The travel industry has welcomed the Civil Aviation Authority’s decision to refund customers affected by the collapse of Freedom Flights and Pure Flights.

The Air Travel Trust Fund trustees and the CAA have decided to refund customers who booked flights with Freedom and Pure Flights through split contract agents.

However, the CAA will demand that these agents reimburse it for the payouts and those that refuse could face court action by the CAA as it seeks to recoup its losses.

Abta said it was "pleased" by the move to refund affected customers and gave its "wholehearted" support to the CAA to take action against companies organising package holidays without protection.

Mark Tanzer, Abta chief executive, said: “We do, however, remain concerned that the lack of transparency makes it difficult for the travel industry and its customers to understand and we urge the government again to review this complex issue."

Abta won a case in the High Court against the CAA guidance in 2006, which appeared to give agents who were dynamically packaging the legal basis to do so without an Atol. 

However, an appeal court hearing tightened the original judgment somewhat, prompting the CAA to claim it would be difficult for dynamic packaging agents to continue to operate within the law.

Dermot Blastland (pictured), managing director of Tui Travel UK & Ireland, said: “We desperately need an environment for customers so when they book holidays they can be 100% certain whether they are protected or not. 

"We continue to urge the government to undertake a fundamental review and overhaul of this area of regulation for the benefit of the British public and the industry as a whole.”

Derek Moore, chairman of Aito, said: “It’s good to see the CAA is upholding the integrity of Atol arrangements, which protect consumers who book flights and flight-inclusive packages.

“Bona fide companies such as Aito members should not have to pay out twice because some companies have been operating outside the rules, and it’s good to see the CAA is tackling the situation robustly and is seeking to set a legal precedent.

“However, the government needs to simplify the travel industry regulations and to ensure that one rule – 100% financial protection for consumers – is applicable to all.”

• CAA to pay non-Atol XL claimants (12 Dec 2008)
• Travel Republic faces 'Atol breach' lawsuit (12 Dec 2008)
• Former XL boss Phil Wyatt breaks his silence: TTG EXCLUSIVE (11 Dec 2008)