Trailfinders founder and owner Mike Gooley said an escrow account – which keeps clients’ money separate from that of the business – “carries none of the burden of full trust accounting”. The agency has used the escrow system since its start-up in 1970 and is refunding clients from its reserves.

“It is beyond belief that the CAA has just renewed Atols for a raft of companies flouting the refund laws,” Gooley said.

“Trailfinders are currently honouring their unique financial guarantee and refunding clients from their own pocket, even where an airline has already failed and they have little or no hope of recovering the pre-payments already made.”

Trailfinders said this “is proof of the concept, were any needed”, but added the CAA had typically told it: “The industry cannot afford it.”

Gooley said the government’s decision in 1973 to appoint the CAA as a financial regulator was “a woeful example of Whitehall at its worst”. Trailfinders has begun lobbying the government to change the system and to bring all consumers under the protection system.

“All the energy has been misdirected at sorting out the crashes rather than preventing them in the first place. The systemic flaws in the scheme have been patched over time and time again only to open another avenue for manipulation, so that the majority of the public travel without Atol protection anyway.”