Questions need to be asked about how Monarch went from being considered financially secure to bust within a year, according to leading industry accountant Chris Photi.

Speaking at the annual Broadway Travel Group conference in Rhodes, Photi said when the carrier secured a £165 million refinancing last October it claimed its future was assured.

The cash injection prompted the CAA to issue Monarch with its Atol licence having given it a two week extension, but part of that deal saw flight-only sales taken out of Atol.

Had they still been covered by Atol when it failed on October 2 the Air Travel Trust Fund that backs Atol would have faced “an extraordinary bill”, Photi said.

The fact the CAA decided flight-only could be taken out of Atol cover was touted as a further vote of confidence in the airline’s financial reliability.

“Why did this change. Why did Monarch [seat only] come out of the Atol scheme? When the funding arrived the chief executive of Monarch said you can bet on us and our future.

“He said the new deal would allow us to carry out our six-year investment without the need for additional investment and then the company failed within a year.

“You have to look at that and figure out, as an industry, were we duped that they were safe for a six year period.

“Is it any wonder we went along with all of this and now we find ourselves with the mess you have had to deal with over the last two weeks?”

Photi said Monarch’s problems stemmed from market pressure which saw its average per seat revenue drop by £30 as competition pushed down prices.

Given Monarch flew an average of 12,000 people abroad a day this equated to a fall of £120 million in a calendar year. “Airlines have had a bad year,” Photi said.

He went on to question the £60 million cost of the Monarch repatriation. “You know what you pay [for flights]. In my opinion it can’t possibly cost more than £30 million.”

He also claimed the CAA found it “logistically too difficult” to offer the empty outbound legs of the repatriation fights to brokers to sell to travel firms looking for capacity.

One expected fallout of the Monarch collapse is likely to be on the supplier failure insurance sector that is in line to take a big hit as Atol holders make claims for rebookings.

Photi said insurers who previously would not cover Monarch were persuaded to come back into the market only after assurances from the CAA and owner Greybull Capital.

“They are going to be faced with some big losses,” he said. “Supplier failure cover is going to become more difficult or expensive to obtain.”

A change Photi believes is sure to happen following the Monarch collapse is insolvency rules will be brought in to allow airlines to wind down in an orderly manner if they go bankrupt.

He said there is a direct parallel to the Monarch situation in Germany with Air Berlin which has continued trading since it declared bankruptcy on August 15.

Secretary of state for transport Chris Grayling has indicated this is something he is looking at.

Monarch failed with £50 million in the bank, but Photi said it could not have continued trading as the Atol renewal process had “crystalised” its cash crisis.

Company directors have a legal responsibility make sure firms are not trading insolvently.

Photi was less confident that Atol rules will be reformed, as Grayling also suggested, and any attempts to bring in an all-flights levy will fail due to strong lobbying by airlines.