All holiday companies must refund passengers for trips cancelled due to coronavirus, and cannot only offer the option to rebook or take vouchers, the European Commission says.
The EU executive announced today that it is writing to all member states to say they must enforce citizens rights to a refund and sanction any airlines that breach this.
Under EU law, travel companies must refund customers within 14 days if their package holiday is cancelled.
And passengers should receive a refund in seven days if a flight with an airline based in the UK or EU, or from an airport in the UK or EU, is cancelled - according to the EU's Denied Boarding Regulations.
Commission executive vice-president Margrethe Vestager said that all customers have a right to a refund if they wanted.
But companies can offer incentives for people to accept vouchers instead.
In a news conference this morning, she said: “That’s exactly why we insist that each citizen has a right here because we can’t judge the economic situation of the individual.
"If you have lost your job, if this is your entire holiday budget for travelling that sits in these tickets so you can’t use anymore then you would have the refund and this is why we say ‘this is your right’. Full stop.
“At the same time there is a liquidity crunch.
"If one can afford to take a voucher or would like to support the businesses by taking a voucher, this can be made attractive.
The commission had faced pressure to suspend regulations allowing passengers the right to a full cash refund, in order to protect the ailing tourism industry.
But this was rejected as the commission said companies should make vouchers more attractive to customers.
The EU group proposed that vouchers could be made valid for at least a year - and recommended that they are protected against bankruptcies.
Now letters have been sent to countries that are failing to force companies to respect travellers rights - the first step in infringement procedures when countries fail to follow EU law.
Ms Vestager said: "As of today, where we have taken the Commission's decision on this, letters will be sent to the member states who are in breach of this very fundamental principle.
"So these letters, they are going off as we speak."
The EU Commissioner said holiday firms need to make vouchers appealing for people who can afford to choose to hold it for use at a later date.
She added: "What is starting now is the first step in the infringement procedure.
"The first thing we do is send a letter to say you’re not in agreement with European legislation and then we expect the member of state to correct it immediately otherwise the next steps will be taken."
During a press conference, the commission said it would release a list of countries that have been contacted later today.
It is not known yet whether the UK is included but the action comes as many Brits are struggling to secure a refund.
Despite the laws in place, many people have complained of being forced to accept potentially worthless vouchers instead.
An investigation by Which? magazine found that none of the country's top 10 holiday companies have been offering refunds within the legal time.
Meanwhile, some have only offered vouchers or credit notes "which may prove to be worthless" if the company collapses.
