Travel World International (TWI), the Essex-based tour operator, became the second travel company to go bust in less than a week yesterday, leaving more than 500 holidaymakers abroad.
However, the Civil Aviation Authority (CAA) said it would ensure all those on holiday would be protected under its Air Travel Organisers' Licensing (Atol) scheme. TWI had provided a bond of £933,500 to the CAA, which will now be used to fly passengers home at the end of their holidays, and to reimburse those who have not yet left the UK.
TWI, which also operated under the Jewels of the World and flightcabin.com brands, specialises in holidays to northern Cyprus.
The CAA said yesterday that customers who were booked on a TWI package and who have yet to travel should submit a refund claim. Forms can be found at www.atol.org.uk. Those who had flight-only bookings may still be able to travel, but should reconfirm their flight with the airline.
Plans are being made to ensure the 500 holidaymakers are flown home as planned.
TWI's collapse comes five days after the London-based Tapestry Holidays shut down, leaving 1,500 people abroad, and thousands more with forthcoming bookings. Tapestry offered holidays to Turkey, Greece and Croatia. It had paid a £1.7m bond to the CAA which will ensure its customers are refunded.
Bob Tolliday, the travel spokesman for Which?, the Consumers' Association, said it was good to see Atol coming to the rescue twice in one week.
"This proves once again the value of the Atol scheme and makes the Government's failure to extend the scheme to include scheduled airlines even more baffling," he said.