Fewer flights are covered by the Atol travel protection scheme

Many flights - including lots booked directly with low-cost airlines - are not covered by the existing Air Travel Organisers' Licensing (Atol) scheme.

The CAA wants ministers to change the passengers' protection policy to bring these under the Atol umbrella too.

The CAA believes a passenger levy could be one way of making the change.

Internet bookings

Currently all tour operators selling flights and air holidays must hold a licence from the CAA and must lodge a bond with them. This is used to refund and repatriate passengers should a holiday firm collapse.

In the late 1990s, as much as 98% of air leisure travel originating from the UK was Atol covered but the rise of internet bookings and the spread of low-cost carriers meant that figure dropped to 69% in 2003.

The CAA is presenting its draft plans to deal with the issue to the government on Saturday.

However, any changes are unlikely to be introduced until 2006 at the earliest because the law would have to be changed.

CAA consumer protection director Helen Simpson said: "The way forward we've set out is practical and would deal with the biggest gap in holiday protection at present.

"It just isn't possible for Atol to stay as it is, because the trend in buying patterns mean that its effective coverage is falling quite sharply in percentage terms."