The UK’s leading online travel agent On the Beach has responded robustly to questioning of its policy on refunds for cancelled package holidays to Spain.

On the Beach has pledged to refund customers who don’t wish to travel to Spain against Foreign Office (FCO) advice for their accommodation, but will refund flight costs only where airlines cancel flights and pay out refunds.

The Package Travel Regulations (PTRs) entitle customers to a full cash refund for a package holiday cancelled by the travel organiser, and entitle the customer to cancel and obtain a refund “in the event of unavoidable and extraordinary circumstances” affecting the destination or travel to it.

However, there is growing debate about what this means in light of Covid-19 travel restrictions.

Abta confirmed this week that members “should offer refunds to package holiday customers where the Foreign Office advises against travel” following a unanimous decision of its board.

On the Beach is an Abta member. Abta confirmed last week that it is carrying out “preliminary investigations” under its Code of Conduct of the refunds policies of On the Beach and fellow OTA and Abta member Love Holidays.

Separately, the Sun newspaper reported at the end of July that it had referred complaints about On the Beach and Love Holidays to the Competition and Markets Authority (CMA).

In a statement to customers on the OTA’s site, On the Beach chief executive Simon Cooper says:

“You may have seen reports in the media about Abta’s policy on refunds to destinations affected by FCO advice and quarantine measures.

“Last week, Abta asked us to provide representations on this issue by close of business on Thursday 13 August, which we have done. We were therefore surprised to see Abta publish their policy on this issue the day before we filed our representations.

“We are working on the assumption that notwithstanding Abta’s statements of August 12 and 13, they will consider our representations in good faith . . . and will consider updating their policy.

“Abta is an industry body of which membership for travel businesses is not mandatory.

“It is not a regulator or a lawmaker. Industry practice, mainly driven by Abta’s historic guidance, has been to treat the FCO [advice] as a trigger for full cancellation and refund rights for customers.

“Industry practice is not law. It is something which can and should change and evolve over time and should certainly change in response to this highly unusual situation.”

Cooper says: “The legal position is set out in Regulation 12(7) of the Package Travel Regulations (PTRs). The legal position is very clear that FCO advice does not automatically trigger Reg 12(7).”

In fact, the PTRs make no reference to FCO advice. Regulation 12(7) on “Termination of the package travel contract by the traveller” confers the right to “terminate the package travel contract . . . in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and which significantly affect a) the performance of the package, or b) the carriage of passengers to the destination”.

Where a holiday is cancelled for this reason, “the traveller is entitled to a full refund of any payments made for the package”.

Cooper tells customers: “The ‘unavoidable and extraordinary’ circumstances must be present at the destination or in its immediate vicinity and . . . significantly affect the performance of the package or the carriage of customers to the destination.

“Whether the circumstances in question ‘significantly affect’ the package must be assessed on a case by case basis, which is the approach On the Beach is taking.”

He notes the Foreign Office website, in an explanation of its travel advice, tells consumers: “Travel companies and airlines often take our advice into account but the decision to cancel or re-schedule a flight, holiday, tour or excursion is a decision that can only be taken by the travel company and the customer.

“The question of refunds is a matter that must be resolved between the customer and the relevant airline, tour operator or travel agent. We don’t dictate when travel can or can’t take place.”

Cooper then argues: “The blanket approach within the current FCO advice on Spain is highly unusual. Many in the industry, including Abta, have called for a more nuanced approach.

“The advice has not triggered airspace closures or widespread flight cancellations. Large volumes of flights continue to go ahead to Spain and its islands every day and hotels and tourist attractions remain open.

“In accordance with the PTRs, we are still able to fulfil our obligation as a package organiser – the carriage of passengers is unaffected and the holiday is still able to be delivered.

“Of course, we are not proposing to take a rigid approach. Before making this assessment, we review the circumstances at the relevant destination(s) to establish carefully whether the package would be significantly affected. We will also clearly consider individual circumstances.”

On the issue of travel insurance, Cooper points out: “Travel insurance is not part of the package. We always advise customers to take travel insurance, though it is not compulsory and many customers travel without travel insurance in normal circumstances.

“Customers who do not wish to travel may be able to claim cancellation costs from their travel insurance provider.

“If customers wish to travel and are not covered by their current insurers, insurance products are available to purchase.”

He insists: “We remain committed to offering refunds, in cash, on accommodation and transfers to customers who choose to cancel their holiday based on the advice.

“If the airline cancels the flight and refunds us, we will also pass that refund back to the customer in full.”

Leading industry lawyer Stephen Mason, senior counsel at law firm Travlaw, noted this week that consensus among travel firms on responding to Foreign Office advice “is breaking down”.

Mason noted “it’s not illegal to travel if the FCO advises against travel” and suggested: “It’s a new area in the law and one day the courts will decide.”