A consultation on potential changes to the Atol scheme is currently being carried out by the CAA ahead of detailed plans being published next year. This could include the requirement for the greater use of trust accounts to protect consumer cash before they travel.

But John de Vial, special advisor to Abta, said there could be an “unfair playing field across different business models” if package travel companies had to deal with “cost upon cost layered on them” through a new Atol regime.

He added this could end up causing a “shrinking in the share of protected travel arrangements” because of this “cost disadvantage”.

“We think it’s really unfair – albeit through good intentions – if there are further costs placed on to Atol holders and our members when others in the industry are providing the same components of a holiday at the end of the day but are not required to pay these costs,” de Vial argued during a panel discussion at the Abta Travel Matters online conference.

De Vial called for any Atol reforms to be introduced “hand in glove” with proposals to change airline insolvency rules in the wake of the failures of Thomas Cook and Monarch over the past few years.

Although he admitted that “nothing has happened” within government to progress airline insolvency reform.

Julia Lo Bue-Said, chief executive of Advantage Travel Partnership, added it was important for the CAA not to have a “sledgehammer approach” to Atol reform.

“We cannot have a sledgehammer approach while the industry is in such a fragile state,” she said. “It’s about clarity and making sure there are options available – we don’t want a one-size-fits-all sledgehammer approach for every business.”

Garry Wilson, chief executive of easyJet holidays, agreed that a “one-size-fits-all” approach to Atol protection was “inappropriate” and “would not work”.

“Clearly there are many different organisations with different levels of liquidity and risk,” he said. “We need to look at the financial status of the operator or airline. What are the repatriation costs should there be a failure?”

Martin Alcock, director of Travel Trade Consultancy, said Atol reform could have “profound consequences for the UK travel industry and the whole supply chain”.

“It feels like the proposals disproportionately affect smaller companies – they are being asked to underwrite the risk of much larger companies,” he added.

CAA chairman Stephen Hillier urged the travel industry to continue to give their views on changing the Atol system, with the current consultation open until 30 July.

During his appearance at Travel Matters, Hillier emphasised the CAA’s priority was ensuring “better protection of consumers’ money, as well as improving the financial resilience of Atol holders and the system itself”.

He also promised to “take full account of the need to allow the industry to adjust” to any changes in the Atol system through a transition period once the reforms have been finalised.

“I understand the impact the pandemic has had on your finances – we hear that from colleagues every day,” added Hillier.