Travellers who book holidays online or with budget airlines could receive greater financial protection if companies go bankrupt, under new plans mooted by the European Commission.

Currently, only those who have booked specific package deals under a scheme such as ATOL have rights to cancel or refunds if operators goes into liquidation.

The European Commission says it is time to extend the consumer protection that covers package holidays to the independent trips that millions put together using websites such as Expedia and Opodo. Protection could also cover passengers in the event of an airline collapsing.

“We need tough protection that gives all consumers booking a package holiday the peace of mind they deserve, and we need a level playing field so businesses compete on equal terms,” said EU Consumer Commissioner Meglena Kuneva.

More than one in five families now organise their holidays this way. But they have little or no protection if there is a problem or poor service with flights or hotels.

The current legislation, which came into force in 1990, only offers protection for people who book packages through a travel agent.

Provision must be made to refund travellers and return them home if the operator goes bust.  It give these travellers various rights including a refund if parts of the holiday are changed or if the organiser cancels the package.

The European Commission wants to consult on the possibility that basic insolvency protection should be extended to cover independent travellers buying standalone airline tickets which are not part of any package.

The review is expected to start in the second half of 2010.