Reforms are needed so the aviation regulator can take action against airlines that flout the law by failing to refund customers for cancelled flights, a former transport secretary has said.

Making the call at Westminster, Conservative peer Lord Young of Cookham said tens of thousands of passengers had complained to the Civil Aviation Authority about “inexcusable delays” in getting compensation.

He pointed to concerns raised by consumer groups that the CAA did not have “the right tools” to take effective enforcement against firms flouting the rules.

More: CAA holds fire on deadline for issuing refund credit notes

Responding to his question on the issue, transport minister Baroness Vere of Norbiton said: “The government recognises the challenge consumers and businesses are experiencing regarding refunds for cancelled holidays and flights.

“We are clear that where a flight or holiday has been cancelled consumers have a legal right to a refund, which must be paid.

“The Civil Aviation Authority launched a review into this issue and as a consequence most airlines are now paying refunds effectively.”

Lord Young said: “She will be aware that tens of thousands of passengers have complained to the CAA about inexcusable delays in getting compensation for cancelled flights.

“Will she bring in much-needed reforms, enabling the regulator to take swift and effective action to protect consumers when the law is broken?”

Former cabinet minister Lord Pickles said two package holiday companies – Loveholidays and On the Beach – had quit Abta to avoid paying full refunds on cancellations due to Covid-19.

He added: “Will the minister look carefully at the regulations and the alleged loophole that suggests that if the Foreign Office advises against travel and yet the company itself keeps a flight open and the accommodation open, that a full refund is not payable?”

Lady Vere encouraged people to consider the implications of cancellation when making their travel plans, including if a firm is a member of Abta and if it has Atol protection.

Which? Travel editor Rory Boland said: “Which? has long been calling for meaningful action from the regulator in response to airlines breaking the law on refunds on a scale that has never been seen before – but it has been unable to do so, so it’s clear that the time for reform is now.

“The CAA has also asked for stronger powers, including the ability to fine airlines directly for breaches of the law.

“The government’s aviation recovery plan should set out steps it will take to address this, to ensure airlines do not feel empowered to brazenly break consumer law again in the future.”

MoreCAA holds fire on deadline for issuing refund credit notes