The failures of Flight Options and retailer Sun4U have plunged the trade into a crisis at least as serious as September 2008 when XL Leisure collapsed.
However, the timing is worse and the affliction more contagious, with suppliers and retailers nervous of one another. Rumours are rife more failures will follow.
Add the impact of Goldtrail Travel, which ceased trading in July, and the number of customers affected broadly matches that of XL – with 35,000 overseas across the failed companies and close to 185,000 booked to travel.
Such failures in peak summer are a major worry. They suggest more to come through the autumn, the traditional failure season.
The underlying situation is worse than two years ago. Credit remains tight – so a firm in trouble cannot find funding – but now an 18-month recession has taken its toll, compounded by renewed economic uncertainty and the impact of the ash cloud. Companies on the edge have no room for manoeuvre.
The media reaction can only stoke consumer concern. XL faded from the newspaper front pages immediately. This time, travel has been in the headlines for days thanks to downbeat trading statements from Tui Travel and Thomas Cook, the threat of bank holiday strikes and now the failures.
The irony is that the big two appear in good health despite the media stories of bargain-basement holidays, with average selling prices up year on year into early August.
Indeed, UK number-three Monarch Airlines felt sufficiently comfortable with the state of late sales to lay on additional August bank holiday flights to Spain.
The overall market does not appear in distress, just sections of it. The question is how far the fall-out will extend.
The failures highlight the urgent need for Atol reform and should spur the Department for Transport to act quickly. It has been considering the industry response to proposals to enlarge the Atol scheme for months. Hopefully, it will now make a decision and issue proposals next month.
There are limits to how far the process can be speeded up, however. It will require a fresh consultation, making the earliest implementation March 2011 – and probably later.
Calls for measures beyond those laid out already will probably be a waste of breath.
The date at which the charge for Atol protection on holidays falls from £2.50 will be postponed. The CAA has made clear it will only look again at the rate when the Air Travel Trust Fund approaches a surplus.
The differences for customers of Kiss and Sun4U highlight the issues reform must address. The CAA believes every Kiss client was Atol- protected, but fears most Sun4U clients were not. They must foot the bill themselves unless covered by insurance or a credit-card provider.
A CAA spokesman said: “Kiss shows the benefit of a simple system. People thought they were protected – and they were.”
Sun4U held an Atol, but dealt largely in unprotected bookings direct with airlines. It appears people did not know if they were protected, or wrongly believed they were.
This is not about a right or a wrong way to do business. But reform has to produce greater clarity and that will mean wider cover of trade sales.