MPs say a new scheme could cost up to two pounds per ticket

The Air Travel Organisers' Licensing scheme protects package holidaymakers from airlines or tour companies which collapse or defraud them of money.

But the Commons transport committee says it does not protect people who book flights independently.

An inclusive scheme would add between 50p and �2 to each flight ticket.

More and more people now create their own holidays using the internet and they are not protected if the airline goes bust BBC correspondent Simon Montague Who's protected, and who isn't

The committee of MPs says the existing measures should be replaced because they are failing to protect increasing numbers of passengers.

It said the government must bring in new measures because airline collapses were likely to happen again.

BBC correspondent Simon Montague said the Atol scheme had rescued or refunded more than a million travellers over the years.

"But more and more people now create their own holidays using the internet and they are not protected if the airline goes bust", he added.

'Quick decision'

The Civil Aviation Authority (CAA) is due to make recommendations on passenger protection to the government later this month.

The committee urged the CAA to recommend a comprehensive consumer protection scheme to ministers.

It also called on the government to make a quick decision on their advice "since delay will only increase the risk to passengers".

As a passenger, you need to know all the ins and out of Atol to work out whether you are covered or not Gywneth Dunwoody MP

Committee chairman Gywneth Dunwoody MP said the committee's call did not amount to "scaremongering" because "those involved in the airline industry expect a scheduled airline to fail".

"As a passenger, you need to know all the ins and out of Atol to work out whether you are covered or not", she said.

"I suspect this means that, for most people, buying an air ticket is buying a pig in a poke."

Welcome

The Federation of Tour Operators welcomed the committee's report, saying the Atol system had worked well, but that the time was "now overdue to extend protection to all UK-originating air travel sold or offered for sale in the UK".

Association of British Travel Agents (Abta) chief executive Ian Reynolds, who gave evidence to the committee, added: "The committee is spot on with their analysis. This is the biggest missing piece in the consumer financial protection jigsaw.

"The government must require airlines to provide the same cover of protection against their failures as already provided by Abta travel agents and tour operators."

The government was also urged to act by the annual report of independent watchdog body the Air Travel Insolvency Protection Committee (Atipac).

Deficit

It warned ministers that failure to introduce legislation to top up the Atol back-up fund, the Air Travel Trust, could lead to travellers being stranded abroad. The fund has been in deficit since 1996.

Atipac chairman John Cox said he was also concerned about the growing proportion of leisure trips that fall outside Atol, leaving the consumer is unprotected.

"As the pace of change in the travel industry accelerates, so the risk of failure of a major airline or tour operator increases.

"But the government is still not prepared to articulate a clear policy on financial protection for holidaymakers. In Atipac's view this indifference and inertia is a disgrace".