The CAA has confirmed it will pay up on claims from passengers who booked the group’s Freedom Flights as part of a "package" through non-Atol-bonded agents.

The authority will then demand agents it said were operating without an Atol illegally to recompense it.

The move means consumers will get their money back, while the CAA might also recoup its funds wlthough this could mean a court case if the agents refuse to pay.

A CAA spokesman today said its stance would apply to bookings through Freedom Flights and Pure Flights, another seat-only operator that failed in August, two weeks before XL collapsed. (pictured: how TTG covered the story, September 19, 2008).

He said the CAA and trustees of the Air Travel Trust believed customers who were sold a flight and a hotel or other travel services by a non-Atol agent had a valid claim for refund of the whole package price against the agent. Those agents had acted "unlawfully" by selling the package without an Atol, in the CAA's view.

Those customers were also eligible for a refund of their flight cost under the Atol scheme, said the spokesman.

However, it was "not appropriate" for Atol holders who had correctly protected their customers to see funds they had collected through the Atol Protection Contribution used to refund claims relating to an "unlawful transaction".

"Consequently the trustees will be taking action to recover monies from the organising agents who made these unlawful sales," the spokesman added.

One observer said: “It’s very, very clever. It allows the CAA to ensure customers are financially protected, but that those agents deemed to be breaking the guidelines are brought to account in court.”

The strategy is expected to please the big two travel giants and The Co-operative Travel. Having bought Atols and lost millions due to XL's collapse, they had threatened to pull out of the Atol scheme altogether if non-licensed agents get off scot-free in the fallout.

According to sources, the XL collapse is likely to see the CAA having to use £48 million of its £60 million loan facility with Barclays Bank.
 
The Air Travel Trust Fund, which pays out against Atol collapses, is already £20 million in the red. The XL payouts will then leave it with just £12 million available in the event of another major failure.
 
However, the £1 Atol Protection Contribution, brought in this year to replenish the fund, is widely expected to rise to £2.50 per passenger, boosting its annual revenue to more than £30 million.
 
Both Thomas Cook and Tui Travel are thought to be ready themselves to launch legal action if the claims of non-Atol-holders were paid. They have threatened to reduce their Atol business if the APC goes up.
 
Both face increased costs of up to £5 million if the APC rises to £2.50, industry observers have estimated. The CAA’s decision however, may placate the big two.

• Travel giants eye CAA's XL payouts (6 Nov 2008)
• Former XL boss Phil Wyatt breaks his silence: TTG EXCLUSIVE (11 Dec 2008)