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EU set to extend holiday travel protection

European travelers who book holiday "packages" with combinations of flights, hotels, car rentals were set to receive tougher financial protection, under plans put out for consultation by the European Commission on Thursday.

The European Union (EU)'s executive arm is consulting on extending the basic cover provided by EU's 1990 Package Travel Directive to the next generation of "dynamic packages," where consumers make up their own packages, often online, through one website or different partner websites.

It was estimated that 23 percent of EU consumers, and over 40 percent in countries like Ireland, Sweden are now booking "dynamic packages," many of which currently fall outside EU protection rules.

"We need tough protection that gives all consumers booking a package holiday the peace of mind they deserve, and we need a level playing field so businesses compete on equal terms," said EU Consumer Commissioner Meglena Kuneva.

The EU Package Travel Directive, dates back to 1990 when the most common type of holiday was a two-week package booked through a travel agent using a brochure.

It is no longer suited for today's travel market since the Internet and low cost airlines have transformed business models and changed consumer behavior. Increasingly large volumes of bookings are made by consumers putting together their own packages, often online.

The European Commission was particularly concerned about the issue of insolvency following the recent spate of airlines going bust.

"Anyone who saw the TV pictures of thousands of holidaymakers stranded at airports after bankruptcies from Sky Europe to XL, Futura and Zoom, knows that now is the right time to ask tough questions about extending basic insolvency protection to consumers across the board," Kuneva said.

The Package Travel Directive requires the tour operator or travel agent to provide security for the refund of all money paid by the consumer and for the repatriation of the consumer in the event of bankruptcy.

The commission is considering extending basic insolvency protection for consumers beyond package and dynamic packages across the board, including for stand alone airline tickets, i.e independent travel arrangements not part of any package, so that passengers would be reimbursed for money paid over or repatriated if the airline went bankrupt.

Following the consultation, the commission intends to bring forward concrete proposals to review the Package Travel Directive in Autumn 2010.