The travel firm had placed a bond with the Spanish regulators but this only totalled £1.09 million, The Times reported.

Finbarr O’Connell, of Smith Williamson, said: “We’ve had a meeting with the Govern de les Illes Balears. It said that there is a bond in place but for the very limited sum of €1.3 million. The potential claims from customers are expected to be very substantial and could be more than £50 million.

“There are about 140,000 customers we believe have lost out. Sadly this means there will be very little back for any claim. The compensation will be paid to claimants on a pooled basis so everyone would get back the negligible sum of about 1 or 2 per cent.”

Boss Paul Evans memorably quit the CAA’s Atol scheme in 2013, moving his package holiday business to Majorca.

Even though the many of the firm’s customers were British, the company was able to move its place of establishment to another country under the EU Package Travel Directive.

At the time he said passengers were “fully protected” and that Lowcost had the “maximum bonding available under Spanish law”.

Meanwhile, it has since emerged that Irish regulators, unlike the CAA, made the company supply a bond, even after it moved its business to Spain. A spokesperson for the CAA was unable to tell TTG why it did not do the same.

“All tour operators and travel agents trading in the state are required by law to be licensed and bonded to buy or sell overseas travel originating in the state to destinations outside the State or Northern Ireland, unless they qualify for exemption being a retailer or organiser established in another Member State who has provided the Commission with sufficient evidence of security for the protection of consumers,” the Commission for Aviation Regulation said in a statement.