The risk of a holiday being ruined because of a collapsed airline or agent is growing, but payment protections are available, writes Caroline Madden

THERE WAS a time when all that holidaymakers had to worry about was packing a capsule wardrobe, making their flight on time and getting an even tan. Now they have to contend with far more serious challenges, like getting stranded in a resort if their travel agent goes bust, or missing the holiday of a lifetime because an airline collapses.

These holiday disasters happened occasionally in the past, but now, with sky-high oil prices and the economic downturn hitting the travel industry hard, they're becoming a more regular occurrence. In addition, the opening up of the airline industry to competition means that the days of state carriers are becoming a memory. Lower start-up costs mean more and more small airlines are being established all the time.

They may offer excellent deals, but these newer, smaller airlines are also more vulnerable to industry downturns - and, for those in trouble, the second half of the year is considered a time when financial turbulence is likely to come to the fore.

Already this year there has been a string of airline collapses, from business-class-only airlines like Eos to budget long-haul carriers such as Zoom Airlines, which went into administration last week. And the toll keeps rising - the Italian flag carrier Alitalia filed for bankruptcy protection last Friday.

Over the summer, three Irish travel agents - Fáilte Travel, MacLaverty Tours and, last week, Ronane Travel/Great Escapes - ceased trading, in some cases leaving hundreds of holidaymakers stranded abroad.

Although their holidays may have been ruined, at least these travellers had the protection of the bonding system in place in the travel agent industry, unlike the victims of Zoom's demise.

In order to renew their licence each year, travel agents and tour operators are required to set aside a sizeable bond. This is essentially an emergency fund that will be used to compensate customers if their business fails. The Commission for Aviation Regulation (CAR) is responsible for overseeing the refund process.

If customers are on holidays when the travel agent collapses, as happened when Great Escapes ceased operating last week, the commission will repatriate holiday-makers free of charge. A number of Great Escapes customers were temporarily stranded before being repatriated and had to pay for two extra nights' accommodation, but they can claim a refund for this.

In addition to the 489 customers who were on holidays when Great Escapes went under, a further 400 people were due to travel with the company in the future. These customers are also being refunded in full. In the past it took months to process refunds, but according to a spokesman for the commission, applications can now be turned around in days.

The appeal of travel agents and tour operators has waned in recent years with growing numbers of holidaymakers going online and booking flights and accommodation directly themselves. The DIY route may prove cheaper and more convenient, but consumers should realise that they are losing out on the protection available on bookings made through licensed providers.

Customers of bankrupt airlines such as Zoom are equally exposed, because no such bonding system exists in the airline industry. Individuals who booked their flights through licensed travel agents are eligible for a full refund, but the situation is more precarious for those who booked flights directly.

If they used a credit card, there is some hope that they may see their money again. Dermott Jewell of the Consumer Association of Ireland explains that credit card companies share responsibility with the retailer in ensuring that the cardholder receives the service purchased. Therefore, if the flight was booked with a credit card, the customer may receive a refund.

The Irish Payment Services Organisation advises anyone who booked a flight using a credit or debit card to contact the issuer of that card, as they will be able to advise them as to whether they can retrieve their money.

However, even if a customer is eligible for a full refund, he or she is unlikely to cover the cost of making alternative travel arrangements - and rebooking flights at short notice will likely cost considerably more than the original proposed flight. Not surprisingly, the travel agent industry is using the collapse of Zoom Airlines as an opportunity to try to entice holidaymakers away from DIY booking and back to licensed travel operators. "Consumers simply don't realise that their money is not protected when they book direct with many airlines," said Jim Vaughan, president of the Irish Travel Agents Association. "Zoom's customers are completely on their own trying to sort out this mess . . . The consumer protection regime for the Irish travelling public is completely antiquated."

He has called on the Minister for Transport Noel Dempsey to confirm that airlines flying Irish customers would be obliged to provide a consumer protection bond.

Airline bonding might improve consumer protection, but implementing it would be a logistical nightmare. Any such regulation would have to be introduced at European level, and there would be huge resistance from airlines to being saddled with a significant bond requirement at a time when many are struggling to keep afloat.

With industry experts predicting that further airline failures are on the horizon, how can consumers protect themselves when booking flights? Holidaymakers often get a false sense of security by taking out travel insurance. They fail to realise that many standard insurance policies will not cover them in the event of an airline insolvency. Read the fine print and be prepared to pay for a premium policy if you want this level of cover. Also consider booking flights through a licensed travel agent, rather than directly.

Finally, Dermott Jewell advises people to fly with large, well-established carriers that are better-positioned to survive the current challenging times. Full details on how to apply for refunds following the collapse of a travel agent or tour operator are available at www.aviationreg.ie.