Holidaymakers with travel insurance could still end up hundreds of pounds out of pocket if their travel firm goes bust.
Some companies are exploiting a loophole in the law to cut costs – a problem which is not covered by most travel policies.
Every travel company must lodge a bond with the Civil Aviation Authority, which is then used to refund customers if it goes bust.
But some “split contract” travel companies are obtaining flights from a bondholder and contracting accommodation separately. The company then sells both products as a package. Customers may be left out of pocket if the split contract company fails, as the bondholder will only honour the flights and not the accommodation.
The issue was highlighted recently by the collapse of Runway Travel, which was licensed to carry 4,500 passengers throughout the Mediterranean.
One of its companies, Runway Travel Warehouse, operated split contracts.
In this case, customers were left with flights and no accommodation.
Consumer groups are calling for travellers to check if such circumstances are excluded in their travel insurance policies.
