The government has confirmed it will complete the biggest overhaul of the Atol (Air Travel Organisers’ Licensing) scheme for more than a decade by the end of this year.

The changes will extend financial protection to another six million holidaymakers on top of those buying traditional package holidays.

Aviation minister Theresa Villiers outlined the changes in a statement to Parliament this morning and said she would consider further changes through an Act of Parliament later in the year. The government will seek the industry’s views in a three-month consultation in the spring.

The reformed scheme will:

  •  Extend protection to ‘flight-plus’ holidays which “look like a package holiday but fall outside the existing legal definition”. This would apply to trips that include a flight where various elements are purchased within a specified short period.

  • Seek to “deter businesses from misleading consumers about their level of protection”. Villiers’ statement said: “Some companies offer holidays which might look like packages but make the transaction as an ‘agent for the customer’ without explaining that this means forfeiting Atol protection. These proposals are designed to provide customers with a clear and honest explanation so they can make informed decisions.”

  • Replace the wide variety of documents currently issued by travel companies with standardised information making clear when a trip is Atol protected.

Villiers said the changes would be achieved through new regulations, existing legislation and “making greater use of unfair trading rules”.

She said: “Atol has provided protection for millions of holidaymakers and I am determined to see this continue. Insolvencies in recent years have shown how important it is that customers are able to buy protected holidays, but recent court cases have only served to highlight the fact that the scheme is in need of reform.

“These changes will remove much of the confusion surrounding Atol, while ensuring operators who offer such holidays provide customers with the financial protection they expect.

“As well as improving protection for passengers, these reforms will help put Air Travel Trust Fund finances back on track so that taxpayers’ exposure to the fund’s deficit is rapidly reduced and ultimately eliminated.”

Villiers added: “I believe there may be a case for new primary legislation to address other issues in the Atol scheme and will be considering this in the course of the year.”

A spokesman for the Civil Aviation Authority (CAA) said: “We welcome today’s proposals to bring greater clarity for holidaymakers and look forward to working with the government and the travel industry to ensure reform is successfully delivered to give holidaymakers better protection.

“Changes to the way holidays are sold in recent years have meant many people who book what appear to be packages are, in fact, being sold holidays which have limited or no financial protection. This results in confusion and harm for holidaymakers if their tour operator fails, as was evident following a number of travel company failures last summer. The CAA has consistently called for reforms to the ATOL scheme to rectify these issues.”