The deficit in the Air Travel Trust (ATT) fund has fallen by more than 50% in the past year to £18.5 million.

Trustees of the fund confirmed the improvement today as they published the ATT’s annual report for the year to the end of March.

The fund, which underwrites the financial protection of UK holidaymakers under the Air Tour Organiser’s Licensing (Atol) scheme, was £42.7 million in debt at the end of the previous financial year.

The scheme is funded by a £2.50 charge on Atol-protected bookings, the Atol Protection Contribution (APC), introduced in 2007. The fund has been in deficit since the 1990s.

The ATT report shows the fund received £42.6 million in APCs during the year from 17.3 million Atol-protected passengers – a fall from 18.5 million passengers in the previous financial year.

There were 23 Atol-company failures in the year, down from 29 during 2010-11, with the cost to the fund estimated at £14.2 million.

The trustees point out no Atol failure during the year cost more than £10 million, after taking into account bonds held by the trust.

Holidays 4U, which failed last August, was the most-costly collapse. The company was bonded with the ATT to the value of £4.5 million. Consumer claims are expected to cost an additional £7.2 million.

The trustees welcomed the Flight-Plus Atol reforms introduced at the end of April, saying these should benefit consumers by stopping the decline in the number of Atol-protected holidays sold by agents.

ATT chairman Roger Mountford said: “We have consistently supported reform of the Atol scheme to ensure consumers receive the protection they expect and to stem the move away from Atol protection that has been obvious over the past decade.

“Happily, the first phase of these reforms is now in place.”