The Civil Aviation Authority has dismissed fears that the planned £1 levy on ATOL-protected holidays may be insufficient.
The charge will be introduced to fund a replacement financial protection scheme for consumers when bonding ends in April.
Advantage managing director John McEwan has claimed that although he supports the £1 fee, he believes it could be too low to ensure the fund is built up.
However, the CAA has insisted the scheme will be adequately financed unless “there is a very large failure”. The authority is close to announcing an undertaking from insurers that would carry the scheme through a major collapse.
McEwan’s concern arises from the deficit in the Air Travel Trust fund, which underwrites the existing consumer-protection system and will hold the cash for this replacement system. This is more than £20 million in the red and the Government insists the debt must be settled.
The Advantage boss told Travel Weekly: “There is a deficit in the fund. It is not a given that insurance will be in place. If the CAA does not get it [insurance cover], the whole scheme will be exposed.”
Transport secretary Ruth Kelly is due to give the formal go-ahead for the levy within days, pending the agreement of insurers. The bonds secured by tour operators that underpin the existing protection scheme will be released the following day.
CAA consumer protection group deputy director David Moesli said: “All the work we have done suggests £1 will be adequate unless there is a very large failure. This was the figure suggested by the industry and the work has been looked at by Government and third-party economists.”
However, he conceded: “It’s possible the charge would have to increase if there was a large failure.”
McEwan said a £2 levy would not make a substantial difference to holiday sales.