Abta’s chief executive says consumer protection “hasn’t kept pace” with the changing ways travel is booked as he welcomed a government review into airline insolvency.

Mark Tanzer said travellers on the whole are not aware about the difference in protection between booking a package holiday and booking a flight directly with the airline.

Last year, the government repatriated 110,000 customers affected by the collapse of Monarch – the majority of whom were not covered by the company’s Atol licence.

This raised questions within the industry over the fairness of the scheme with those not protected making use of the funds raised by those who had paid for the cover.

Tanzer, said: “Reviewing what happens to passengers when an airline goes out of business is a welcome and necessary step by the government.

“Abta has long-argued that consumer protection hasn’t kept pace with the changing ways in which people can book travel and that there is a need for greater clarity around consumer protection for businesses and consumers alike.

“Many travellers are unaware that if you book a flight directly with an airline you are not protected if the company goes out of business, but if the flight is booked as part of a package or flight-plus, you are. The current system is not clear for passengers or the industry and is inconsistent in its application.

“The Government will need to put consumers at the heart of the review in order to make sure that the outcome delivers the right protection and clarity for passengers and industry. We look forward to contributing to the review.”

Under the current protection system, tour operators have to arrange a repatriation or refund if an airline fails and the Atol scheme currently ensures customers who buy flight-based packages or flight-plus arrangements will be repatriated or refunded if their package organiser fails.

Some flight-only sales are also currently protected, when sold through travel agents or intermediaries. Abta says it is unclear whether this protection will remain in place following implementation of the revised Package Travel Directive which comes into force on July 1.

Atol protection, which costs travel companies £2.50 per passenger, does not apply to everything a company sells but a particular set of travel arrangements. Companies must, under current law, advertise themselves as Atol protected – even if the majority of travel arrangements they operate are not protected by the scheme. Abta says this can lead to consumers thinking their travel arrangement is protected when it isn’t.