The CMA said it had been investigating Virgin Holidays after “receiving hundreds of complaints that people were not receiving refunds for holidays cancelled due to the pandemic”.

The authority said many Virgin customers “had to wait for an unreasonably long time, with some being told they would have to wait 120 days to receive their money back”.

Virgin Holidays has now formally made “undertakings” to the CMA to ensure remaining refunds are issued “without undue delay”.

Under these commitments, Virgin customers with holidays cancelled before 1 September will be repaid by 30 October, while those with trips cancelled from 1 September to 31 October will get their money back by 20 November.

The CMA warned that if these deadlines are not met by Virgin Holidays it would be “prepared to take the company to court”.

In response, Virgin Holidays said it planned to process the 1,300 "outstanding" refunds, adding up to £4.2 million, by the end of Friday (23 October).

The company has received 53,000 refund requests since the outbreak of the pandemic in March, adding up to a total of £203 million, with 98% of these now having been processed.

Virgin Holidays will also have to ensure that customers entitled to a refund for a holiday cancelled on or after 1 November will be paid within 14 days.

The undertakings to the CMA will apply to all Virgin Holidays brands offering package holidays, including Virgin Holidays Cruises.

CMA chief executive Andrea Coscelli said: “People whose holidays have been cancelled due to coronavirus deserve a prompt and full refund.

“Our action means that Virgin Holidays customers should receive all their money back without further delay.

“We are continuing to investigate package holidays in relation to the coronavirus crisis. Should we find that any business is not complying with consumer protection law, we won’t hesitate to take action.”

A Virgin Holidays spokesperson said: “We are pleased to confirm that an outstanding 1,300 refunds will be processed by the end of 23 October, as planned and communicated to our customers.

“We have gradually reduced refund timeframes and are now 98% through the refund queue, with a remaining 1,300 bookings to be processed on Friday 23 October, in line with our plan to do this by the end of October.

“At every step of the way we have monitored refunds progress carefully against our commitments and will return Virgin Holidays refunds in the normal timeframe of 14 days in November.

“Our focus now is on rebuilding trust with our customers, recognising that it has regrettably taken much longer than normal to process their refunds. We thank them sincerely for their patience throughout.”