Last weekend, The Flight Company went into liquidation. Insiders say there could be more failures this summer. So what happens to holidays booked or under way?

If I was booked on a package holiday with a company that goes bust, would I lose my money?

No. There is a legal requirement for any tour operator to provide financial protection for the customer. There are three permitted schemes: bonding, trust accounts and insurance, of which bonding is the safest and most common.

If I went abroad with a company that went bust before I was due to return, would I have to come back immediately, or be left to fend for myself?

Neither. Arrangements should be made for you to continue your holiday and come home by the planned route.

Who arranges all that? The British consulate?

No, the CAA (the Civil Aviation Authority), usually. It's all part of the legal protection.

Isn't the CAA concerned with air traffic?

It also operates the ATOL scheme.

More initials! What's an ATOL?

Any company involved in air passenger travel is obliged to obtain an ATOL (Air Travel Operators Licence), involving a form of bond where the tour operator lodges a sum of money with the CAA to guarantee its obligations.

How do I check whether the operator has an ATOL?

Your travel agent can tell you. Or look in a holiday brochure on the page devoted to small print, usually at the back. The ATOL number and logo should be displayed.

If it's that easy, why do I worry about other acronyms like ABTA?

The Association of British Travel Agents is a trade association that helps regulate the travel industry (but note that you don't need to be a member of ABTA to sell travel). ABTA operates a bonding scheme which covers, among other things, holidays that have no element of a flight included. In the event of a company operating (illegally) without an ATOL, there would be no CAA cover. If it was a member of ABTA, you would be able to lodge a claim, but this is hypothetical: ABTA monitors the finances of all its members, and kicked out the Flight Company two months before it went bust.

What about AITO?

The Association of Independent Tour Operators. All members have to be fully financially protected and are scrutinised quarterly by the association. The quality control is such that there has been no call upon its bonds in the five years of the scheme's existence.

What do I need to do to get my money back?

Contact your travel agent or the CAA as soon as possible. If you paid by credit card, get in touch with the credit card company as well.

CAA: 0171-832 6600/5620, ABTA: 0171-637 2444

AITO: 0181-744 9280