The government has begun moves to overhaul Atol funding, triggering fears that an end to state backing so soon after Flight-Plus reform will damage the sector.

The Department for Transport (DfT) denied any change of policy. But with the Air Travel Trust fund, which provides financial protection to holidaymakers, poised to go into credit for the first time since the 1990s, it is believed ministers want to end 
the government’s liability for a future major failure.

Moves to revise the scheme are already under way. The Civil Aviation Authority (CAA) met senior industry figures to discuss changes before Christmas and the DfT is poised to issue a ‘call for evidence’ within weeks.

This would lead to a consultation later this year, with the DfT hoping to have a new funding scheme in place by 2014.

That has led to fears all Atol holders will have to bear the cost of trust arrangements or insurance premiums on protected holidays.

The extension of Atol to Fight-Plus sales has seen more companies operating trust accounts, which hold customers’ money until they take their holidays. The problem is the impact on cashflow.

A CAA spokesman said: “We’ve always said we would review funding arrangements when the fund returns to surplus.” A DfT spokeswoman insisted: “There is no greater urgency or added pressure from us.”

However, the DfT confirmed changes could be in place by 2014.

Atol specialists expressed alarm at the prospect. Association of Atol Companies legal advisor Alan Bowen said: “We’re aware of rumours the government is looking at alternatives to the existing protection scheme. The industry would be happy if things just sat still for a while. Trust accounts are not a panacea. There have to be options for people.”