The collapse of low-cost transatlantic airline Zoom has left 4,500 UK passengers stranded abroad while up to 60,000 have lost bookings, according to the Civil Aviation Authority.
The carrier has suspended all its flights - blaming the economic downturn and steep rises in fuel bills.
Are all passengers protected equally?
No.
Protection varies significantly depending on how you paid for the ticket and if it was a stand-alone purchase or part of a package.
In simple terms, passengers who booked with a package holiday are in the best position.
And passengers who paid with credit cards will have some chance of getting back their money.
What happens to passengers who are stranded and what recourse do they have?
For those with flights that are part of a package deal, which is covered by the Civil Aviation Authority's (CAA) Air Travel Organisers' Licensing (ATOL) scheme, then it is the responsibility of the tour operator to get people home.
Package deal customers are not meant to spend any extra money on the return leg.
Passengers who bought flights directly from Zoom will have to buy new tickets to return home.
What compensation is available?
Under the Consumer Credit Act, if a plane ticket was bought with a credit card, passengers can reclaim the cost of the failed service from the credit card firm, if it exceeded £100.
"If you pay for your flight with a credit card or book it as part of a package holiday then you shouldn't have any problems getting your money back"
Compensation only applies to the part of the journey that the airline failed to provide - so if the outbound journey has been taken, the refund is for the return leg.
American Express said it would provide refunds to its customers who purchased Zoom air tickets and are now unable to take their flight.
People who bought tickets with Visa debit cards should contact their current account provider, who will attempt to recover the money for you.
Non-UK customers are advised by the Civil Aviation Authority to contact their country's aviation/consumer protection organisation or their credit card firm for advice and information about refunds and assistance.
What isn't covered?
If a ticket was bought with a debit card such as Switch or Maestro this protection does not apply.
Visa debit card holders have a better chance of getting their money back because of a protection scheme Visa has agreed with banks that issue Visa debit cards.
If a ticket was bought with cash, consumers are not protected.
"If you pay for your flight with a credit card or book it as part of a package holiday then you shouldn't have any problems getting your money back," said Espe Fuentes, lawyer at Which? Legal Service.
"Sadly, if these don't apply to you there's little hope of you seeing your money again so bear this in mind when you book your next flight or renew your travel policy."
Does travel insurance automatically protect passengers?
No.
Most travel insurance will not include what is called "scheduled airline failure insurance", which applies to carriers that fail to fly.
This can be bought separately.
But some policies will stipulate that certain airlines are not covered should an airline fail.
For example, in June, UK insurance firm International Passenger Protection added Zoom to the list of firms it would not cover if they failed.
Other firms that had been excluded were LAB Airlines, Olympic Airlines, Alitalia, Frontier Airlines, and Airunion.
What is the time frame for any reimbursement?
This depends on the credit card firm but they are generally fairly prompt. Claims on a visa debit card must be made within 120 days.
In future what steps can passengers take to best protect themselves?
As the economic slowdown kicks in, it is impossible to know how different carriers will be affected.
But larger airlines are more likely to provide better protection than small carriers and are less likely to go bankrupt.
A spokesperson for ABTA said more airline failures were likely to happen as they struggle with rising fuel costs.
If booking a stand-alone ticket, getting the requisite insurance and paying by credit card is the better option.
But for the most secure option, ATOL-covered package deals will pick up the pieces when things go wrong.
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