A committee of MPs has called on the government to extend holiday protection to include bookings made direct with airlines.
Atol is the largest travel protection scheme in the UK
News Online looks at which travellers are protected and which are not.
A survey commissioned by the Civil Aviation Authority last year found that there was much confusion among travellers about which types of flights and holidays offered protection against airlines or tour companies collapsing.
Under current rules, Air Travel Organisers' Licensing, managed by the CAA, "gives comprehensive protection from losing money or being stranded abroad to people in the UK who buy air holidays and flights from tour operators".
The survey found that only 17% of respondents were aware of Atol as protecting air holidays.
Atol is the largest travel protection scheme in the UK and the only one for flights and air holidays sold by tour operators.
All tour operators selling flights and holidays must hold an Atol license.
But what many passengers are also unaware of, says Atol spokesman Chris Mason, is the fact that there is no equivalent scheme covering sales made directly by airlines.
He told News Online: "The distinction is that, if a company is acting as an intermediary, it needs a consumer protection licence, but if a company is booking direct with an airline it does not."
More and more travellers now create their own holidays on the internet, possibly unaware that they are not protected if the airline goes bust.
Bruce Treloar, the Trading Standards Institute's senior officer on the holiday and travel industry, says a law change is needed to end the confusion and to protect all travellers.
"Another practice, which is equally confusing, is where a flight is bought on one screen and a link is offered to another screen to buy hotels or car hire", he added.
"The problem is that people assume they are buying a packaged deal. In reality, though, they are making payments to separate companies."
If one part of the booking goes wrong or travellers are unable to take the holiday they could lose all their money, he added.
In the CAA's 2003 survey, of the 1,040 people questioned, 59% named travel insurance policies as a source of protecting air holidays.
But, in reality, travel insurance policies do not normally provide insolvency protection, according to the CAA.
Similarly, 24% of those questioned named credit cards as protecting air holidays.
While credit cards do offer protection against airlines going bust, they generally only cover purchases of more than £100 made directly from the airline.
This means that a budget traveller who booked a no-frills flight direct using their credit card would be offered no protection at all.