The great British holiday boom

More airport chaos... Flight diverted after bomb scare... Stansted facing strike... Industry predicts end of cheap air travel. But UK holiday bookings soar... Cornwall hangs up 'No Vacancies' sign... Heatwave gives a £1bn boost to domestic tourism

The deepening turmoil in the international travel industry has fuelled spiralling demand for holidays in Britain, with record numbers of people opting to stay at home this summer.

After yet another mid-air security scare yesterday and days of television images showing long delays at British airports, operators have reported a dramatic leap in interest in UK breaks.

Fears over the safety of air passengers, the World Cup and the July heatwave look set to give a £1bn boost to resorts, with many destinations fully booked.

Environmentalists said the trend, if it continued, could be good news in the battle against global warming. Aviation is the fastest growing source of greenhouse gases and campaigners are lobbying hard to check its runaway growth.

The crisis in the airline industry deepened as Ryanair issued an ultimatum to the Government to lift the stringent new security regime. Budget airlines have been hit particularly hard by delays and cancellations.

The Ryanair chief executive Michael O'Leary described some of the security measures as "farcical and Keystone Cops-like", and said he would be seeking compensation for cancelled flights. "They must be rolling around the caves of Pakistan laughing," said Mr O'Leary. The Government refused to change its security arrangements.

In more bad news for air travellers, 500 baggage handlers at Stansted airport said they planned to strike over the August bank holiday weekend. Among the worst affected airlines will be Ryanair, easyJet and charter flights. Industry experts warned that two travel firms could fold every week between now and Christmas. It follows the collapse of two high-profile companies in recent weeks.

And a leaked memo from the Thomas Cook chief executive Manny Fontenla-Novoa warned that industry conditions - even before the raising of the threat level last week - were the most challenging for 15 years.

Tour operators, who prided themselves on getting all their flights away during the height of the scare, have been left with a glut of unsold holidays. The largest, Thomson, has discounted 50,000 breaks, offering discounts totalling £50m.

But the deals will not last, warned Noel Josephides, spokesman for the Association of Independent Tour Operators.

The budget carriers have added 50 million return flights out of the UK in the past six years with more than half of all holidays now independently booked, many of them online.

"You could say the golden age of cheap travel will come to an end," said Mr Josephides. "The industry is out of control because of excess capacity, terrorist fears and the cost of fuel. The general feeling is that we will have to pay more for our travel."

But the UK tourist industry could reap the benefits of the present crisis. Hoseasons, the biggest player in the self-catering holiday market, said it had seen a 10 per cent rise in call traffic, much of it coming from travel agents seeking to find alternatives for customers who no longer wished to go overseas. "They are overwhelmingly asking for Cornwall although there is very little availability so they are opting for Devon and the South of England instead," said Andy Newman, a spokesman for Hoseasons. "This suggests people are looking for the best of the British weather and beaches; people who would otherwise be going abroad."

Haven and British Holidays, which runs 34 holiday parks in the UK, reported bookings up 10 per cent on last year. Naomi Woodstock, a spokeswoman, said: "Since the current problems with travelling by air began, we have seen an increase in bookings, in particular for the August bank holiday which is traditionally difficult for us to sell."

Mark Wray, managing director of the short-break specialist Superbreaks, said last week's events had given "further impetus" to bookings. "A combination of good weather and people staying at home for the World Cup has helped the UK domestic short-break market bounce back from the London bombings last year," he said.

A typical traveller was Emilie Goodall, 24, a research analyst from London, who cancelled a planned trip to Berlin. "At the last minute we decided to go to Winchester. A friend's parents were there and having heard what had happened, they invited us down," she said.

Richard Dyer, aviation campaigner for Friends of the Earth, said: "The threat is obviously deeply worrying so people are making choices to look closer to home. But as well as helping reduce global warming it will benefit our economy. We spend £15bn more overseas on holidays than we earn from tourism in the UK." Friends of the Earth urged travellers to replace air journeys with train travel. Eurostar said bookings were up 27 per cent on last year and West Coast mainline train operator Virgin reported extra demand.

Dee Byrne, of the Association of British Travel Agents, said demand for overseas travel was only marginally down in July compared to 2005. "September 11 had a massive effect and this is not really similar at all," she said. "People are much more likely to say, 'This is not going to rob me of a holiday'."

Tourists rediscover the attractions of home

* NORTH EAST ENGLAND

Traffic on tourism website rose by 42 per cent last week.

* CUMBRIA

Booking hotline "inundated" with inquiries. Accommodation bookings up 13 per cent.

* TRAINS

West Coast main line reported increased demand. Eurostar up 27 per cent.

* CENTRE PARCS

Reported "impact in interest" in booking village activity breaks.

* YORK

Fully-booked ahead of Ebor race festival, reported visitors staying longer and spending more.

* EDEN PROJECT, CORNWALL

Reported an "exceptionally busy" week - 1.2 million annual visitors.

* HOLIDAY COTTAGES

Leading operators reported a 10 per cent rise in inquiries.

* BIRMINGHAM

Call centre handled "significant increase" in the past two weeks, especially weekend breaks.

* HOLIDAY PARKS

Haven and British Holidays reported a 10 per cent increase in bookings.