The association made the demand as part of its submission to the CAA, which is just about to close its consultation with the industry on proposed reforms of the Atol consumer protection scheme.

The government carried out a review of airline insolvency in the wake of the collapse of Thomas Cook in 2019, but the process now seems to have stalled with no sign of any legislation heading to parliament.

The vast majority of AAC members (89%) said new airline insolvency rules should be introduced at the same time as any changes to Atol. 

While 70% said if the government did not address airline failure, then Atol holders should “reject major changes” to the Atol scheme. The association’s members accounted for more than £5 billion in sales in 2019.

Lindsay Ingram, chair of the AAC, said: “There is an urgent need to review protection for those Atol holders who are linked to their own airlines, as these have historically been the major cause of losses from the Air Travel Trust (ATT).

“Most other Atol holders issue air tickets at the time of booking or shortly thereafter, ensuring that there should be no cost to repatriation in the event of failure of the Atol holder.”

The survey of AAC members also found more than 30% had “genuine concerns regarding future consumer protection”, with the CAA proposing the use of trust accounts to protect consumer money before travel.

The association’s legal advisor Alan Bowen added: “A number of the AAC’s largest members already operate their business through trust accounts and believe this is the way forward.

“A number of others, however, expressed genuine concern that forcing trust accounts would have an adverse effect on their business, particularly in the current difficult trading environment.”

Some 60% of members said they would prefer to revert to bonding, if possible, to ensure consumer protection, while others would be interested in using insurance against failure, which is not currently accepted by the CAA for Atol holders.

The AAC called for the CAA to propose “a range of options to meet differing needs of Atol holders".

“The CAA must take into account the very different and strongly held views of Atol holders before taking further steps to avoid damaging the very fragile state of the marketplace,” added the association.

The current consultation on Atol reform closes on Sunday (15 August) with detailed proposals expected in early 2022 followed by another consultation period with the trade.