, while these differences imply insufficient protection of travellers in some Member States. 105 , 106  However, no concrete examples were provided to support this view.

Nevertheless, most public authorities consider that, at least ‘to some extent’, the main factor affecting the effectiveness of the PTD’s provisions on insolvency protection was the difference between insolvency protection systems in the EU/EEA Member States/countries. 107

These statements are relevant given that a substantial percentage of retailers often sells packages from organisers located in another EU or EEA State, some even from organisers located outside the EU/EEA. 108 , 109 , 110  

Insolvency protection in times of crisis, insurability of risks, coverage of refund claims and vouchers where a package is cancelled before an organiser becomes insolvent

The PTD faced particular challenges in certain crisis situations, such as the Thomas Cook bankruptcy and the COVID-19 pandemic in relation to refunds for cancelled trips as well as the solidity and scope of insolvency protection.

The bankruptcy of Thomas Cook in 2019, 111  was the only bankruptcy of a large organiser with a cross-border impact in recent years. 112  In this context, for example, the German insolvency protection system proved to be insufficient. While around 140 000 travellers were repatriated, there was only limited insurance cover for refunds to travellers because of a liability cap for insurance companies in the German transposition. The subsequent improvement of the German system involved the creation of a travel guarantee fund organised as a private company under State supervision. 113  It appears that, after Thomas Cook, Member States and EEA did not experience bankruptcies of large organisers 114 .

The COVID-19 pandemic triggered numerous travel bans, travel warnings and restrictions at borders that led to a vast number of cancellations and many people being unable to travel. Several Member States devised aid schemes to support national guarantee/insolvency protection funds for package organisers 115 , to cover the costs of refunds to travellers 116 and/or to support package organisers and other travel companies by temporary and targeted compensation scheme to cover all or part of their fixed costs or losses. 117

During COVID-19, an increase of organisers’ insolvencies in the period February/March 2020 - end of 2022, as compared to the period July 2018 - February/March 2020 was noticed in some Member States, but there were usually not major insolvencies, inter alia thanks to State aid. 118  

Furthermore, at least in some Member States, organisers reportedly find it difficult to obtain insolvency protection which covers prepayments and repatriation. This is due to insufficient insurance solutions in the market or insurance solutions offered only at prohibitive prices, in particular during a crisis. 119 , 120  During COVID-19, ‘[r]elatively few travel guarantee funds and insurance companies provide[ed] insolvency protection. It has been reported that banks were no longer providing security for organisers and that also some of the already relatively few insurance companies offering insolvency protection are pulling out of the market’ (e.g., in Austria 121 , Belgium 122 and France 123 ). 124  In addition, ‘[r]isks related to pandemics are often excluded from insurance policies, in particular travel cancellation insurance.’ 125  

A very relevant question that became evident in the context of the COVID-19 crisis, is whether pending refund claims for reimbursements from travellers, including under the form of vouchers, are ‘covered by the insolvency protection systems provided in accordance with the PTD’ as divergent practices in the Member States were revealed. 126 The Court of Justice of the European Union is still to rule on this question. 127 Consumer organisations and some Member States suggest that the PTD should clarify that vouchers and refund claims are covered by insolvency protection. 128  Also businesses are largely in favour of such clarification. 129  

Insurance policies for travellers

Insurance policies available to travellers cannot tackle the different aspects of problem 2. As stated under problem 1, such insurance policies usually cover only certain personal risks. Furthermore, there is no need or demand for an insurance policy to be taken out by travellers which would duplicate the legal guarantees under the PTD. In addition, the Commission is not aware of insurance policies being offered to travellers to cover any gaps in the insolvency protection which organisers are obliged to arrange for the benefit of travellers.

Conclusion

Therefore, while the feedback from stakeholders is often not very specific, it is still clear that the current degree of harmonisation has left scope for different implementation in the Member States, leading to certain variations in the level of consumer protection and, consequently, in the costs for businesses, including in relation to the question of whether vouchers and refund claims are to be covered by insolvency protection (regulatory failure). In addition, there is evidence that there are limits for the effectiveness of insolvency protection where it is based exclusively on solutions offered by the insurance market (market failure), in particular, in a major crisis.

1.0.2.Problem 3: Difficulties in implementing the Directive 

Stakeholders faced difficulties in the implementation of the PTD in relation to the interpretation and enforcement of concepts of ‘click-through package’ and LTA, in determining whether the cancellation of a package travel contract was justified by unavoidable and extraordinary circumstances, which became apparent during COVID-19, as well as in the implementation of certain information obligations.

These problems can, to some extent, be explained by practical difficulties, but are, to a large extent, linked to the content of certain provisions (regulatory failure).

The problems are common to all Member States as the concepts come directly from the Directive. For example, during the consultation process, 50% (6 of 12) of national authorities indicated it was ‘to a very great extent’ difficult to implement and enforce insolvency protection for ‘click-through packages’. 130  On LTAs, most stakeholders indicated that the introduction of the concept of LTA did not improve the protection of travellers. 131 Finally, 69% (18 of 26) of the national authorities indicated that the organisers and travellers did not agree on whether the situation qualified as ‘unavoidable and extraordinary circumstances’ and whether it significantly affected the package in question.  132

Given that the legal text is unclear or there are gaps in the legislation, the identified problems could not be addressed exclusively through stronger enforcement against non-compliant traders.

1.0.2.0.Concepts of ‘click-through package’ and Linked Travel Arrangement (LTA)

The evaluation showed that the PTD lacks effectiveness in relation to evolving market trends, e.g., online bookings of combinations of travel services. 133 The PTD meant to address this, inter alia, through the new concepts of ‘click-through package’ 134 and LTA. Still, both concepts raised implementation and enforcement challenges, reducing the possibility of travellers to make informed choices and benefit from the protection under the PTD. 135  Stakeholders outlined that it was difficult ‘to prove whether a package, an LTA or none of them was concluded’. 136 , 137 , 138   

In June 2019, the Commission issued a first report, on the provisions of the Directive applying to online bookings made at different points of sale. The report suggested that “the offer of ‘click-through packages’ appears to be a rather rare phenomenon’ indicating that there was not a clear ‘picture of the prevalence of ‘click-through packages’ on the market.” 139 Further, according to some stakeholders, the concept of ‘click-through package’ has no or very limited practical value, is difficult to apply in practice, 140 or changes should be made. 141  Most national authorities declared that it was difficult to implement and enforce insolvency protection for these packages 142  and that the concept did not contribute to achieving the general objectives of the PTD. 143

The application of the concept of LTA 144  ‘has arguably raised the highest number of questions’ with ‘consumer and business stakeholders consider[ing] the LTA definition overly complex and difficult to apply in practice.’ 145  

According to consumer organisations, ‘concerns have also been raised that, with the exception of insolvency protection and certain pre-contractual information requirements, the PTD does not provide for the liability of traders facilitating an LTA for the performance of the relevant services.’ 146 Furthermore, the evidence collected indicates that the definition of LTA types (a) and (b) 147 did not contribute to achieving its general objectives. 148  

The evaluation identified interpretational and enforcement difficulties that could be grouped in two main categories: lack of clarity in key elements of the definition of LTA types (a) and (b), and unclear delimitation between packages and LTAs. 149 , 150  Travellers find it difficult to understand what kind of protection they can expect and whether they will benefit from insolvency protection. 151  

A consequence of the uncertain boundaries between LTAs and packages is the low awareness of travellers regarding the distinction between these concepts and the associated rights, preventing them from making informed choices and benefiting from their rights. These findings suggest that, although, intellectually, a distinction can be made between a joint and a separate selection of travel services at one point of sale, such distinction can be difficult in practice and is difficult to verify for travellers and enforcement bodies, giving rise to a grey area.

In some cases, the complexity and the uncertainties related to LTAs has led to abuse by traders. 152  It also appears that some traders changed their business models/booking processes to avoid being considered as package organisers. As a result, travellers were deprived of the guarantees for packages, including in relation to liability for the combination of travel services and effective insolvency protection. 153 , 154  

In addition, according to some stakeholders, the provisions on LTAs type (b) are not applied in practice. 155  

The fact that there are hardly any figures on LTAs points to the potential core issue affecting LTAs, namely the difficulties for stakeholders in discerning, in practice, whether an LTA has been created. This makes it difficult to collect data on LTAs and, most likely, to rely on rights related to LTAs.  156  Indeed, the difficult distinction between certain packages and certain LTAs, along with the fact that most obligations for traders (information requirements and, where relevant, insolvency protection requirements) kick in only once a first transaction has been completed, make it difficult to enforce these provisions.

In light of the above, the excessive complexity and lack of clarity of the rules on LTAs, combined with actions by traders and difficulties in enforcing these rules, hampered the proper functioning of the package travel market and resulted in a lower level of consumer protection than intended by the reform of the PTD in 2015. At the same time, the rules on click-through packages have largely been ineffective. These problems are independent of the problems that manifested themselves during COVID-19.

1.0.2.1.Cancellation rights due to unavoidable and extraordinary circumstances

During the Covid-19 pandemic, different interpretations of travellers’ right to cancel the contract in the event of ‘unavoidable and extraordinary circumstances’ 157 , 158  emerged, triggering disputes between travellers 159 and organisers.  160  

The main interpretation issues arose in relation to the place where the unavoidable and extraordinary circumstances occur; 161  the different legal regimes applicable to organisers under the PTD and transport service providers under the specific legislation; 162  the variety of travel warnings/advice by the Member States during the COVID-19. 163

The PTD itself is silent in respect of the legal value of travel warning or advice issued by governments. In practice, ‘travel warnings’ are a key aspect for justifying the cancellation of a package travel contract due to unavoidable and extraordinary circumstances. Travellers and businesses consider that the absence of rules on ‘travel warnings’ hinders the effectiveness of the definition of ‘unavoidable and extraordinary circumstances’. 164  

Consumer organisations called for more clarity on the appropriate time for cancellation of the contract due to ‘unavoidable and extraordinary circumstances’ as well as on the relevance, evidence, and legal value of official travel warnings. 165  

Most national competent authorities called for clarifications on the rules on trip cancellations. 166 Several questions have been referred to the Court of Justice of the European Union in relation to the cancellation right under Article 12(2). 167

1.0.2.2. Issues with information obligations

The evaluation 168 points to limited compliance with the information obligations of traders where they act as organisers or retailers of a package or as facilitators of an LTA. This is likely to be linked to issues with the understanding of certain concepts of the PTD, including the definition of LTAs and the borderline between packages and LTAs. 169  

Stakeholder positions seem to indicate that there is a certain degree of confusion about the information requirements that traders (organisers, retailers, facilitators of LTAs) must provide before a traveller is bound by a contract. The evaluation also showed an enforcement problem regarding the information obligations of traders. In addition, travellers do not understand the information in the current forms on LTAs and it is difficult for organisers to determine the correct form. 170  Also this particular aspect is closely linked to the structural issues regarding LTAs and contributed to hampering the proper functioning of the package travel market and resulted in a lower level of consumer protection, 171  and thus to the PTD not achieving its main objectives. 172

In addition, the evaluation highlighted that travellers may not always understand the exact role of different traders (organisers, retailers, and service providers) and, consequently, may not properly identify the trader responsible for the performance of the contract, the refund of payments or for compensation. 173 , 174  This problem became very obvious during the COVID-19 crisis, but reflects a general issue.

The Opinion of the Fit for future platform, in its Suggestion 5: Clarification ‘other tourist services’, states that ‘[i]n practice, there is a lot of uncertainty when it comes to defining a particular service as “other tourist service”. This particularly applies to single travel service providers who offer another tourist service and become therefore organisers within the meaning of the PTD, without being aware.’

However, the PTD explains and limits the notion of ‘other tourist service’, 175 thus avoiding that combining accommodation and other tourist services lead to a disproportionate application of the PTD. 176 Neither the opinion of the Fit for future platform nor other consultation exercises demonstrated the need for further clarifications nor provided solutions. The different views on whether more or fewer combinations should be exempted from the definition of package do not indicate that the current provision is not effective for the pursuit of the Directive’s objectives. 177  Furthermore, the limited evidence for the alleged problems or the absence of proposed solutions made it difficult to identify this as a problem and further take it up in the impact assessment.  

1.1.What are the problem drivers?

The three main problems identified above, have several, sometimes overlapping, drivers.

1.1.0.Drivers of Problem 1 – Travellers face difficulties in recovering prepayments for cancelled packages, in particular in the event of a major crisis

The main driver for Problem 1 is that the business model implemented by service providers and organisers of packages is based on prepayments from travellers. 178  In the event of cancellations, prepayments need to be refunded. In this context and given the structure of the package travel industry, with a vast majority of businesses being SMEs, problems appear, in particular, in case of massive disruptions of the travel sector, as witnessed during COVID-19.

The extent of prepayments depends on different factors, including the share of transport in the package, scheduled flights as opposed to chartered flights, 179 traditional tour operator packages as opposed to dynamic packages, but, to some extent, also the Member States concerned. By using travellers’ prepayments, certain organisers can purchase large allotments of services in advance, which allows them to keep package prices at a reasonable level. 180  Service providers, especially in the air transport sector, require full payment of the tickets upon booking, allowing them to optimise transport service operations economically and environmentally. Package organisers must take into account this business practice of carriers. Some organisers plan their packages well in advance and book seats in transport means and hotel rooms in bulk to obtain better prices and be in a position to offer advantageous packages to their customers. These advance bookings with travel service suppliers are usually made through prepayments and/or guaranteed by cancellation penalties. Organisers finance such bookings thanks to prepayments from travellers (around 30% of the package price several months before the start of the package, while the remainder often must be paid up to a month prior to the start of the package). This system allows package organisers to limit the need to advance the cost of bookings through their own funds. However, if many travellers cancel packages due to unavoidable and extraordinary circumstances, as was the case during the COVID-19 pandemic, organisers must refund all prepayments disbursed to third parties and this within 14 days. 181  This can put at risk the liquidity of organisers.

Lack of liquidity of organisers when faced with many concurrent requests for a refund could become acute and lead to their bankruptcy if they do not receive (timely) refunds from service providers. 182 As experienced during the pandemic, many organisers did not have sufficient liquidity to reimburse travellers’ prepayments within the mandatory period. 183 , 184  

The PTD does not regulate the business-to-business (B2B) effects of the termination of package travel contracts. There is only a very general provision on redress in Article 22. Therefore, in relations with service providers, organisers rely on contractual obligations and general contract law, which does not seem to have given rise to particular problems at normal time. Still, under contract law, organisers can only claim money back for services (e.g., flights) that have not been performed. Where a package is cancelled due to unavoidable and extraordinary circumstances, but the relevant service may still be performed, organisers would not have a right to get reimbursed, while still having to reimburse travellers. This happened during certain phases of the pandemic, partially due to differences in cancellation rights under the PTD as compared to the APRR. 185  Stakeholders pointed out that one of the major drivers behind organisers’ lack of liquidity and difficulty to refund consumers, was the lack of precise rules on B2B refunds. This resulted in delays and disputes.  186 , 187 , 188 , 189

Recovering prepayments from airlines proved particularly difficult. Businesses ‘explained that refunds in normal times go through the global distribution systems (GDSs) that ensure automatic refunds. However, during the pandemic, airlines chose to go through a manual process, allowing them to hold on to the refunds for 8-9 months.’  190

The dysfunctionalities in the B2B relationships proved to have a negative impact on travellers, triggering two main problems regarding refunds of pre-payments: (a) referral of travellers from organisers to retailers and vice-versa, making it very difficult for travellers to obtain their rights and (b) delay in reimbursing travellers due to the difficulties that organisers faced in recovering the pre-payments from service providers, e.g., airlines and hotels.

There are currently no specific rules on the use of vouchers in the PTD. During the pandemic organisers often imposed vouchers/credit notes on travellers instead of a refund upon cancellation of a package due to unavoidable and extraordinary circumstances and did not make it clear that travellers were not obliged to accept vouchers. 191 At the same time, the rights of travellers regarding vouchers are unclear. 192

In the 2020 Recommendation on vouchers, 193 the Commission set out principles in relation to make voluntary vouchers more attractive for travellers. 194  

Most of the Member States which introduced systems of voluntary vouchers did not have data on the share of travellers who accepted vouchers following cancellations due to COVID-19. 195 , 196  Given the non-binding nature of recommendations, package organisers continued to issue vouchers as they saw fit or in line with national rules breaching the PTD and the Recommendation, with the consequence that travellers in different EU countries were treated differently. 197 , 198

Consumer organisations emphasise that travellers should not be deprived of their right to a monetary refund, as the choice of whether to accept a voucher or to receive a cash refund ultimately belongs to consumers. 199  Nevertheless, in reality, travellers often did not have this choice. On the other hand, an industry stakeholder explained that often travel agents had no choice but to impose vouchers on their customers, even if not the best solution, as they were the only short-term alternative solution to help traders to avoid bankruptcy. 200  Furthermore, travel industry representatives outlined the problem rising from the divergent regime applicable to organisers under the PTD, who must reimburse travellers in money, and that applicable to some service providers, such as hotels, allowed to issue vouchers during the pandemic. 201  

Finally, academic research suggests that vouchers should benefit travellers and tour organisers alike, and this cannot be the case in the framework of mandatory vouchers. 202  

1.1.1.Drivers of Problem 2 – Prepayments made by travellers are not sufficiently protected against insolvency of the organiser

The evaluation confirmed that there are differences between insolvency protection systems in the Member States as the PTD leaves it to Member States to determine the details of their systems. 203  

Moreover, COVID-19 brought to light divergent practices in the Member States as regards the coverage by insolvency protection of vouchers and open refunds claims for trips cancelled before an organiser becomes insolvent.  204 The Court of Justice of the European Union is still to rule on the question whether the wording of Article 17(1) regulates such coverage. 205 Consumer organisations and some Member States suggest that the PTD should clarify that vouchers and refund claims are covered by insolvency protection. Also, businesses are largely in favour of such clarification.  206  

At least in some Member States, organisers reportedly find it difficult to obtain insolvency protection covering prepayments and repatriation. This is due to insufficient insurance solutions in the market or insurance solutions offered only at prohibitive prices, in particular during a crisis. 207 , 208

1.1.2.Drivers of Problem 3 – Difficulties in implementing the Directive

Several drivers were identified for the difficult implementation of the Directive. Certain provisions are not sufficiently clear, contain gaps or are too complex. This leads to uneven levels of consumer protection and distortions of competition across the EU as the Directive is applied in different ways. 209 This relates, for instance, to (i) the definitions of LTAs; 210 (ii) the rules on cancellations in the case of unavoidable and extraordinary circumstances,  211 (iii) the complexity of the standard information forms 212 and (iv) the role of different parties (organisers, retailers, and service providers), including in relation to refunds, which is not always understood by travellers, although the legal provisions are clear. 213  In addition, unclear and complex provisions may have contributed to enforcement problems. 214

The link between the problems identified in this SWD and in its support study 215 , their drivers and their consequences are depicted in the problem tree in Annex 6.

1.2.How likely is the problem to persist?

Without additional public intervention the problems identified above will remain.

In case of a future major crisis, large-scale cancellations, the corresponding need for refunds for non-performed packages, the identified uncertainty and risks for travellers will continue. The lack of rules on vouchers and the unclear and divergent status of vouchers and refund claims in relation to insolvency protection would continue with negative effects also in the event of a smaller crisis. This, coupled with the absence of specific rules on B2B rights in relation to cancellations, would likely again affect package organisers’ liquidity, inevitably leading to problems with refunds of prepayments to travellers in particular in a major crisis. Without such improvements, many travellers will continue to be cautious before booking packages far in advance. 216  It was also confirmed by consumer organisations that travellers received a full refund within 14 days or at least within one month only ‘occasionally’ before COVID-19. Moreover, travellers ‘often’ received a refund only after filing a complaint, and ‘rarely’ without this procedure even at normal times. 217  Without any changes to the current legislation, such problems related to refunds, both outside and during crises, are expected to persist. 

As regards insolvency protection for package organisers, there are varied regimes of prepayment and insolvency protection mechanisms across the Member States. Some consumer organisations suggested during the evaluation that package organisers may establish their businesses in Member States with less stringent insolvency protection requirements. 218 In addition to the uncertainty of insolvency protection cover for refund claims and vouchers for cancelled packages, problems were reported with the availability of insurance solutions regarding insolvency protection and the conditions under which such insurances are offered. Hence, if no action is taken, prepayments by travellers may continue to be insufficiently protected against the organiser’s insolvency at least in some Member States in the event of a major crisis, potentially leading to further financial losses for travellers. In addition, consumer organisations declared that also outside of crisis situations travellers ‘often’ faced problems when asking for reimbursement of payments for travel services that were not performed following the organiser’s insolvency. 219 Moreover, as regards the timeliness of the refund claims, national authorities highlighted several factors that may impact the effectiveness of refunds in practice. 220

If not amended, certain provisions will remain unclear or too complex to be applied and enforced. This concerns in particular the provisions on LTAs and their distinction from packages. In the baseline scenario, the potential for confusion and circumvention will continue. This could result in divergent levels of consumer protection and continue to limit the effectiveness of the PTD. In view of the increasing digitalisation, this issue will likely become even more prevalent, as more travellers will buy packages and/or LTAs online. Indeed, it is forecast that in the package travel segment, 78% of total revenue will be generated through online sales by 2027, compared to approx. 73% in 2023. 221

In general, package travel will remain a very relevant market segment, slightly growing before stabilising in 2027. As a result, the scale of the problems encountered may also increase in line with this market trend if the status quo is maintained.

2.Why should the EU act?

2.0. Legal basis

The legal basis for EU action is Article 114 of the Treaty on the Functioning of the EU (‘TFEU’), which provides that "the European Parliament and the Council shall […] adopt the measures for the approximation of the provisions […] which have as their object the establishment and functioning of the Internal Market." Article 114 (3) also specifies that "the Commission, in its proposals envisaged in paragraph 1 concerning […] consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts." In addition, Article 169(1) and Article 169(2) (a) TFEU provide that the EU must contribute to the attainment of a high level of consumer protection by adopting measures under Article 114 TFEU.

At the same time, Article 114 TFEU, can be a legal basis also for the harmonisation of business-to-business rules, like specific measures that are considered in relation to problem 1, i.e., possible business-to business rules on refunds or pre-payments.

In line with Article 26(2) TFEU, the internal market comprises an area without internal borders in which goods and services move freely and businesses have the freedom of establishment. Harmonising the rights and obligations regarding package travel is necessary to develop a real internal market in tourism and will help maintain and increase a high level of consumer protection.

2.1. Subsidiarity: Necessity of EU action

Package travel is cross-border, not only in the sense of travellers going abroad, but also in terms of package holidays sold to travellers by organisers based in other countries. 222  

The revision of the PTD aims to modernise the current rules and fix the problems flagged in the evaluation. The two overarching objectives of the PTD are still relevant, namely to ensure that all travellers in the EU have a high and uniform level of protection and to contribute to the proper functioning of the internal market, remain relevant. EU-level action to remove the identified problems, close gaps, clarify and simplify the rules of the current Directive will give greater confidence to travellers and traders in purchasing and selling packages, including across borders, and improve the functioning of the internal market. For instance, laying down binding rules on vouchers and common rules on prepayments will ensure more uniformity in the application of the Directive. If Member States addressed such issues in an uncoordinated manner, this would increase fragmentation in the internal market.

2.2. Subsidiarity: Added value of EU action

Directive (EU) 2015/2302 seeks full harmonisation of legal provisions and therefore problems in its application can only be solved at EU level. This includes areas where Member States took different approaches in terms of legislation or interpretation, such as regarding insolvency protection for vouchers and refund claims. National-level action is insufficient to enable all EU citizens to exercise the rights provided by the Directive, including in a crisis.

The proposed revision of the PTD also complies with the proportionality principle of Article 5(3) TFEU. It does not exceed what is necessary to achieve the objectives of the Treaties, as it is limited to aspects of travel law for which EU action is necessary.

3.Objectives: What is to be achieved?

3.0. General objectives

The general goal of the revision of the PTD is to strengthen the level of consumer protection, at all times, including in the event of a major crisis, while improving the functioning of the Internal Market in the package travel sector. This is in line with the original objectives of the Directive, which remain relevant for the current needs. The evaluation showed that the PTD is only partially effective in meeting its objectives and the needs of consumers and traders and pointed that there’s scope for improvement and simplification. Consequently, although the PTD contains comprehensive rules in relation to package travel and has brought significant benefits in terms of consumer protection and the functioning of the internal market, the identified weak points in the legislation in terms of gaps, legal uncertainty and excessive complexity in some respects require targeted action.

The tackling of these shortcomings will be important for the preparedness of a future crisis but also for the application of the Directive at normal times.

In line with these findings, the specific objectives and problems identified in the IA 2013 have to be adapted to the current context and the specific problems identified in the application of the Directive to date.

3.1. Specific objectives

Specific Objective 1 (“SO1”): Better protection of travellers’ prepayments and their right to a swift refund of prepayments in the event of cancellations, including in times of a major crisis, while maintaining the liquidity of package organisers (addressing Problem 1).

Specific Objective 2 (“SO2”): Giving travellers greater protection against the organisers’ insolvency, including in the event of a major crisis, while also ensuring a level playing field in the internal market (Problem 2).

Specific Objective 3 (“SO3”): Increase legal certainty and enforceability by clarifying and/or simplifying some of the provisions of the Directive that are interpreted or applied differently or are difficult to apply in practice (addressing Problem 3).

The three specific objectives are inter-related in different ways. For instance, the measures aiming to implement SO2 will also facilitate the achievement of SO1. Furthermore, while certain measures implementing SO3 are self-standing, for instance the ones related to LTAs, legal certainty will also be increased through some measures implementing SO1 and SO2, e.g., through rules on vouchers or clarifying that vouchers and refund claims are to be covered by insolvency protection.

4.What are the available policy options?

This SWD assesses policy measures addressing one or several of the three problems. As the SOs are interlinked, some of the policy measures (“PMs”) presented below provide (partial) solutions to more than one problem. They are presented under the problem they primarily address. Some measures exclude each other and could not be applied simultaneously. Different combinations of these policy measures (‘options’) can achieve the defined SOs to different extents. The intervention logic depicts the interactions between the identified problems, the specific and general objectives and the proposed policy measures and the resulting options. This intervention logic is presented in figure 1 below.

Table 1 Intervention Logic

5.1. What is the baseline from which options are assessed?

The baseline (Policy option 0) implies the continuation of the current situation, the status quo, without the introduction of new measures (do nothing scenario), thus maintaining the Directive in its present form. The baseline is described and analysed in the evaluation.

The evaluation suggests that the PTD was only partially effective in achieving its stated objectives. Crises (e.g., COVID-19) exacerbated some issues, but some provisions proved not to be fully effective also in non-crisis situations. While guidance and evolving case law may help interpret some notions or provisions, such potential is limited by the wording of the relevant provisions and concepts. Maintaining the Directive as it stands would thus not address its shortcomings.

The current APRR and Air Services Regulation have certain impacts on organisers under the dynamic baseline scenario. Indeed, organisers reported that due to the current lack of compulsory insolvency protection for airlines, they face higher insolvency protection costs than if compulsory airline insolvency protection would exist. However, the currently envisaged changes in the APRR will not affect this baseline scenario, while no relevant future changes in the Air Services Regulation can be assumed.

Any strengthening of the Consumer Protection Cooperation Regulation and of the Directive on alternative dispute resolution would increase the chances of effective enforcement of the PTD in relation to traders.

In a major crisis, but also at normal times, travellers can face problems recovering prepayments for cancelled packages. In some Member States there are restrictions on the amount of prepayment that may be asked for a package that can somewhat decrease the risk of problems with refunds to travellers in case of a cancellation. E.g., in Germany, based on national case-law on unfair contract terms, prepayments are limited to a 20% down payment at the time of booking, the rest being due not more than 30 days before the beginning of the trip. As an exception to this general rule, prepayment can be higher than 20% in circumstances where the organiser duly justifies it, due to expenditures present at the time of the conclusion of the contract. A limitation of prepayment to 20% applies also in Austria, unless unlimited insolvency protection is available. In one Member State, there are no national rules on prepayments, but the industry itself applies a limitation of 20% of the price paid ten days after booking and the rest four weeks before the start of the trip. in practice. Also, in other Member States the average prepayments lie around 20%-30%. 223  However, prepayments can vary depending on the relevance of flights and the length of the trip and the nature of the package. In particular dynamic packages with a high share of the transport element, the percentages can be considerably higher and can go up to even 100% if the package contains a large flight component. 224  A report commissioned by the Dutch Ministry of Economic Affairs and Climate found that the average prepayment rates in 6 countries, i.e., the Netherlands, Portugal, Germany, France, Denmark and UK, were around 25%-30%. 225  Moreover, according to consumer organisations, prepayments lie at approximately 40% in both Malta and Spain. 226  

An important feature of the status quo is that organisers do not hold travellers’ pre-payments but use them to pay for travel services. Therefore, in case the package is cancelled, and they need to reimburse travellers within 14 days following the application of the PTD, they can find themselves short of funds to do so if service providers do not refund them quickly enough. While, under contract law, service providers have to refund prepayments for services not rendered, there is at present no explicit business-to-business refund right with a specific deadline in the PTD. Therefore, under the baseline scenario, organisers may face liquidity problems if faced with many refund requests from travellers at the same time, this implying a risk that many travellers will not be reimbursed within the legal deadline.

In addition, certain types of payment methods used when booking the packages can in some cases help consumers to get money back more easily. However, no detailed figures on the payment methods used are directly available. In a few Member States, travellers enjoy statutory protection for services not rendered if purchased with a credit card and can claim money back from their credit card company. Another way for travellers to try to recover their prepayments is through credit card chargeback, as stated in the terms and conditions of Visa and MasterCard. On a traveller’s request, it allows banks to withdraw funds that were previously deposited into a service provider’s bank account if the service is not provided. Chargeback is a voluntary industry scheme that many banks participate in but is not available in all Member States. Moreover, not all travellers prepay packages by credit card. In 2020-2021, only 51% of adults in high-income economies used a credit card in general. While no specific data are available on the means of prepayment for package holidays within the EU, it is unlikely to be significantly higher than the aforementioned 51%. In addition, the experience during COVID-19 showed that protection mechanisms related to credit cards are insufficient to address the question of prepayments. Notwithstanding the foregoing, potential chargeback is unrelated to the right of the traveller to get reimbursement from the organiser in case of cancellation under the PTD. It is, therefore, important to make sure that, when a package is cancelled, travellers always get a timely refund from the organiser, independently on the payment method used. Only this would allow for equal treatment of all travellers within the EU. As a result, the availability, or not, of chargeback is not taken into account in determining the magnitude of the problem in the baseline.

Continuation of the status quo would thus likely lead to travellers’ continuing to experience financial losses, especially in a major crisis. Based on alternative calculations, such cumulative yearly losses of travellers were estimated in a support study 227 at between EUR 126 million and EUR 1.6 billion. 228  Direct costs related to compliance with the PTD would remain the same for businesses. 229  The costs of insolvency protection, especially in relation to insurance-based solutions, went up moderately to significantly in several Member States in recent years, 230 often in connection with COVID-19. 231  Hence, if the status quo is maintained, compliance costs will either be stable or increase.

As a reaction to the difficulties encountered during the COVID-19 pandemic, certain Member States, i.e., Poland and Denmark, set up crisis funds at national level. Such funds, allowing for timely reimbursement of travellers in case of cancellation for unavoidable and extraordinary circumstances, are, at least in the case of Poland, expected to remain in place.

The 2020 Recommendation would formally remain in place. However, its scope is limited to vouchers issued during the COVID-19 pandemic and does not address many problems identified in the evaluation. In addition, it is not legally binding and does not guarantee rights to travellers. Indeed, many Member States and traders did not follow the principles contained in it. 232  

Moreover, maintaining the status quo would imply continued enforcement-related costs and other costs for public authorities. The Commission would continue to monitor how the PTD is being implemented at national level, and national authorities would continue to enforce compliance by package organisers and other traders with the current rules. The median costs, for national enforcement and insolvency protection authorities, were reported to reach approx. EUR 97,000 per year per Member State for national enforcement authorities and EUR 5500 for insolvency protection authorities, per Member State. 233  Enforcement authorities would continue to cooperate through the Consumer Protection Cooperation (CPC) network 234 and the network of central contact points for insolvency protection.

Travellers could continue to seek redress also through alternative dispute resolution bodies 235  and European Consumer Centres Network (ECC-Net) or other legal means available at national level. From 25 June 2023, they could also do so through qualified entities under the representative action mechanisms for protecting consumers’ collective interests. 236

5.2. Options discarded at an early stage

5.2.1.Non-legislative measures

It would have been an option to introduce exclusively non-legislative measures, such as a Commission guidance notice or a recommendation, instead of amending the PTD. This option was discarded at an early stage, as it corresponds largely to the baseline detailed under section 5.1. With exclusively non-legislative measures, the Specific Objectives (SOs) could be achieved only to a very limited extent, if at all. Information campaigns have already been carried out. Furthermore, such campaigns cannot resolve the legal uncertainty identified in the evaluation and the problem definition above. While guidance in conjunction with evolving case law may help interpret some notions or provisions to some extent, such potential is limited by the wording of the relevant provisions and concepts. Hence, guidance cannot resolve the issues of legal uncertainty identified in the evaluation and in the problem definition above such as the question of whether refund claims and vouchers should be covered by insolvency protection or the complexity of the provisions on LTAs. Many of the issues identified (e.g., prepayments not being sufficiently protected, excessive complexity of some rules) could thus not be tackled without legislative changes. Moreover, the effectiveness of soft law alone is uncertain, as it would depend on the will of national legislators and traders to follow any non-binding guidance or recommendation. As a result, gaps and uncertainties in the PTD would remain. This implies that varying levels of consumer protection and implementation between Member States, plus the absence of a level playing field would remain in important respects. Such discrepancies in implementation of non-legislative measures have been evidenced, for instance, in relation to the 2020 Recommendation on vouchers.

As explained under the problem definition, there are no insurance products available to travellers in the market to address any of the identified problems.

Purely non-legislative measures would hence not be effective.

In any event, even if legislative amendments are proposed, the Commission retains the possibility to issue guidance and other non-binding measures at a later stage to enhance the interpretation and application of the Directive. Possible guidance will be more useful at a later stage, for instance, after the European Court of Justice (ECJ) has clarified certain issues in pending preliminary rulings, in relation to cancellations due to unavoidable and extraordinary circumstances in particular situations and at particular stages of the pandemic, and possibly after certain provisions and concepts have been clarified in the PTD. The same applies to possible additional information campaigns. Moreover, legislative changes do not preclude the active enforcement of the existing and new rules by the Commission in relation to the Member States.

5.2.2.Legislative measures discarded after a preliminary assessment

According to stakeholders, a total ban of prepayments to organisers would seem very difficult to implement, especially since many organisers prepay themselves the services included in a package at the time of booking. Stakeholders indicated that organisers request prepayments at the time of booking in the range of 20%-30%. This can be much higher, in particular, where the package includes a significant flight component, as, at least for scheduled flights, airlines usually require full payment of the ticket at the time of booking. 237 A complete prohibition could hence lead to liquidity problems for organisers or the need to obtain capital to finance prepayments to service providers on the capital market, as long as pre-payments for included services are not limited. In addition, a total ban on prepayments is likely to lead to higher prices and less choice in packages and thus less protection for travellers. Indeed, as indicated by some stakeholders, airlines may decide in such case to offer only flexible, i.e., more expensive, tickets for packages. Stakeholders generally oppose this measure. 238  

Obligation for organisers to give travellers the choice between a package with prepayment and one with no or limited prepayments, possibly at different prices. Travellers choosing packages without prepayment (or with a limited one) would face higher package prices (5 % price increase expected 239 ) and potentially a limited offer. While they would have the choice to book their packages early and still use the funds for their own purposes until shortly before departure, it is unclear to what extent this may offset the increased costs of packages. Moreover, this measure would create considerable administrative burden for organisers, who would need to maintain a double booking and accounting system to account for packages with different payment terms. As a result, businesses strongly oppose this measure.  240

While it would theoretically be possible to introduce specific rules on voluntary vouchers that would apply exclusively in times of crisis (as per the 2020 Recommendation), this did not seem appropriate. Such measure would require a central instance to declare the presence of a significant crisis to trigger this possibility, which would raise additional questions and make this instrument unnecessarily heavy. It would also prevent legal clarifications and guarantees on the use of vouchers at normal times.

Funds at EU level (rapid refund mechanism and/or insolvency back-up fund)

New mandatory funds at EU level could serve as: (i) a rapid refund mechanism for travellers (crisis fund) where package organisers face liquidity problems due to a major crisis or (ii) a back-up where the first-line national insolvency protection system is insufficient.

Certain Member States have put in place national temporary or permanent insolvency back-up funds or rapid refund mechanisms that are often backed up by State aid, especially where they were created during COVID-19. It would be difficult to find appropriate solutions at EU level, including in relation to State aid rules.

The introduction of a rapid refund mechanism (crisis fund) at EU level would likely raise prices and lead to competition problems, as certain organisers might be tempted to freeride. As reported by some stakeholders, it would be difficult to determine when an organiser is facing only temporary liquidity problems (and can rightfully call upon the rapid refund mechanism), as opposed to more persistent liquidity issues putting him in a state of insolvency. 241  Such a crisis fund at EU level would be in addition to similar funds already existing in certain Member States or would replace them. This may lead to duplication and raise subsidiarity concerns. Most businesses disagreed with the idea of an EU crisis fund 242 and only 43% of consumer organisations were in favour of it. 243

Concerning a potential mandatory insolvency back-up fund at EU level, certain Member States have put in place such funds at national level on a temporary or permanent basis, which are said to work well. Therefore, an insolvency back-up fund at EU level would be in addition to such funds at national level or would replace them, raising subsidiarity concerns and possible duplication. Furthermore, a back-up fund at EU-level that applies more generally would dilute the responsibility for setting up effective systems at national level and would be difficult to reconcile with the differences between national insolvency systems, which will prevail, even if an amending directive were to increase the level of harmonisation. Consequently, while such a back-up fund might be useful for some, it is not necessarily so for Member States with certain types of insolvency protection funds, or which have found other ways to ensure the effectiveness of their insolvency protection systems. Accordingly, half of the national insolvency protection agencies responding to the targeted survey rejected the idea of a back-up fund EU-level, and only one supported it. 244 Furthermore, it would be difficult to ensure a calculation of contributions that would correspond to the needs of all Member States and that would be considered fair. While many consumer organisations supported the creation of an EU-level back-up fund, 245  most businesses rejected this idea. 246

Moreover, it would be difficult in practice to organise and manage a rapid refund mechanism and/or an insolvency back-up fund at EU level. Creating a specialised agency at EU level would be necessary to manage such funds or the delegation of responsibilities to a private institution under the Commission’s supervision. Consequently, it would bring about coordination, set-up and management/administration costs. Based on the available information, this would be fairly costly. 247

Consequently, based on the preliminary assessment of available information, the added value of a fund or funds at EU level, as compared to solutions at Member States level, seems rather limited. In view of the foregoing, the option to set up such funds or mechanisms at EU level has been discarded.

5.3.Description of the policy options assessed in detail

In addition to policy option 0 (status quo), this SWD examines various legislative measures that could, through amendments to the PTD achieve the specific objectives described in section 4.2 to different extents. The measures are grouped into three policy options, either favouring minimal costs (option A) or maximal effectiveness (option C), option B being a middle-solution.

Option A consists of targeted amendments to the PTD aiming to clarify and simplify it and making it more effective, while having a limited/moderate cost impact. Option B would further improve the level of consumer protection, in some respects, but increase the costs for different categories of stakeholders (both businesses and travellers). Option C includes measures aiming at the highest level of consumer protection in relation to SO1 and 2, but at high costs. In this way, the three change options are structured in light of the anticipated proportionality of the included measures with regard to addressing problems 1 and 2, with option A making the Directive more crisis-proof compared to the status quo while limiting the costs at ordinary times as compared to option B, which contains more rigid measures on prepayments and vouchers, and option C, which ensures very effective preparedness for a major future crisis while implying high costs at ordinary times.

The detailed policy measures included in the options are presented under the problem they predominantly address.

5.3.1.Measures addressing Problem 1: Travellers face difficulties in recovering prepayments for cancelled packages, in particular in the event of a major crisis

Measure 1.1 Limitation of prepayments

To protect the money of travellers in the event of cancellations and insolvencies and limit the burden on the insolvency protection systems, a partial limitation of prepayment at the time of booking could be provided in the PTD. Under general civil law the fundamental principle is that payments for a service are made when it is performed and not in advance. Therefore, it is the request for pre-payment that requires justification and not the absence thereof. Under the general unfair contract terms provisions, a deviation from this general legal principle would have to be justified to be considered fair and valid. This is incidentally the basis of the German case law on the limitation of prepayments.

The prepayment could be limited to a relatively low percentage of the total price, the balance being due 4 weeks before the start of the package. In order not to multiply different systems of limitation of prepayments, the same threshold could be proposed as currently used in Germany and in Austria 248 , 249 . This level seems also justified by the fact that, in practice, in some other Member States the average prepayments lie around 20%. E.g., in one Member State there are no national rules on prepayments, but the industry itself applies a limitation of 20% of the price paid ten days after booking and the rest four weeks before the start of the trip. On the other hand, a report commissioned by the Dutch Ministry of Economic Affairs and Climate found that the average prepayment rates in 6 countries, i.e., the Netherlands, Portugal, Germany, France, Denmark and UK, were around 25%-30%. 250  This could justify setting the threshold for the prepayment limitation at 25% of the total price. However, prepayments can vary depending on the relevance of flights and the length of the trip. They can e.g., go up to even 100% if the package contains a large flight component. 251 According to consumer organisations, average prepayments lie at approximately 40% in both Malta and Spain. 252  

The deadline of 4 weeks before departure for the full payment has been set to protect organisers as it will ensure that all services have been paid for by the traveller before the departure. This seems also to be in line with the current practice of prepayments. Indeed, almost all consumer organisations and business organisations responding to the targeted survey stated that usually travellers make a down-payment at the time of booking, and the remaining amount is paid some time before start of contract (e.g., one month). 253 , 254

There are several ways of implementing such a limitation. Under Measure 1.1.1 - Flexible limitation of prepayments - part of Option A - the organiser would retain the flexibility to ask for prepayments higher than the threshold set, where this is justified . 255  An increase would be justified where this is necessary to ensure the organisation and the performance of the package. This would, for example, be the case where organisers have to make higher advance payments to service providers or need to cover their other costs related specifically to the organisation of the package at the time of booking or shortly afterwards. Such a limitation of prepayments would not apply to package travel gift boxes and packages booked less than 28 days before the start of the package.  Organisers would continue to be obliged to inform travellers about the prepayments they request before the conclusion of a package travel contract.

This measure would be in line with the current practice in Germany, where, based on national case-law on unfair contract terms, prepayments are limited to a 20% down payment at the time of booking, the rest being due not more than 30 days before the beginning of the trip.  256  Also in Germany the prepayment can be higher than threshold in circumstances where the organiser duly justifies it, due to expenditures present at the time of the conclusion of the contract.

Under measure 1.1.2 strict limitation of prepayments - part of Option B, there would be no flexibility for organisers, so that the maximum prepayment for travellers at booking would always be 20% regardless of prepayments made by organisers. This stricter, fixed, threshold of 20% for the prepayments would be justified by the fact that this is the lowest average level of prepayments observed in one of the Member States. 257

Measure 1.1.3 Strict limitation of prepayment to organisers and service providers - part of Option C) would limit not only prepayments from travellers to organisers, but also from organisers to service providers.  258

Measure 1.2 Rapid refund mechanism (i.e. crisis or liquidity fund):

As confirmed by the evaluation, organisers face liquidity problems when confronted with many simultaneous refund requests, this hindering refunds to travellers. 259 A possible solution would be a rapid refund mechanism (a crisis/liquidity fund). During COVID-19, already under the current PTD, several Member States designed State aid schemes, providing loans to organisers to pre-finance refunds. In addition, one Member State – Poland – created a permanent crisis fund (rapid refund mechanism). 260  The European Court of Auditors has invited the Commission to assess the option of introducing such a permanent mechanism across the EU. Such mechanism/fund would ensure that travellers who do not accept vouchers receive a timely refund without endangering the liquidity of organisers. This fund would have to be built up over time through fees paid by all organisers.

The mildest measure in relation to such mechanisms would be a clarification on the possibility to set up a crisis fund at national level –Measure 1.2.1 - part of Option A. It would be clarified in the PTD that the Member States may consider maintaining or introducing such a mechanism subject to compliance with State aid rules. Should they indeed decide to do so, they would be obliged to inform the Commission and the Central Contact Points of the Member States of the introduction of such a mechanism, thus ensuring an exchange of information. As this issue is currently not regulated in the PTD, it is a priori already admissible that Member States introduce such crisis funds/mechanisms. Therefore, this measure would not lead to additional legal fragmentation.

Alternatively, a crisis/liquidity fund could be made mandatory, Measure 1.2.2 – part of Option C.

Measure 1.3 Business-to-business (B2B) refund right

Another way of increasing the protection of travellers’ prepayments in practice would be the introduction of a B2B refund right. Under measures 1.3.1 part of option A and 1.3.2 part of option C, service providers would be obliged to refund to the organiser all prepayments for services within 7 days of a cancellation. Since, where a package travel contract is terminated (e.g., due to unavoidable and extraordinary circumstances) under the PTD, the organiser must refund all prepayments to travellers within 14 days, 261 the introduction of the B2B refund right would enable organisers to make timely refunds to travellers or, where agreed with the traveller, to book services for a substitute package, while maintaining their liquidity. 

Under Measure 1.3.1 - part of Option A – the B2B refund right would apply only if the service provider cancels the relevant service (e.g., a flight) and the 7 days would start running from that cancellation. This would be independent of any cancellation of the related package (e.g., due to unavoidable and extraordinary circumstances).

While the PTD does not currently regulate the business-to-business effects of the cancellation of packages as such, it provides for the right of organisers to seek redress from third parties (Article 22 PTD). Therefore, providing specifically for a refund right against the service provider who cancels a service would be in keeping with the spirit of the PTD. This measure is also consistent with the 7-day business-to-business refund right included in the preferred option of the impact assessment on passenger rights in cases where an intermediary is involved in the sale of air tickets and the air carrier decides to reimburse passengers via the intermediary.

Under Measure 1.3.2 - part of option C, service providers would have to refund all prepayments to organisers within 7 days after the cancellation of a package due to unavoidable and extraordinary circumstances and the communication of this fact to the service provider. Such refund right would exist even if their service was or could have been provided (e.g., the flight took place or the hotel was open).

Measure 1.4 Introduction of rules on vouchers

Under these new rules, in line with the 2020 Recommendation, organisers would be able to offer vouchers instead of refunds upon cancellation of a package. Such rule would entail the following conditions: (i) vouchers should have at least the same value as the cancelled package; (ii) the validity of the voucher would be up to 12 months, but might be extended once with the explicit agreement of both parties; (iii) if the voucher is not redeemed or extended, travellers would receive a refund automatically when its validity period expires; (iv) vouchers would be protected against the insolvency of the issuer; 262 and (v) the rights of travellers must be clearly stated on the voucher.  263

Under Measure 1.4.1 Voluntary vouchers at all times - part of Option A - vouchers could be offered always (during and outside a crisis) and would be voluntary, i.e., organisers would have to inform travellers that they are entitled to a refund within 14 days but may instead accept a voucher.

Under Measure 1.4.2 - Mandatory vouchers in times of crisis – part of Option B - the PTD would permit vouchers only during a crisis and travellers would then have to accept them instead of a refund. 

5.3.2.Measures addressing Problem 2: Prepayments made by travellers are not sufficiently protected against insolvency of the organiser 

Under Measure 2.1 - Strengthened rules on insolvency protection, covering vouchers and refund claims with insolvency protection and explicit reference to back-up funds - part of Options A and B - it would be specified that the organiser’s insolvency protection must cover all prepayments received at the period when the highest number of bookings takes place plus, where appropriate, the costs for repatriations. 264 Moreover, wording would be added 265  to strengthen the responsibility of the Member States to ensure effective insolvency protection, for instance, through exposure analysis or a sufficiently high minimum percentage of the organisers’ turnover to be covered by an insurance policy. Additionally, the PTD would refer to insolvency back-up funds as one means to address gaps, limits or limited availability in first-line insurance policies. Indeed, the PTD already today obliges the Member States to protect travellers effectively against the insolvency of the organiser. The additional parameters mentioned, including the setting-up insolvency protection back-up funds are indicated as possible ways to achieve this objective and thus aim at improved implementation.  266  Information on such solutions would be exchanged within the network of central contact points of the Member States.

Contributions for an insolvency back-up fund would come, in principle, from package organisers. The exact amount or percentage per package to be paid as fee would be determined by the Member States that decide to introduce such a fund and will depend on national specificities, including the features of the first-line insolvency protection.

Under Measure 2.2 Strengthened rules on insolvency protection, covering vouchers and refund claims with insolvency protection and mandatory back-up fund at Member State level - part of option C- the PTD would make such fund mandatory.

5.3.3.Measures addressing Problem 3: Difficulties in implementing the Directive

Simplification of the key concepts, including the full or partial deletion of LTA, and of related information requirements

The evaluation confirmed that provisions on single-point of purchase LTAs (type (a)) as well as click-through LTAs (type (b)) 267  were ineffective in achieving the PTD’s stated objectives. To achieve simplification, under Measure 3.1.1 - part of Option A - LTAs type (a) could be removed from the Directive. For single-point-of-purchase packages, the criterion of services having been selected before the traveller agrees to pay would be complemented with an alternative criterion inspired by the notion of ‘services booked on the occasion of a single visit or contact’, taken from the definition of LTAs type (a), so as to avoid the difficult distinction between these types of combinations under the current rules. At the same time, the vague term “on the occasion of a single visit or contact” would be replaced with a specification of a short period of time within which the bookings are made to achieve a more legal certainty. This would make LTAs type (a) obsolete In addition, the definition of click-through package in Article 3(2)(b)(v) and the definition of single-point-of-sale package, in Article 3(2)(b)(i), would be adapted. All click-through bookings where the traveller’s personal data are exchanged between traders would be packages 268 , i.e., a smaller group of click-through bookings would be treated as packages. Type (b) LTAs would be maintained, but their definition would be simplified to allow for easier application. The definition would be limited to situations where a trader that is party to a first contract invites a traveller to book additional types of travel services for the same trip or holiday and receives payments from or on behalf of travellers. Furthermore, for traders to know that they are subject to this obligation, they would recommend to travellers through the information forms on linked travel arrangements recording the invitation to book additional travel service and the additional booking and to inform the trader with whom a first contract was concluded that a contract on an additional type of travel service has been concluded for the same trip or holiday within 24 hours following the confirmation of the first booking. To allow for this, the trader would need to make available to travellers a facility, such as an email address or a website, where travellers can register such information, and must acknowledge receipt of such information. As currently, the second trader would remain obliged to communicate to the first trader that a contract has been concluded.

Under Measure 3.1.2 Deleting LTAs type (b), adapting the definition of click-through package and clarifying LTAs type (a) - part of Option B, LTAs type (a) 269 would be kept, while LTAs type (b) 270 would be deleted. The definition of click-through package would be adapted as under measure 3.1.1. Regarding LTAs type (a), the criterion of a “single visit or contact” in Article 3(5)(a) would be explained in a recital (as under Measure 3.1.2) to achieve a more uniform interpretation. In addition, information on insolvency protection would be provided to travellers only where such protection exists.

Under Measure 3.1.3 Deleting LTAs type (b) - part of Option C - only LTAs type (b) would be deleted, and the definition of click-through package adapted as under the other measures. LTAs type (a) and the definition of single-point-of-purchase package would remain unchanged.

Depending on the degree of simplification of the substantive rules under Measure 3.1., the information to travellers could be improved and simplified, including through the removal of some information forms for LTAs (three for Measure 3.1.1, two for Measures 3.1.2 and 3.1.3).

Clarifications on cancellation rights due to unavoidable and extraordinary circumstances

To increase clarity on the impact of travel warnings and reduce uncertainty in relation to cancellations due to unavoidable and extraordinary circumstances 271 , 272 , a clarification of cancellation rights, explaining the role of travel warnings, while leaving scope for a case-by-case assessment would be envisaged under Measure 3.2.1 - part of Options A and B). 273   Under this measure, it would be clarified that travel warnings are an important element to determine whether unavoidable and extraordinary circumstances prevail and affect the performance of the package. However, it would not automatically imply a cancellation right without fees in all cases, whereas the absence of a travel warning would not automatically prevent a cancellation right without fees. 274  

Under Measure 3.2.2 Clarification of cancellation rights and formal value of travel warnings - part of Option C - formal value would be given to travel warnings. This means that the PTD would specify that a travel warning for the travel destination issued by the authorities of the country of departure proves the existence of unavoidable and extraordinary circumstances and the fact that the package is significantly affected by those circumstances. In the absence of a travel warning, the current case-by-case assessment would remain applicable.

In addition to the foregoing, under both Measure 3.2.1 and Measure 3.2.2, it would be specified that the situation both in the country of departure or residence and the country of destination may be taken into account for the assessment of whether unavoidable and extraordinary circumstances prevail and affect the performance of the package.

Additional specifications and clarifications

Since travellers may not always understand the role of organisers, retailers and service providers and may thus not identify the trader responsible for the performance of the contract and for the refund of prepayments or for compensation 275 , under Measure 3.3.1 Clarification of the role of the parties - part of Option A - the role of these parties could be further clarified, in particular, in the information forms annexed to the Directive. However, the legal obligation to refund prepayments would stay exclusively with the organiser, unless a Member State uses the regulatory option under the first sub-paragraph of Article 13 (1), as under the current Directive. Under Measure 3.3.2 - Retailers also responsible for refund of prepayments – part of Option C- organisers and retailers would be jointly and severally liable for refunds. 

5.What are the impacts of the policy options?

All assessed policy options positively contribute to the achievement of Sustainable Development Goals (SDG). By facilitating the provision of better information to travellers and better protection of travellers’ rights, the options will result in a more equal position of all travellers in the EU, contributing to SDG no. 10 – reduced inequalities. The clarifications of several provisions in the PTD will reduce inequalities between travellers from different Member States and likely decrease the number of travellers needing recourse to dispute resolution or legal procedures. The proposed measures will hence contribute to promoting non-discriminatory laws and policies and ensuring equal justice, addressed by SDG no. 16 Peace, justice and strong institutions. In addition, the measures will contribute to promoting growth of SMEs – as most package organisers belong to this category – thereby contributing to SDG no. 8.

The use of digital channels to conclude package travel contracts has been on the rise in recent years. The revision of the previous PTD in 2015 already took this trend into account. While certain provisions, e.g., on LTAs, and possible changes to them, may be relevant for this digital dimension, the assessed policy measures are not expected to have any significant impact on digitalisation. Consequently, all policy options are expected to have a neutral impact on the application of the ‘digital by default’ principle.

As regards social impacts, any impacts on consumer protection, consumer trust and income distribution are included in the economic impacts on travellers and businesses. Otherwise, social impacts are described, in the section hereunder, along with economic impacts.

The proposed individual measures, and the options resulting from their combination, will have an impact on SMEs, as many package organisers belong to this category. According to the evaluation, in 2019, around 99% of organisers in the EU were SMEs. 278 Moreover, 96% of companies that responded to the public consultation are SMEs, the majority of which are micro companies. 279  Therefore, the views of organisers reported below, to a very large extent, represent the views of SMEs and mostly micro enterprises. The proposed changes will affect both large companies and SMEs in the package travel sector. None of the measures proposed are expected to influence the number of SMEs operating in the market significantly. Still, cost factors affecting their operations and potential future growth were identified. These impacts are included in the description of the economic impacts on companies. The detailed SME Test and impacts on competitiveness are presented in Annex 5. Stakeholder consultations are summarised in Annex 2. 

Some measures presented below aim to increase legal certainty, thereby decreasing litigation costs and the need to seek legal advice. Businesses not respecting consumer law may incur costs to change their business practices or are more likely to face sanctions. However, costs resulting from their past or future non-compliance are not considered in this impact assessment.

A modification of the existing Directive will inevitably generate transposition costs for public authorities. Based on the administrative costs for transposition, alignment of procedures, guidance and training, monitoring and reporting of the present Directive, they are estimated at. EUR 49,677 per Member State, i.e., approximately EUR 1.3 million for the whole EU. 280 Considering that each legislative measure assessed below will entail changes to the Directive, such one-off transposition costs are not repeated separately for each option.

5.0.Economic and social impacts of Option A

Option A includes the following measures addressing Problem 1: flexible limitation of prepayments (1.1.1), possibility to set up a crisis fund at national level (1.2.1), a B2B refund right if services are not performed (1.3.1) and voluntary vouchers at all times (1.4.1).

Measure 1.1.1 Flexible limitation of prepayments

This measure would not put additional pressure on the organisers’ liquidity and may decrease insolvency protection costs for organisers that currently ask for higher prepayments. 281 Moreover, service providers would not face any prepayment restrictions, so that their liquidity situation will not change compared to the status quo. 282 On the other hand, organisers who would like to request higher prepayments, would need to have a justified reason to do so, such as the fact that they need to prepay providers of certain services included in the package or that they need higher prepayments to cover their own costs specifically related to the organisation and performance of the package at the time of booking or shortly afterwards. However, they would not need to provide any specific justification for higher prepayments for each package. Rather, they could calculate the necessary level of prepayments e.g. per type or group of packages having similar characteristics. Moreover, they would continue to be obliged to inform travellers, before the conclusion of a package travel contract, about the prepayments they request in the same way as it is currently done. As a result, their administrative burden would not increase.

In terms of potential changes to the cost structure pursuant to the introduction of Measure 1.1.1, an organiser responding to the specific targeted consultation of May 2023 indicated that their high-level estimate for a potential price increase, if the threshold were set at 20%, would be 3-4% of the current cost of a package, i.e., similar to a strict limitation of prepayments. However, this estimate seems to overestimate the actual impacts, as in many cases (as long as they are justified) prepayments can stay at the current level. A service provider replied that, in their view, the costs would increase by approx. 7.5% in the EU except for Germany. In Germany, where there is already a limitation of prepayments to 20%, they expect an increase in costs between 2.5% and 5%. The only difference between the current German practice and the proposed measure would be the collection of the remaining sum 28 days before the start of the package instead of the 30 days currently applied by this service provider. A price increase of up to 5% for receiving the funds 2 days later, does not seem plausible, and seems to largely overstate the actual costs increase (if any). It, therefore, also puts into question the reliability of the cost increase figure quoted for the remainder of the EU. In addition, having only two data sources, puts into question the representative value of the provided estimates. Overall, the cost impact for organisers would likely be the same or only slightly higher than the status quo. Still considering the high-end 3% increase in the operating costs of organisers, and the operational costs representing 10% of company turnover, the high side estimate for cost increases of organisers would be approx. EUR 332.1 million. 283  However, as explained, this seems in any event to largely overstate any potential cost increases. Obviously, the cost impact would be slightly lower if the threshold were set at 25% instead of 20%, which would be in favour of organisers, most of whom are SMEs, or even micro enterprises. This would justify setting the threshold rather at the level of 25% instead of 20%. Moreover, a threshold of 25% would be in line with the average prepayments in a number of Member States 284 , but would still allow to bring down the average prepayments in member States where they are substantially higher, such as Spain or Malta, where they currently lie at 40%. 285

To be noted that it has been indicated by organisers and service providers that any cost increases resulting from the introduction of new measures under the PTD, would be transferred onto travellers through corresponding increases of prices for packages. 286  In view of this pass-through effect, any cost increases for organisers would be compensated by corresponding increases of package prices. In terms of benefits for organisers, with the flexible limitation of prepayments, organisers would obtain sufficient funds to cover prepayments to service providers but would also need to refund less to travellers in case of cancellation for unavoidable and extraordinary circumstances. This may slightly positively impact their liquidity in times of a high number of cancellations. Moreover, the clarification of the permitted level of prepayment would in the medium- to long-term lead to a qualitative improvement of the industry, by favouring sustainable business practices and levelling the playing field for all organisers across the EU. Overall, the measure is expected to have a neutral cost impact on organisers.

The measure is not expected to have any economic impact on service providers.

Considering that this measure harmonises rules among Member States, since some countries already apply prepayment limitations, it will increase effective competition and hence lead to competitiveness gains within the EU. It is not possible, however, on the basis of available data to quantify the competitiveness gain for organisers resulting from this measure. International competitiveness will not change as a result of measure 1.1.1, because third country organisers offering packages to consumers in the EU will also have to apply the revised PTD.

As regards travellers, their costs will potentially increase through the cost pass-through by organisers described above, and result in a maximum total cost increase of EUR 332.1 million. This would represent an increase of the package price of EUR 4.4 per package or approx. 0.3% of the average package price. 287  To be noted that such a price increase would apply both in normal times and in crisis and may be slightly lower if the threshold is set at 25% instead of 20%. 

On the other hand, in terms of benefits, travellers would in principle prepay only 25% at booking, compared to often higher percentages currently. 288  This implies that in case of cancellation organisers will need to refund only a smaller percentage of the package price to the travellers concerned, thus decreasing their risks of not being reimbursed. Moreover, the clarification of the permitted level of prepayment is expected to result in a qualitative improvement of the package travel industry and increased transparency, benefiting also travellers. In addition, travellers would have legal guarantees and be less dependent on the business practices of organisers. 

Feedback from consumer organisations indicates that travellers prefer to sometimes pay substantially more to enjoy higher protection. 289 ,  290  This seems also to be confirmed by evidence from the UK’s ATOL reform survey 291 , showing that travellers are willing to pay more for a package compared to organising the travel themselves to benefit from the increased protection granted by the PTD, notably regarding the protection against the risks of organisers’ insolvency. These examples of the travellers’ willingness to pay indicate that a slight increase in price of the package, i.e. maximum 0.3%, in return for a higher protection granted by a lower prepayment will likely be accepted by travellers. Moreover, such a small price increase because of this measure will anyway be dwarfed by price increase due to the current two-digit inflation. Therefore, the measure is not expected to lead to any decrease in consumption of packages by travellers.

The size of the benefit for travellers will vary depending on the current practices in individual Member States and on the extent to which packages contain prepaid services. 292  In Member States where this would lead to changes, it would reduce the risk related to refunds and improve the liquidity position of travellers. As mentioned in Section 5, organisers request prepayments in the range of 20%-30%, increasing to 40%-70% or more where the package includes a significant flight or transport component, and reaching 100% in case of dynamic packages. Therefore, it could conservatively be estimated that the average prepayment rate would lie somewhere between 33% and 50%, depending on the composition of travel arrangements and destinations in a given year. Using the 2022 average package price, i.e., EUR 1380, as the baseline, the current average prepayment per package would be between EUR 456 and EUR 691 EUR. 

The requirement to limit prepayments to 25%, unless higher prepayments are justified, makes the prepayment rate something companies can compete on more aggressively. As a result, it can be expected the average prepayment will decrease. In theory, the prepayments could go down by, on average, between 8 and 25 percentage points. However, considering that, in many cases, organisers will be able to defend higher prepayments in view of prepayment they have to make to service providers, a reduction of an average 5 percentage points is conservatively assumed, or around 70 euros per package travel arrangement compared to the baseline. 293  This would imply that average prepayments would be between 28% and 45% of the package price, i.e., between EUR 387 and EUR 622. As such, in case of a cancellation for unavoidable and extraordinary circumstances, travellers would generally need to recover a smaller percentage of the package price. This would result in a liquidity gain of approx. EUR 69.2 per package or EUR 3.8 billion per year. Considering that approximately 4.4% of travellers suffer financial loss in normal times, 294 the introduction of this measure would result in a reduction of consumer detriment of approx. 4.4% of this liquidity gain, i.e., EUR 168.7 million per year. It can be expected that in a crisis, the overall loss suffered by travellers is on average higher than outside crisis. This implies that in times of crisis the consumer benefit related to this measure would be higher than the EUR 168.7 million per year calculated for non-crisis times.

Consumer protection would thus increase, but likely against some cost increase, as specified above. Overall, however, consumers will likely be better off as a result of this measure.

Member States authorities indicated that clearer rules on pre-payments would have a positive impact on them by ensuring better enforcement. 295  On the other hand, this measure is expected to cause one-off transposition costs for public authorities. These are, however, included in the overall transposition costs. 296  

Overall, in view of its limited costs and benefits, the measure is considered proportionate both with a view to crisis preparedness and outside of crisis situations.

Measure 1.2.1 Possibility to set up a crisis fund for rapid refunds at national level

Given its non-mandatory nature, the impact of this measure will depend on decisions taken at national level. Therefore, it would have no direct cost impact on companies or travellers. However, the decision of a Member State to introduce a crisis fund would obviously generate costs for package organisers as they would be required to contribute to such fund. The exact fee would still need to be determined by each Member State. As an example, Poland – who introduced a permanent crisis fund – imposed a fee of EUR 5 per package on organisers. To be noted, however, that, in addition, Poland granted State aid, of approx. EUR 68 million, to permit the start-up of this liquidity fund. 297

Considering price level differences between countries 298 , Eurostat data shows that in 2022 Poland was at 86% of the EU average. Therefore, the EU average cost per package for the crisis fund would be EUR 5.81. Taking into account the Commission’s estimate for the total number of packages in the EU in 2022 of 55.4 million, the total cost of crisis funds in all EU Member States would be approx. EUR 322.3 million, considering a 100% take-up rate. However, while at present the PTD does not impede the creation of a crisis fund, only Poland decided to create such a permanent fund, and Denmark a temporary one. It is difficult to predict the number of Member States that will establish such fund following the introduction of measure 1.2.1. Considering that only two Member States did this so far, combined with the fact that, in the consultation process, only a few Member States indicated openness to the idea of a crisis fund, suggests that not many will establish such a fund directly following the adoption of the proposal, hence keeping the costs of this measure minimal. At the same time, the introduction of measure 1.2.1, which entails an obligation to inform the Commission and the Central Contact Points should a Member State decide to set up such national crisis fund, will enable a discussion of the best approach based on real models and practical experience without imposing a crisis fund on the Member States at this stage. The Commission could thus still make such proposals in the future in light of the experience gained by the Member States. Such a flexible measure would hence be beneficial in the long-term. The overall costs of this measure will hence remain substantially below the maximum costs evoked above. In addition, in the medium and long term, the costs for such mechanisms will depend on different factors. These will include the frequency of recourse to the fund, which, in turn, will depend on the frequency and extent of future crises, how a crisis triggering the activation of a fund is defined, as well as the rate and speed at which organisers benefiting from such fund are able to pay back the amounts refunded to consumers on behalf of them, assuming that the fund will work on the basis of loans rather than grants.

As with other cost-increasing measures, such additional costs will likely be passed on from organisers to travellers in the form of price increases. It is expected that Member States would only introduce this measure if in their assessment it is cost-neutral in the long-term, i.e. consumer benefits would be (at least) equal to its costs. Such consumer benefits would stem from the fact that in case of a crisis where packages are cancelled due to unavoidable and extraordinary circumstances, travellers would receive immediate refund of their prepayments instead of waiting until organisers are able to reimburse them.

In terms of operating costs, Denmark, where a temporary crisis fund is in operation, found that costs for its set up were negligible, since the infrastructure of existing funds is used. However, its cost in times of crisis is estimated to be around EUR 700 000 annually. 299  

Overall, this measure is thus estimated to be cost-neutral in the long-term.

In case Members States wish to introduce such a crisis fund, they would need to inform the Commission and the Central Contact Points thereof. Based on the past costs for such reporting obligation and considering that only some Member State authorities would introduce such funds, the costs are expected not to exceed EUR 5,390. 300 On the other hand, this obligation will also help decrease operating costs of such funds by facilitating the sharing of best practices.

Measure 1.3.1 Business-to-business (B2B) refund right if the relevant service is not performed

An obligation for service providers to make a refund to organisers within 7 days of the cancellation of the service, i.e. only when a service is not provided, would have some positive impact on organisers, and indirectly travellers. 301 Organisers indicate that under the current rules they face excessive burden, which is further exacerbated in a crisis. 302 A B2B right to a refund within 7 days of a cancelled service could help alleviate this burden. 303 While under contract law service providers would anyway have to refund prepayments for services not rendered, a B2B refund right with a specific deadline in the PTD would provide a stronger basis for organisers’ receiving and claiming money back for a cancelled service. This has been indicated as an important element by organisers during consultations.

A B2B refund right if the relevant service is not performed would not result in any change or shift of the responsibility between the organiser and the service provider and the responsibility towards the traveller would remain with the organiser. As organisers do not hold travellers’ pre-payments but use them to pay for travel services, a legal guarantee to be refunded by service providers within 7 days of the cancellation of their service would increase the availability of funds to cover refunds to travellers and would improve the liquidity position of organisers. 304 Such specific deadline, however, might slightly negatively affect the liquidity of certain service providers that do not already have the obligation to make refunds within 7 days. It would, therefore, not affect airlines, who must reimburse passengers within 7 days under the APRR if they cancel a flight and will continue to be subject to this obligation. It is not possible to quantify the impact of this measure. In any event, it is not expected that the introduction of this measure would result in higher costs for packages. 305  

With the proposed measure, all service providers – both established within the EU and outside – would, in principle, have to abide by this rule insofar as the law of an EU Member State applies to the contract. In practice, though, organisers based in the EU may not be able to insist on the application of EU law in a business-to-business contract with a third-country service provider 306 and to enforce a 7-day refund in relation to third country service providers. 307  At the same time, it has to be taken into account that a difference in the possibilities to enforce refunds within and outside the EU already exists at present and that a refund right for services that are not performed corresponds largely to general principles of contract law. In addition, the new provision would allow organisers to obtain a refund from (especially EU-based) service providers more easily (and quickly) than currently, as, in view of their smaller bargaining power they are often not able to agree to mutually beneficial contract terms with service providers such as airlines. This will, in turn, put package organisers in a better position to refund travellers, thus having a positive impact on organisers’ competitiveness. This may hence improve the position of organisers compared to the status quo to some extent in relation to EU service providers and to a lesser extent in relation to third country service providers. Moreover, whilst overall competitiveness would be unchanged, the obstacle to recovering funds easily from non-EU countries, as long as it is not addressed (e.g. through bilateral agreements between the EU and the third country concerned), could lead organisers to choose the services of EU providers, such as airlines, over non-EU service providers for inclusion in packages that they offer. As a result, this may in the longer-term lead to an improvement of the competitive position of EU service providers. In addition, it may encourage third country service providers wishing to operate within the EU to establish a representative office and/or a subsidiary in the EU.

This measure would hence have a neutral or slightly positive overall economic impact on businesses as a group (both organisers and service providers) and should not result in any cost increases.

Travellers would also indirectly benefit from the proposed measure in terms of quicker refunds, as the measure would make it easier for organisers to provide such refunds within the 14-day deadline set in the Directive. Experiences with reimbursements in the pandemic demonstrates that it is not clear, though, whether these deadlines would be able to be respected in case of such widespread disruption.

There would be no impact on public authorities.

Measure 1.4.1 Voluntary vouchers at all times

The introduction of voluntary vouchers 308 , i.e. vouchers that could be emitted by organisers subject to specific acceptance by travellers, would have a positive impact on the liquidity of organisers. Upon cancellation of a package, they would not need to refund travellers accepting the voucher within 14 days, but either would propose a different package during the validity period of the voucher or would have to provide cash refunds only at the end of the validity of the voucher. However, the size of this effect would depend on the acceptance rate of vouchers by travellers. 309  According to the responses to the Public Consultation, for most EU citizens, public authorities and consumer organisations, the PTD should specify that organisers may issue vouchers instead of a refund within 14 days, provided that a) travellers agree and b) there is a guarantee that travellers will receive their money back if the voucher is not used within its validity period, and c) that vouchers have to be protected against the insolvency of the issuer. 50% of companies and business associations agreed with this statement, while 47% disagreed. 310 ,  311

In addition, certain guarantees included in the potential rules on vouchers, including the fact that they would be covered by insolvency protection under measure 2.1 (discussed below) and that they would be informed on this fact under measure 1.4.1, would make vouchers more attractive and are likely to increase the acceptance rate. The costs for businesses related to the introduction of this measure, if any, are expected to be minimal.

If Member States decide to introduce a rapid refund mechanism (measure 1.2.1), voluntary vouchers (measure 1.4.1) would be less relevant as a means of alleviating a liquidity crisis. Indeed, travellers are unlikely to accept vouchers if they can obtain immediate refunds through a rapid refund mechanism, thus decreasing the effectiveness of measure 1.4.1.

The introduction of rules on vouchers is not expected to create costs for travellers and would instead add clarity on their rights. Travellers will not be forced to accept vouchers but may accept them depending on how urgently they need their money back.

This measure would harmonise diverse national rules and practices, thus creating stronger cohesion in the internal market. 312  It would also increase coherence with the APRR, which has rules on vouchers.

To address Problem 2, Option A would contain Measure 2.1 - strengthened rules on national insolvency protection, including the coverage of vouchers and refund claims by insolvency protection and a reference to the possibility of setting up an insolvency back-up fund at national level.  

This measure aims to ensure the achievement of an effective insolvency protection system, including in times of crisis. It would also make it clear that in all Member States refund claims and vouchers related to cancelled packages would be covered by insolvency protection both at normal times and in a crisis.

In this way, it will bring clear benefits for the protection of pre-payments from travellers, in Member States where there are currently gaps in the protection and would enhance the comparability of protection levels in the Member States, thus levelling the playing field for organisers in the internal market.

The obligation of effective insolvency protection and covering all reasonably foreseeable costs is already provided in the current PTD. However, the provision to be added would aim to facilitate the achievement of this objective. Indeed, several of the parameters to be inserted into the provisions on insolvency protection are already used by some Member States. For instance, some Member States already apply minimum percentages of annual turnover to be covered, sometimes in addition to other criteria. 313 , 314 Exposure analysis will be carried out by many insolvency protection providers. 315 Some Member States already have back-up funds in addition to first line insolvency protection. Since the obligation to establish an effective insolvency protection system already exists today, any additional measures taken by the Member States to reach this objective cannot be seen as an additional burden created by the amendment. Moreover, any additional cost for the national insolvency protection systems in some Member States must be calculated against the very real risk of State liability for ineffective protection of travellers through national systems, as numerous CJEU cases from the past demonstrate. It is hence not sure that this measure would increase net cost for Member States. 

 Should Member States decide to introduce national insolvency back-up funds, such funds may be financed through contributions from organisers. It could be considered that a fee of EUR 5 per package could be reasonable in such case. This seems to be in line with the fee requested by the Polish fund. 316 This is a conservative cost assumption, since e.g., the UK charges a flat rate of GDP 2,5 (approx. EUR 2.92) for fully-fledged insolvency protection. 317 , 318

Under the proposed measures, vouchers and pending refund claims would be covered by insolvency protection. The Commission saw a risk that claims under Article 12 would not be covered in the context of Article 17(1), for instance, in the 2020 Recommendation and in the PTD Application Report. 319  Moreover, the current practice in the Member States varies. Indeed, six Member States replying to the consultation activities already cover vouchers and/or refund claims by insolvency protection up to a certain extent, while six do not. 320 In addition, the CJEU is still to rule on this issue in two pending requests for a preliminary ruling. 321 As a result, introducing a rule in the PTD providing that vouchers and refund claims are to be covered by insolvency protection would provide clarification benefits. Furthermore, it would provide indirect benefits to companies by creating a level playing field across the EU and by making vouchers, which help maintain the liquidity of organisers, more attractive for travellers. 322  Indeed, a big percentage of the respondents to the consumer survey indicated that they do not trust vouchers. 323  Covering vouchers and refund claims by insolvency protection would increase such trust and could lead to a higher acceptance rate. Most stakeholders agree with introducing in the PTD rules on vouchers applicable at all times. 324  Most consumer organisations and public authorities and a minority of businesses were in favour of covering vouchers and refund claims by insolvency protection. 325  

At the same time, this measure might have a cost impact in jurisdictions that currently do not impose such coverage. No detailed information on the cost burden of this measure was provided by stakeholders, and it was not possible for the Commission to quantify them precisely on the basis of the available data. However, such costs seem reasonable. 326  The costs for covering refund claims and vouchers can be expected to be higher in periods of a major crisis.  327 , 328  However, the available data shows that even in times of crisis, funds covering vouchers against insolvency protection do not seem to encounter high operational costs. 329  

To address Problem 3, Option A would include the following measures: deletion of both types of LTAs (3.1.1), clarification on cancellation rights and case-by-case assessment of travel warnings (3.2.1), and clarification of the role of the parties (3.3.1).

Measure 3.1.1 LTAs type (a) 330 to be deleted, while the definitions of click-through package and single-point-of-sale package and of LTAs type (b) would be adapted.

Some business stakeholders report that currently they are unable to identify anyone as LTA type (b) provider and stakeholder have stated that travellers should be informed about insolvency protection for LTAs only in cases where such protection exists. 331  Under the proposed measure, the definition would be limited to situations where a trader that is party to a first contract invites a traveller to book additional types of travel services for the same trip or holiday and receives payments from or on behalf travellers. Furthermore, for traders to know that they are subject to this obligation, they would recommend travellers in the information form on linked travel arrangements to record the invitation to book additional travel service and the additional booking and to inform the trader with whom a first contract was concluded that a contract on an additional type of travel service has been concluded for the same trip or holiday within 24 hours following the invitation. To allow for this, the trader would need to make available to travellers a facility, such as an email address or a website, where travellers can register such information and shall acknowledge receipt of such information.  332  While this may bring about minor hassle costs for travellers, it will allow them to benefit also in practice from insolvency protection that LTAs type (b) are supposed to offer. The overall impact on them would thus be positive. For traders, this additional obligation may introduce minor one-off costs to create and make available an email address or webform for such contacts, in cases where they do not already have them. In addition, they would face minor costs for sending the acknowledgments of receipt each time that a traveller provides them with such information. As a result, the overall impact of the changes on traders would be minimal. Moreover, in this way, traders will have more clarity on the volume of LTA sales for which they have to obtain insolvency protection and the increased clarity should lead to savings for traders over time. Limiting the requirement to provide information on insolvency protection for LTAs is not expected to increase operational costs and would be positive for travellers. 333  No cost data was received as to how changes to the definition of click-through package could impact service providers.

Deleting LTA type (a) and treating the purchase of different types of travel services for the same trip or holiday at one point of sale during the same visit or contact as packages (currently considered as LTAs) in the same way as ‘services purchased from the same point of sale and those services have been selected before the traveller agrees to pay’ (currently in the definition of package under Article 3(2)(b)(i)) would bring about significant simplification, in terms of the substantive rules and information requirements and would remove the current grey zone or circumvention potential between packages and LTAs type (a). At the same time, the criterion of a single visit or contact would be replaced with a specification of a short time window within which the transactions are concluded. Those changes would bring benefits for all stakeholders and would help in the pursuit of the objectives of a high level of consumer protection and a better functioning of the internal market in the area of package travel. Many stakeholders were in favour of such simplification. 334 However, this may result in some costs for companies which would find it more difficult to avoid liability as package organiser. However, also currently, avoidance of a package is not possible, legally speaking, if one of the criteria of a package is met (e.g. if there is an inclusive or total price or if there is a selection of different travel services at one point of sale before the traveller agrees to pay) 335 . Furthermore, any additional costs for non-complying businesses cannot be taken into account.

This measure is not expected to result in direct costs for travellers. Benefits could arise from the simplification and increased legal certainty and better enforceability of their rights. Simplification and increased clarity could facilitate enforcement and thus reduce burden on authorities. Moreover, deleting LTAs type (a) would reduce administrative burden as travel businesses will spend less time choosing the right information form. Out of the currently five information forms for LTAs, three would be removed. This gain could reach at least EUR 181.4 million per year. 336 It may however entail one-off adjustment costs for companies to get to know the new provisions, estimated at EUR 6.5 million. 337 Simplification regarding LTAs, as well as regarding the pre-contractual information to be provided to travellers. are also two of the suggestions of the Fit for Future platform. 338

Measure 3.2.1 Specifications on cancellations due to unavoidable and extraordinary circumstances: taking into account the country of destination and departure and travel warnings being an important element for the presence of unavoidable and extraordinary circumstances. There would still be scope for a case-by-case assessment.

No data was received from stakeholders to estimate the financial benefits from the clarification that travel warnings are an important element to determine whether unavoidable and extraordinary circumstances have occurred. Anyhow, such benefits are likely to be limited. While the CJEU has not yet ruled on this question, national courts already include travel warnings in the case-by-case assessment of cancellations due to unavoidable and extraordinary circumstances and travel warning have de facto an important role in that respect. One benefit for travellers would be that the mere absence of a travel warning could not in practice lead to an automatic denial of a cancellation without fees or alternative arrangements. Benefits will be related also to the clarification that the situation in the country of departure, residence and destination may be taken into account to determine whether there are unavoidable and extraordinary circumstances that affect the performance of the package. Negligeable cost increases due to the inclusion of the circumstances in the place of departure in the assessment might arise for organisers, although they may in practice already be recognised by many courts. This clarification may somewhat decrease (litigation and non-refund) costs for travellers. Both clarifications may, to some extent, improve the effectiveness of enforcement by competent authorities, thus leading to some savings in the medium run. In the short-term, the relevant national provisions may need to be adapted, potentially creating one-off transposition costs.

Measure 3.3.1 Clarification on the role of different parties

Under this measure, the roles of the parties would be further clarified. The compulsory information form would specify more clearly the roles and obligations of each party and would help achieve a better understanding. This would help travellers to reduce the time looking for information on who is the right party to contact in case of modifications or cancellation of a package. From the evaluation it appears that 33% travellers did not know who to contact for a refund during the COVID-19 crisis. Based on the ratio of cancelled flights between March – May 2020, the number of cancelled packages in the same period would be approx. 4 million. For 33% of these cancellations, i.e. approx. 1.34 million cancellations, there was a time loss while trying to get a refund. It seems reasonable to assume that this time loss was between 1 and 3 days per cancelled package. Therefore, between 1.34 million and 4 million days would have been lost by travellers at EU level in finding the right party to claim refund between March and May 2020. It is expected that the introduction of Measure 3.3.1 would lead to a reduction of consumer detriment by 50%, thus resulting in reduction of time loss between 664,894 and 1,994,682 days. However, such time loss will most likely consist mainly of frustration for travellers and not translate directly into a loss of income. Considering that in practice it can be estimated that between 1 and 3 hours would have been spent by consumers trying to identify whom to contact during the period March-May 2020, this would have represented an income loss of between EUR 38.6 million and EUR 115.7 million. As a result, Measure 3.3.1 is expected to result in a reduction of consumer detriment by 50%, i.e., between EUR 19.3 million and EUR 57.8 million.

For organisers, this measure could further contribute to the ease of doing business, with a negligeable administrative impact. Moreover, it could support the work of national enforcement bodies without any direct cost for them. It would also address one of the recommendations of the Fit for Future Platform. 339

Option A is not expected to have any additional social impact.

Overall impact of Option A

0 (no change) + (somewhat effective) ++ (Moderately effective) +++ (Effective) ++++ (Very effective) +++++ (Extremely effective)

A flexible limitation of prepayments would be to a certain extent effective in addressing Problem 1, as it would decrease the amount to be reimbursed where the package is cancelled before the final payment, making it easier for the organiser to refund the prepayment. 340  The introduction of a voluntary rapid refund mechanism would allow timely refunds to travellers in case of a liquidity crisis, thus very effectively addressing Problem 1 if it is indeed introduced. An explicit 7-day B2B refund right upon cancellation of the relevant service would make it easier for organisers to refund prepayments to travellers within the 14-day deadline without endangering their liquidity. The effectiveness of the measure on voluntary vouchers in relation to maintaining the liquidity of organisers in a crisis will depend on the acceptance rate by travellers. Such acceptance will be increased by attractive conditions relating to vouchers, as set out in this measure and under measure 2.1. However, regardless of the acceptance rate, this measure would be fully effective in providing legal certainty and clear information on the use of vouchers and would thus strengthen the rights of travellers in relation to refunds.

Businesses interviewed highlighted the need for more harmonisation between national insolvency protection systems. The clear cover of vouchers and refund claims under measure 2.1 would strengthen insolvency protection, including in a crisis, for the benefit or travellers, and enhance harmonisation with benefits for travellers and furthering the level playing field for businesses (thus addressing Problem 2, but also Problem 1). Otherwise, the harmonising effect is more indirect as Member States would continue to decide on the specific way in which to achieve effective insolvency protection. In this respect, effectiveness will thus depend on whether Member States decide to strengthen their national systems, for instance, by adding a back-up fund to an insolvency protection system based on insurance policies. Since Option A would facilitate stronger insolvency protection, it would help address Problem 2. To be fully effective, this measure would have to be combined with the Commission’s monitoring of the national insolvency protection systems, which is part of the baseline.

By the changes in the definitions of package and LTA, travellers would benefit from a clearer definition of package and from a reduced scope for circumvention of the rules on packages by traders. At the same time, information for travellers would be simplified, benefitting travellers and organisers. This would simplify the PTD significantly and would considerably facilitate enforcement. The measure would hence be effective in achieving SO3, and substantially more effective than the status quo. The clarification that travel warnings are an important element in the assessment of unavoidable and extraordinary circumstances, while maintaining the case-by-case assessment of the circumstances, would be more effective in addressing Problem 3 than the status quo, even though this effect would be limited. The additional clarification that not only the situation at the destination, but also at the place of departure should be considered for such case-by-case assessment is likely to address Problem 3 effectively. Most of the proposed clarifications correspond to what is expected to be developed by the CJEU case law but would be more transparent for the benefit of all parties if reflected in the text of the PTD. The proposed clarifications on the role of the parties will be somewhat effective in addressing Problem 3.

Wherever possible, the benefits and costs were quantified. Where no sufficient data was available for quantification, a qualitative assessment of costs and benefits was undertaken. Therefore, the quantified cost-benefit assessment is only partial and had to be combined with the qualitative assessment to reach a final assessment.

For the quantified costs and benefits both the net benefits and their Net Present Value (“NPV”) were calculated. For the qualitative assessment, scores between 0 and +5 for the benefits, and between 0 and -5 for the costs, were assigned to all impacts. These scores were aggregated to show the net benefit. 341  

The efficiency in terms of costs and benefits of the measures included in Option A are depicted in the table below. More detailed calculations can be found in Annex 10.

The burden on companies overall would remain limited with a flexible limitation of prepayments, while only slight price increases for travellers are expected. According to the stated preferences of consumers 342 , they would seem willing to accept certain price increases in return for higher protection. 343  A provision specifying that Member States may put in place rapid refund mechanisms would be cost-neutral in the longer-term. With a B2B refund right only if the service is not performed, the burden on companies as a group would be very limited. Voluntary vouchers would increase organisers’ liquidity, while creating only very limited administrative burden on companies and public authorities from the implementation of the measure.

As the PTD already requires effective insolvency protection and, considering that Option A would only further specify how this objective can be achieved, this aspect of Option A is not likely to increase costs. However, it may in practice lead to increased insolvency protection costs for companies in some Member States because vouchers and refund claims would need to be covered, which could imply an increased duration for the coverage of the perceived risks. Such cost increases may be passed on to travellers. At the same time, this measure will benefit organisers in that it will make vouchers more attractive for travellers and would lead to increased costs for insolvency protection only insofar as many vouchers are issued or if many refunds are delayed in a crisis. Overall, cost increases are thus likely to be limited. Since Option A would be effective in addressing Problem 2, it is efficient.

Deleting type (a) LTAs and covering in the definition of package may entail some one-off costs but would bring clear benefits to all stakeholders in view of substantial simplification in terms of the substantive provisions and information requirements. The clarifications in relation to cancellations and the role of the parties will have limited benefits for stakeholders, with potentially only limited costs. Option A would hence be more efficient than the status quo.

Taking into account both the Net Present Value (“NPV”) of the net quantified benefits and costs, and the efficiency scores determined qualitatively, Option A arrives at a normalised 344 efficiency score of 0.14. 345

The flexible limitation of prepayments for package organisers takes into account the rules and practices applying to service providers, including under the EU passenger rights regulations, and avoids incoherence with them. At present, there are no rapid refund mechanisms for standalone tickets under the APRR, but since option A does not impose them, while the current PTD does not exclude them, this measure would not raise coherence issues. A 7-day B2B refund right in case of cancellation of services would ensure coherence with the preferred option for the modification of the APRR on refunds to intermediaries in similar situations. In addition, rules on voluntary vouchers at all times would increase coherence with the APRR, where already today airlines may compensate passengers in the form of vouchers with the signed agreement of the passenger in case of denied boarding, cancellation or delay.

With the introduction of measure 2.1, the coherence with other policies would not change. There are no rules on insolvency protection for carriers in the passenger rights regulations. This discrepancy could be removed only through changes in the transport legislation, which is outside the scope of the PTD. 346

The changes in the definition of package and LTA would not lead to a change in coherence with other policies. If improvements on cancellation rights were introduced in the APRR, this would enhance coherence between these policies. However, this cannot be achieved through changes in the PTD. 347  

5.1.Economic and social impacts of Option B

Option B is composed of the following measures addressing Problem 1: strict limitation of prepayments to organisers (1.1.2), and mandatory vouchers in times of crisis (1.4.2).

Measure 1.1.2 Strict limitation of prepayments to organisers

Introducing a stricter threshold of 20% for the prepayments would be justified by the fact that this is the lowest average level of prepayments observed in one of the Member States. 348  However, reducing the maximum prepayments to that level without any possibility to increase them, would result in bigger liquidity risks for package organisers, considering that they would not be able to limit prepayments to service providers. This impact may be particularly strong for SMEs, representing 99% of organisers, as they generally have fewer resources available than large enterprises. As this measure is more difficult to enforce in relation to third country organisers it could result in a competitive disadvantage for EU organisers. 349  Most businesses estimated that limitations to prepayments would increase the costs of packages by at least 5%. 350 , 351 , 352 Such increases would be passed on to travellers, resulting in corresponding price increases for packages of EUR 553.5 million, or EUR 7.4 per package (i.e. 0.5% of the average package price). In addition, industry representatives allege that the offer in packages available to travellers would be reduced. It was not possible to estimate on the basis of stakeholder replies if, and to what extent, this would lead to a decrease in purchases of packages. However, as described in Annex 8, and sourced from the replies to the May 2023 targeted survey, the average price elasticity for European Tourism is -1,29, which implies that the sector is very price sensitive. Therefore, there might be a negative impact on the sales of package organisers due to increased package prices. No impact on service providers is expected, as they could continue selling standalone travel services should it become uninteresting for them to include their services in packages. 

On the other hand, for travellers, the likely price increases would coincide with certain benefits, as this measure would allow them to part with their money later and reduce the amounts to be refunded in case of a cancellation, thereby reducing the effect of delays in reimbursements and potential losses. 353  Considering that the estimated current average prepayment between 33% and 50% would go down to 20%, the average prepayment per package would decrease from between EUR 456 and EUR 691 EUR to EUR 277. The reduction in prepayments per package would hence be between 151 and 349 EUR. Considering that 55.4 million packages were sold in 2022, this represents between EUR 8.4 billion and EUR 19.3 billion prepayments. As approximately 4.4% of travellers suffered financial loss in normal times, the introduction of this measure would result in a reduction of consumer detriment between at least EUR 369.1 million and EUR 851.7 million per year.  

This measure is expected to cause one-off transposition costs for public authorities, which are already included in the global transposition costs for all the amendments of the PTD. 354  More Member State authorities supported this measure than opposed it. 355

Measure 1.4.2 Mandatory vouchers in times of crisis

The COVID crisis has shown that mandatory vouchers, i.e. vouchers imposed on travellers without their agreement, can be an effective means of easing the pressure on the liquidity of organisers in times of crisis. However, this measure would decrease consumer protection compared to the current PTD. At present the right to a refund within 14 days is guaranteed, while under this measure the traveller would not receive the refund until the validity of the voucher ends, if the voucher is not used for another package beforehand. This would mean that the average waiting time for refunds would increase, hence resulting in a corresponding increase in consumer detriment. Therefore, this measure is supported only by very few stakeholders. 356 In addition, the introduction of this measure would necessitate the determination by a central instance that there is a type and magnitude of crisis, e.g., a serious liquidity crisis, that justifies the application of this measure. This would raise different questions and make this instrument rather heavy.

In order to address Problem 2, Option B consists of Measure 2.1 - Strengthened rules on insolvency protection with explicit reference to back-up fund, as Option A. Therefore, the impacts of this policy measure are the same as described above for Option A. 

To address Problem 3, the following measures would be included under Option B.

Under Measure 3.1.2, LTAs type (b) would be deleted, and the definition of click-through packages would be adapted to incorporate all click-through bookings where the traveller’s personal data are exchanged between traders. 357 In addition, regarding LTAs type (a), the criterion of a “single visit or contact” would be explained in a recital. Finally, traders would be obliged to provide information on insolvency protection only where it exists. In addition, under Measure 3.2.1, there would be a clarification on cancellation rights, including a case-by-case assessment in relation to travel warnings. As the content of this last measure and of the clarification of the role of the parties is the same as under Option A the impacts would be identical in this respect. Consequently, only the economic impacts of the measure 3.1.2 are described below.

Some business stakeholders report that currently they are unable to identify anyone as LTA type (b) provider. As a result, there should be no or only minor costs connected with the removal of this concept, but stakeholders were not able to quantify them. The simplification and increased clarity should lead to savings for traders over time and to benefits for travellers.  358  No cost data was received as to how clarifications to the definition of click-through packages could impact businesses. Limiting the requirement to provide information on insolvency protection for LTAs is not expected to increase operational costs and would be positive for travellers. 359 However, familiarisation with the changes and replacing the old information documents could lead to one-off compliance costs for businesses of approx. EUR 6.5 million, as for Measure 3.1.1. In addition, the deletion of two information sheets out of five would bring about some simplification benefits for travellers and businesses, resulting in a benefit of approx. EUR 108.9 million. 360 The proposed clarification of the criterion of a “single visit or contact” for type (a) LTAs is not expected to lead to cost increases for travellers and businesses but would increase consumer protection and benefit businesses through improved clarity and enforceability of the rules. Simplification and increased clarity could facilitate enforcement and thus reduce burden on authorities.

However, the simplification and clarification benefits for all stakeholder groups would be limited if LTAs type (a) continued to exist in parallel to packages. 

Social impacts: Introducing a strict limitation of prepayments could undermine the competitive position of EU organisers. In the long-term this might lead to a decrease of jobs for EU citizens. The remaining measures included in Option B are not expected to have additional social impacts.

Overall impacts of Option B

0 (no change) + (somewhat effective) ++ (Moderately effective) +++ (Effective) ++++ (Very effective) +++++ (Extremely effective)

If travellers were obliged to prepay only 20% of the package at the moment of booking, the need for a refund in the case of a cancellation due to unforeseen and extraordinary circumstances would be limited. While this measure would address Problem 1, the degree of its effectiveness will depend on the current market practice in the Member State concerned. Overall, while not completely resolving the problem on its own, this measure would be more effective than the status quo and could make a significant contribution to tackling problem 1 in conjunction with other measures. Mandatory vouchers would help maintain liquidity of package organisers in a crisis. However, they would seriously weaken the right of travellers to a timely refund of prepayments in the event of cancellations. Therefore, they would be only partially effective in addressing Problem 1.

Businesses interviewed highlighted the need for more harmonisation between national insolvency protection systems. Like under Option A, the clear cover of vouchers and refund claims under Option B would strengthen insolvency protection for the benefit of travellers, including in a crisis, and enhance harmonisation (addressing Problem 2 but also Problem 1). Otherwise, the harmonising effect is more indirect as Member States would continue to decide on the specific way in which to achieve effective insolvency protection. As under Option A, in this respect, effectiveness will thus depend on whether Member States decide to strengthen their national systems, for instance, by adding a back-up fund to an insolvency protection system based on insurance policies. To be fully effective, this measure would have to be combined with the Commission’s monitoring of the national insolvency protection systems, which is part of the baseline.

Deleting LTA type (b), broadening the definition of click-through packages and adding a few clarifications regarding LTAs type (a) would bring some clarification/simplification benefits. However, the difficult distinction between packages and single point of sale LTAs (type A) would remain and the complexity of a set-up with packages, LTAs and stand-alone services would remain. Therefore, there would still be scope for circumvention and confusion of travellers and the simplification effect only partial. Therefore, in this regard, Option B, would be only somewhat effective in addressing Problem 3. The effectiveness of the clarifications on cancellations was already discussed under Option A above.

Wherever possible, the benefits and costs were quantified. Where no sufficient data was available for quantification, a qualitative assessment of costs and benefits was undertaken. Therefore, the quantified cost-benefit assessment is only partial and had to be combined with the qualitative assessment to reach a final assessment.

For the quantified costs and benefits both the net benefits and their Net Present Value (“NPV”) were calculated. For the qualitative assessment, scores between 0 and +5 for the benefits, and between 0 and -5 for the costs, were assigned to all impacts. These scores were aggregated to show the net benefit. 361  

The efficiency in terms of costs and benefits of the measures included in Option B are depicted in the table below. More detailed calculations can be found in Annex 10.

A strict limitation of prepayments to organisers would result in the highest burden on EU package organisers, while reaching the same or similar result as other possible measures in terms of consumer protection. The increased consumer protection, as compared to the status quo, would likely come at a significant cost for travellers. However, cost increases compared to the status quo, hence the efficiency of the measure, will also depend on the current market practice in relation to prepayments and will likely vary from one Member State to another. Mandatory vouchers in times of crisis would increase the liquidity of organisers in a crisis, while creating only very limited administrative burden on organisers and public authorities. Overall, Option B, while taking into account both the quantified benefits and costs (see table above) and the ones assessed qualitatively, would be less efficient than the status quo. 362

The efficiency of measures addressing Problem 2 that are included in Option B was already discussed under Option A above.

The measures included in Option B to address Problem 3 would bring some clarification and simplification benefits, while entailing some one-off costs. Option B would hence be somewhat efficient.

Taking into account both the Net Present Value (“NPV”) of the net quantified benefits and costs, and the efficiency scores determined qualitatively, Option B arrives at a normalised efficiency score of 0.08. 363

A strict 20% limitation of prepayments for package organisers, while there are no limitations for service providers would lead to increased incoherence with the transport legislation, including the APRR. Indeed, no limitations of pre-payment are planned under the parallel revision of the APRR. The introduction of mandatory vouchers would decrease coherence with other legislation.

With the introduction of measure 2.1 on insolvency protection, the coherence with other policies would not change. There are no rules on insolvency protection for carriers in the passenger rights regulations. This discrepancy could be removed only through changes in the air transport legislation, which is outside the scope of the PTD. 364  

The measures addressing Problem 3 that are included in Option B would not change coherence with other policies.

5.2.Economic and social impacts of Option C

Option C includes the following measures addressing Problem 1: strict limitation of prepayments to organisers and service providers (1.1.3), mandatory rapid refund mechanism (1.2.2), and a B2B refund right in all cases (1.3.2).

Measure 1.1.3 Strict limitation of prepayments to organisers and service providers

A limitation of prepayments from travellers would lead to lower amounts to be refunded by organisers in case of a cancellation before the payment of the last instalment. This would make it easier for organisers to refund such prepayments to travellers within the legal deadline. Since this limitation is accompanied by a corresponding limitation of prepayments by organisers to service providers, organisers would not face liquidity risks. This would be particularly relevant for SMEs, who make up 99% of organisers. In addition, a limitation of prepayments may decrease the need for insolvency protection of organisers, so that their costs for insolvency protection may decrease in the long-term.

However, extending the limitation of prepayments to service providers would increase the liquidity risks of service providers. It could also affect the competitiveness of EU as compared to non-EU service providers. Under the choice-of-law principle for B2B contracts, the latter could avoid the application of the PTD to their (B2B) contracts with EU package organisers even where a package is sold to EU travellers. According to an air carrier, introducing limitations on prepayments could mean higher fares and ultimately fewer choices for customers as companies would likely reduce certain connections due to a lack of profitability. 365 While other transport service providers were not targeted in the interviews, it is likely that these impacts would be relevant also for them. Similar views were expressed in workshops 366 and in targeted consultations, where stakeholders indicated that they would expect cost increases of even more than 10%. 367 In addition, some hospitality service providers might adapt the prices of their services for inclusion in package or offer stand-alone services only. 368  Some risks for service providers, such as airlines, could be eliminated by organisers’ depositing the entire payment for the service in an escrow account and making it accessible only once payment is completed by the traveller. However, this would transfer the whole liquidity risk to organisers. In addition, organisers dealing with service providers outside the EU may, in many cases, still have to prepay the current amounts to their service providers at booking, while only receiving a limited prepayment from their customers, leading to a situation similar to a limitation of prepayments to organisers as under Option B even if only for packages performed outside the EU.

Any cost increases for service providers would in principle be transferred, through corresponding price increases, to package organisers and subsequently consumers/travellers. Considering the announced 10% increase in costs for organisers, the corresponding cost increases for travellers would reach approximately EUR 1.1 billion, or EUR 14.7 per package (i.e. 1% of the package price). At the same time, in view of improved liquidity, it would be easier for organisers to make refunds to travellers. As for Measure 1.1.3, this would result in a reduction of consumer detriment between EUR 369.1 million and EUR 851.7 million per year.

This measure may create additional enforcement costs for national authorities, as they would need to start monitoring business practices of service providers in addition to those of organisers, to verify their compliance with the PTD.

Measure 1.2.2 Mandatory rapid refund mechanism (crisis fund) at Member State level

A mandatory rapid refund mechanism could be financed through contributions of organisers. The amount of the fee could be extrapolated from the information provided by Poland of EUR 5 per package, 369 which has created such a permanent fund. Considering price level differences between countries 370 , Eurostat data shows that in 2022 Poland was at 86% of the EU average. Therefore, the EU average cost per package for the crisis fund would be EUR 5.81. Taking into account the Commission’s estimate for the total number of packages in the EU in 2022 of 55.4 million, the total cost of crisis funds in all EU Member States would thus be EUR 322.3 million. The cost increase may be particularly relevant for SMEs, which generally have fewer resources to absorb price increases. Consequently, package organisers may try to pass such costs on to travellers. 64% of businesses disagreed that Member States should create permanent national crisis funds, as this could create a moral hazard with some enterprises taking more risks than others. 371 On the other hand, since such fund would refund travellers in case of liquidity problems of organisers, fewer organisers may become insolvent, potentially leading to cost decreases for insolvency protection. 63% of consumer organisations support the creation of national crisis funds. 372 If a rapid refund mechanism is introduced and there is a liquidity crisis, the fund - instead of organisers - would reimburse prepayments to travellers, thus safeguarding organisers’ liquidity. All travellers would directly or indirectly pay for it. 373 However, only those travellers that insist on a rapid refund through such fund and who do not accept a (delayed) reimbursement through a voucher, would benefit from its existence. National regulatory bodies may incur additional tasks related to overseeing the operations of such crisis funds and monitoring their compliance. Denmark, where a – temporary – crisis fund is already in operation as a reaction to the COVID-19 pandemic, found that costs for its set up were negligible, since the infrastructure of existing funds is used. However, its cost in times of crisis is estimated to be around 0.7 million EUR annually. 374 No permanent contributions from competent authorities are expected, so that no further costs would be incurred by them. However, there may be the need to bolster the fund in a crisis through loans or increased contributions, if it has not built up enough capital, which would then have to be assessed under State aid rules. or as in the case of Poland, State aid might be necessary in the start-up phase of such liquidity fund if the aim is to have sufficient capital available for a larger crisis at an early stage. Any State aid measure is subject to approval by the European Commission. The Polish crisis fund was approved under the COVID-19 Temporary Framework, which provided for simplified and broader State aid rules for a limited time to support the economy in the context of the COVID-19 outbreak. Future measures will likely have to be approved under standard non-crisis State aid rules, implying that the Polish measure and other State aid measures approved in analogy to the COVID-19 Temporary Framework cannot be used as a template. 

Measure 1.3.2 Business-to-business (B2B) refund right in case of cancellation of the package within 7 days, independently of whether the service is offered

The introduction of such B2B refund right would benefit package organisers by increasing their liquidity. 375  Moreover, organisers indicate that under the current rules there is an excessive burden on them, which is further exacerbated in a crisis. 376 A B2B refund right would help alleviate this burden. Introducing a maximum 7-day deadline for reimbursements from service providers to organisers could create certainty about reimbursement timelines for travellers and organisers. Under this measure, service providers would not be able to refuse such refunds if the termination of the package travel contract is justified under the PTD, regardless of whether the service provider cancelled the service. 377 However, in case of disagreement on whether the cancellation of the package was justified, this could lead to more B2B disputes, thus creating litigation costs for service providers and organisers, which may be substantial in a major crisis. At the same time, the number of disputes between organisers and travellers regarding refunds, and corresponding litigation costs, should decrease. 378  

On the other hand, while reducing the liquidity risks of organisers, this measure would increase risks and costs for service providers since the B2B refund would be due whenever a package is cancelled even if the relevant service is not cancelled and is provided or could be provided (e.g. the flight which is part of a package is going ahead despite the cancellation of a package or the hotel is ready to receive travellers). Service providers would possibly transfer such additional costs to organisers and indirectly travellers by charging a risk premium on services included in packages, or they may even contractually exclude the provision of some services from packages. 379  No impact on prices of stand-alone tickets is expected. 380  In addition, given the choice-of-law principle for B2B contracts, the effect of the measure may be limited for third country service providers, possibly causing competitiveness issues for EU service providers. 381  

Travellers may thus face a smaller offer of packages and/or higher prices. On the other hand, in case of cancellation in unavoidable and extraordinary circumstances, they are expected to benefit from the measure through more effective refunds. Indeed, organisers would have a right to obtain refunds from service providers within 7 days from the notification of the cancellation of a package. Consequently, they would likely be able to refund travellers within the mandatory deadline. Experience with reimbursements in the pandemic demonstrates that it is not clear, though, whether, in practice, these deadlines would be respected in case of such widespread disruption. Stakeholders were not able to provide detailed data on the cost impacts of this measure.  382  Only one organiser indicated a likely cost increase of more than 10%, but without providing any underlying data. Considering the inherent limitations of having just one data source, it is difficult to establish whether this estimate is representative. However, it must be assumed that all cost increases would be passed on to travellers. Conservatively taking the 10% increase in costs of travel providers as an increase in the price of the packages, this would result in a cost of travellers of EUR 1.1 billion. At the same time, organisers would have more liquidity and able to provide quicker refunds to travellers in case of cancellations, thus decreasing consumer detriment.

The measure is not expected to have any material impact on the administrative burden of organisers. 383  

A significant share of businesses and business organisations responding to the consultations did not express support for this measure, although other stakeholder groups seem to support it. 384  

Some national authorities consider that B2B arrangements should remain outside the scope of the PTD.

To address Problem 2, Option C contains strengthened rules on national insolvency protection, covering vouchers and refund claims by insolvency protection, and includes mandatory insolvency back-up funds at Member State level (Measure 2.2).

Mandatory back-up funds at Member State level could be financed from contributions of organisers. The exact fee would still need to be determined, but looking at existing examples, the cost could lie around EUR 5.81 per package. 385  Such additional costs will be passed on to travellers through price increases. This would result in additional costs for travellers of approx. EUR 322.3 million. 386  The operating costs of such a fund in times of crisis can be estimated at around 0.7 million EUR annually. 387  In the targeted survey, businesses were split on the usefulness of this option, 38% of respondents agreeing and the same percentage disagreeing with this idea. 388 Businesses interviewed were asked but did not provide additional information on potential costs. This option would aim to make insolvency protection more effective in many Member States and address limitations in insurance-based solutions, including limited insurance offers, 389 in some Member States, including in times of crisis. Mandatory back-up funds are not expected to burden travellers directly. However, for organisers in Member States where such funds do not yet exist, this could imply new costs, 390 which may be passed on to travellers through price increases. Mandatory back-up funds will require national level implementation, creating new tasks for competent authorities related to enforcement and monitoring. Opinions from national insolvency protection agencies varied on whether mandatory back-up funds were necessary. Indeed, the need for a back-up fund will depend also on the characteristics of the first-line protection arrangements in a given Member State and the relevant insurance market. Therefore, a back-up fund may not fit with all national systems and may lead to an unnecessary structure with associated costs.

As regards public authorities, additional costs for a back-up fund for the Member States would have to be balanced against the risk of State liability for an ineffective insolvency protection system.

For Problem 3, Option C would include the following measures: deleting LTAs type (b) and broadening the definition of click-through packages without clarifications for LTAs type (a) (3.1.3), clarifying cancellation rights and giving formal value to travel warnings (3.2.2), the role of the parties would be clarified, and retailers would also be made responsible for refunds of prepayments (3.3.2.)

Measure 3.1.3 LTAs type (b) would be deleted, without amending definitions for LTAs type (a)

As mentioned under Option A, there should be no or only minor costs connected with a legislative change deleting LTAs type (b). Stakeholders were not able to quantify them. The simplification and increased clarity should lead to savings for traders over time, related to the deletion of two information forms out of five, leading to a benefit of approx. EUR 108.9 million. 391 No cost data was received as to how clarifications to the definition of click-through packages could impact businesses. However, familiarisation with the changes and replacing information documents could cause one-off compliance cost of EUR 6.5 million.

Measure 3.2.2 Specifications on cancellations due to unavoidable and extraordinary circumstances, including circumstances in the place of departure, and formal value for travel warnings.

The impacts of a clarification that unavoidable and circumstances both at destination and in the place of departure may be taken into account would be the same as under measure 3.2.1 (described under Options A and B). Giving a formal value to travel warnings would make it more difficult for organisers to object to cancellations of packages without a fee. This may cause additional costs for them. However, it will reduce the litigation costs for organisers and travellers. Stakeholders have not provided an indication of the cost impact of this measure. Regulation of travel warnings in this sense could lower consumer detriment from unsuccessful reimbursement requests. It could decrease the cancellation costs for travellers, as no fee would be due for cancellations based on a negative travel warning. This measure could lower administrative costs for the Member State authorities related to court proceedings on the existence of unavoidable and extraordinary circumstances. However, some authorities indicated that travel warnings may be issued by different entities and for different purposes. Moreover, there is a risk of a time-lapse between something happening and the moment that a warning is issued. Travel warnings issued by authorities of different Member States can also be inconsistent. Therefore, there may be concerns regarding Member States liability if there is an automatic link between travel warnings and cancellation rights, and some remain sceptical. 392 In addition, the relevant national legislative provisions would need to be adapted, creating one-off transposition costs. A strict automatism of travel warnings for the cancellation of packages might also imply certain changes in the procedures relating to travel warnings. Since several Member States oppose this measure and even prevented any reference to travel warnings in the current PTD, this idea seems difficult to put in practice from a political perspective.

Measure 3.3.2 Retailers would be made responsible for refund of prepayment in addition to organisers.

Making retailers jointly and severally liable for refund of prepayments will likely increase the risks, and costs, for retailers who would then have to refund the traveller, and possibly only get the money back from the organiser at a later stage. Under Article 13(1), Member States may have national provisions making the retailer also responsible for the performance of the package. Therefore, in Member States where the authorities already used this possibility, there would be no impact. 393 However, it is likely to affect business models in most of the Member States, where retailers are not liable for the performance of packages. Especially in markets where retailers operate with small margins this additional burden may be relevant. The proposed measure would improve the ease with which travellers obtain refunds, in particular in cases where the organiser is based in a different Member State. It could result in better enforcement by public authorities but may require one-off transposition costs.

Social impacts: A strict limitation of prepayments to organisers and service providers (Measure 1.1.3) could undermine the competitive position of EU service providers, as explained below under economic impacts. In the long-term this might lead to a decrease of jobs for EU citizens. On the other hand, the introduction of a mandatory rapid refund mechanisms at Member State level might create additional jobs within the EU, as additional resources will likely be needed to deal with this task. Overall, the additional social impact of this option would rather be negative. Introducing mandatory national back-up funds may create additional jobs in the EU.

Overall impact of Option C

0 (no change) + (somewhat effective) ++ (Moderately effective) +++ (Effective) ++++ (Very effective) +++++ (Extremely effective)

Limiting prepayments to organisers and service providers would very effectively address Problem 1. An explicit B2B refund right where a package is cancelled, even if the relevant service was or could have been provided, would make it easier for organisers to refund prepayments to travellers within the 14 days deadline of the PTD. This would very effectively address Problem 1 but may be less effective in relation to third-country service providers. A mandatory rapid refund mechanism, once created and having collected sufficient funds, would ensure timely refunds to travellers in a liquidity crisis, effectively addressing Problem 1.

Compulsory national back-up funds would increase consumer protection in Member States where they would constitute a useful addition to the current protection. They would also help create a level playing field for companies in the EU. Measure 2.2 would thus be very effective in addressing Problem 2 for the Member States where such funds are a useful addition to the current mechanism.

Deleting LTAs type (b) would be only partially effective in addressing Problem 3, as problems related to LTAs type (a) and their delimitation from packages plus three information sheets for LTAs would remain. The clarification that the place of departure should also be taken into account for case-by-case assessment and giving formal value to travel warnings is likely to effectively address Problem 3. So would the measure on the parties responsible for refunds.

Wherever possible, the benefits and costs were quantified. Where no sufficient data was available for quantification, a qualitative assessment of costs and benefits was undertaken. Therefore, the quantified cost-benefit assessment is only partial and had to be combined with the qualitative assessment to reach a final assessment.

For the quantified costs and benefits both the net benefits and their Net Present Value (“NPV”) were calculated. For the qualitative assessment, scores between 0 and +5 for the benefits, and between 0 and -5 for the costs, were assigned to all impacts. These scores were aggregated to show the net benefit. 394  

The efficiency in terms of costs and benefits of the measures included in Option C are depicted in the table below. More detailed calculations can be found in Annex 10.

A strict limitation of prepayments to organisers and service providers would result in the highest burden on EU companies of the three options. The increased consumer protection, as compared to the status quo, would likely come at a financial cost for travellers. However, cost increases compared to the status quo, and hence the efficiency of the measure in achieving its objectives, will also depend on the current market practices in relation to prepayments and will likely vary from one Member State to another. Mandatory rapid refund mechanisms will result in increased costs for organisers, likely to be passed on to travellers. Moreover, in times of crisis, there could be substantial costs for public authorities. Introducing a B2B refund right in all cases where a package is cancelled due to unavoidable and extraordinary circumstances would keep the burden on companies as a group limited. However, the liquidity risk and related costs would shift from one category of businesses (organisers) to another (service providers). Hence, while it may increase costs for service providers, it would be beneficial for organisers (99% SMEs). On the other hand, it may lead to a decreased offer and/or higher prices for packages, thus reducing the benefits for travellers from shorter refund deadlines.

While the mandatory crisis fund included in Option C to address Problem 2 would entail additional costs for companies and public authorities, it would provide benefits to travellers in Member States where it is a useful addition to the current system. Overall, increased efficiency compared to the status quo is not guaranteed.

Giving formal value to travel warning would have substantial benefits for all stakeholders, while potentially creating some costs for companies and public authorities. Consequently, it would be very efficient but may face political opposition from certain Member States. Option C would be more efficient than the status quo in addressing Problem 3.

Taking into account both the NPV of the net quantified benefits and costs, and the efficiency scores determined qualitatively, Option C arrives at a normalised efficiency score of -0.37. It thus performs worse than the status quo. 395

Limiting prepayments for package organisers and service providers would be coherent within the PTD. However, it would create incoherence with the rules applicable to stand-alone services. Full coherence and elimination of negative effects on the availability of packages could only be achieved if similar limitations applied also to stand-alone services (e.g., under the Air Passenger Rights Regulation), which are not included in the parallel IAR on passenger rights and cannot be achieved through changes in the PTD. The introduction of a 7-day B2B refund right whenever a package is cancelled would create the same rules for all packages that are cancelled due to unavoidable and extraordinary circumstances and thus be beneficial for internal coherence. However, it would deepen the incoherence between the rules on packages and those applying to single services. This coherence issue could only be resolved through a cancellation right for passenger in the event of unavoidable and extraordinary circumstances, which, however, is not included in the parallel IAR on passenger rights. Moreover, there are no crisis funds for service providers. The mandatory introduction of such mechanism for packages would thus increase the cost gap between packages and stand-alone services and would reduce coherence with EU transport legislation. Moreover, such a fund would only benefit travellers that insist on a rapid refund and do not accept vouchers as a means of (delayed) reimbursement, thus creating an internal coherence issue.

The introduction of measure 2.2 would somewhat decrease coherence, as other EU legislation does not require insolvency back-up funds (most sectors, incl. air transport, do not even have a first-line insolvency protection).

If similar clarifications on the value of travel warnings and on cancellations were introduced in the APRR, this would create coherence between these policies. However, this cannot be achieved through changes in the PTD.

6.How do the options compare?

This section compares the performance of the five policy options, based on Section 6 assessments.

6.0.Effectiveness: expected achievement of the initiative’s objectives

Table 2 Effectiveness (scores from 0 to 5, normalised 396 scores from 0 to 1) 397

In the table above, the expected achievement of the objectives is presented net of the baseline 398 . Keeping in mind the scale used for the normalised scores, i.e. from 0 to +1, it becomes clear that all the options assessed are substantially more effective than the status quo. Overall, Option C would be the most effective option in achieving the specific objectives of the review. This is mainly due to the mandatory nature of the measures included in it. It is followed by Option A, with Option B being the least effective one.

6.1.Efficiency: impact on travellers and businesses

To compare the efficiency of the different options, this report considers the costs and benefits for all stakeholder categories (businesses, travellers and public authorities), including any (change in) consumer detriment. The costs and benefits for all stakeholder groups have been added together to represent the total impact of each option, distinguishing between quantified impacts (where available) and qualitative ones. The quantitative and qualitative scores were normalised, i.e., expressed as a proportion of the same base value, so as to determine a mean score. Where appropriate, e.g. in view of diverging impacts, the impacts per sub-group (e.g. impacts on organisers and service providers or retailers) were also assessed. As 99% of organisers are SMEs, the specific impact on SMEs is already accounted for under the impact for organisers. We took the conservative assumption that impacts on each stakeholder category are equally important, thus used the same weighting for each category. The overall efficiency score of each option is hence made up of the individual scores for each stakeholder category.

For each stakeholder (sub-)group, the qualitative impacts on efficiency were assessed according to a scale (from worst, negative scores, to best, positive ones), with values from 0 to +5. The baseline was always assigned a score of 0. The conservative assumption was applied that impacts on each stakeholder category are equally important, thus the same weighting was used for each category.

For the quantified costs and benefits both the net benefits and their normalised efficiency (NPV) were calculated. 399  It should be noted, however, that it has proven more difficult to quantify benefits than costs. As a result, the cost-benefit tables in Section 6 above, which only consider quantified costs and benefits, show a limited overall benefit-cost ratio. Taking into account both the normalised efficiency in terms of NPV and the normalised efficiency determined based on the qualitative scores (ranging between -1 and +1), the average normalised efficiency was determined.

This average normalised efficiency for each of the assessed options is presented in Table 3 below.

Table 3 Efficiency (average normalised efficiency score from -1 to +1)

Based on the full efficiency scores, 400 i.e., including both the NPV score and qualitative efficiency score, Option A would be most efficient in reaching the objectives of the review. It comes second in terms of NPV of the quantified measures. In view of the high costs, Option C obtains a negative NPV, while still scoring relatively well on the qualitatively assessed impacts but ends up being the least efficient option and worse than the status quo. Option B comes second in terms of overall efficiency.

While the full efficiency scores may seem relatively low, one needs to keep in mind the scale used (i.e. from -1 to +1). Therefore, in terms of overall efficiency, Option A still performs better than the status quo.

6.2.Coherence with other EU legislation and internal coherence across SOs

Table 4 Coherence (scores from -2 to +2, normalised scores from -1 to +1)

In the table above, the expected achievement of the objectives is presented net of the baseline. Based on the coherence scores established for the three options in Section 6 in light of a detailed coherence analysis, Option A thus achieves the highest coherence with other EU legislation. It is followed by Option B and C that show a decrease in terms of coherence compared to the status quo.

6.3.Comparison of options

In order to find the best performing option, the three options were compared across the criteria of effectiveness, efficiency and coherence. The results are presented in the tables below.

The methodology for comparison is explained in Annex 4, part 3. The detailed calculations and their results can be found in Annex 10.

Table 5 Comparison of policy options based on average normalised scores for each dimension

The multicriteria method used above compares the options based on a fully compensatory weighted average. 401  The weights used were equal to 1, as the number of sub-criteria per dimension is already neutralised by having averaged their normalised scores. The results in the table above show that Option A performs better than Option B, which, in turn, is better than Option C. 

Table 6 Comparison of policy options based on the Condorcet outranking method (partial compensation over 8 sub-criteria)

The second multicriteria method tested is the Condorcet partially compensatory outranking method 402 , 403 over the 8 individual sub-criteria that were assessed (3 for effectiveness, 3 for coherence and 2 for efficiency). This produces a ranking where Option A outranks (i.e., performs better in terms of efficiency than) Option C, which, in turn, outranks Option B.

Table 7 Comparison of policy options based on the Condorcet outranking method (over 3 key IA criteria)

The final comparison of options in Table 7 above, is a mix between the first and second method. The Condorcet outranking method is still used. However, rather than using the options’ value for each of the 8 sub criteria the pairwise comparison is performed on the mean normalised scores 404 for each dimension (i.e., effectiveness, efficiency and coherence). As a result, there is full compensation between the various sub-criteria that belong to each dimension, but only partial compensation between the dimensions themselves. Option A again scores best. At the same time, there is no difference in the ranking of Options B and C, as they obtain the same scores.

The analysis above shows that, independently of the comparison method used, the overall best performing option, in terms of economic impacts, is Option A. While it is not the most effective option, it brings about benefits for travellers and businesses with the lowest costs. It also ensures the most coherence with other legislation.

As regards social impacts, Option A is not expected to have any specific positive or negative impacts. On the contrary, the social impacts of Options B and C are rather negative overall. This again points to Option A being the best one, on balance.

In addition, Option A contains measures that are less interventionist than the other options considered. Consequently, it respects the balance between the objective and the means and methods used as well as the consequences of the action, and is, therefore, the most proportionate.

7.Preferred option

7.0.Composition and performance of the preferred option

Based on the impacts identified in Section 6 and the detailed analysis and comparison of options in Section 7, Option A is the preferred option. It contains the following measures:

·Regarding problem 1: flexible limitation of prepayments (1.1.1), possibility to setup of a crisis fund at national level (1.2.1), 7-day business-to-business refund right if the relevant service not performed (1.3.1) and voluntary vouchers at all times (1.4.1);

·Regarding problem 2: strengthened rules on national insolvency protection (covering vouchers and refund claims and an explicit reference to voluntary back-up funds at MS level) (2.1);