Some sectors of the industry have called for the break up of regulator the Civil Aviation Authority for not updating consumer protection rules earlier and for bringing the case in the first place.

Travel Republic managing director Kane Pirie said: “We welcome the clear judgment from the court and the dismissal of all charges against Travel Republic and me. Our position has been vindicated.

“This confirms that it is perfectly legal to sell more than one travel product at the same time.

“Travel Republic has always, and will always, act within the law, including the ATOL regulations, in their current, and any future form.

“The whole process has been an expensive, unpleasant and gruelling diversion for the whole company and for me personally.

“I am now looking forward to being able to focus once again on driving the ongoing growth of the business.”

The company stressed that all Travel Republic bookings are protected by its "Total Financial Protection" insurance. 

But Christian Cull, communications director for Thomson and First Choice Holidays responded by saying: “Travel Republic insist they don’t sell packages, but if something looks like a duck, waddles like a duck and quacks like a duck, then it's a duck.

“We are incredibly disappointed that the courts have not recognised this.

“The ATOL system is confusing enough for consumers and we hope that those who book with Travel Republic will be made aware that their money is not financially protected in the way it is when they book with other businesses such as ourselves.

"This judgment emphasises the need for government to act, both here in the UK and in Europe, and to give us the new regulatory framework that this industry so desperately needs”

He added that parent company TUI Travel would continue to campaign for regulatory change both in the UK and at the European level.

“[Chief executive] Peter Long will be taking those same messages to Brussels when he meets with Commissioner Kuneva next week," Cull added.

ABTA chief executive Mark Tanzer said: “The failure of the CAA's case against Travel Republic marks a low point in the administration of the travel industry's system of financial protection.

“The uncertainty that surrounds this area has led to the initiation of expensive and ultimately futile proceedings against a prominent ABTA member

“The case for reform of the ATOL scheme and the Package Travel Regulations is now irrefutable.

“ABTA initiated discussions with the Department for Transport at the beginning of this year with a view to bringing all holiday arrangements within a single scheme of financial protection, and I am pleased that this idea has been taken up within the DfT's forthcoming consultation.

“The opportunity to remove the uncertainty for ABTA members and their customers must not be missed.”

The Association of ATOL Companies described the decision as a major step backwards in the battle for consumer protection.

“We are dismayed but not entirely surprised at the outcome’ said AAC chairman David Mortimer.

“Regrettably this opens the door to more consumers wrongly believing they are protected when they are not.

AAC legal advisor Alan Bowen added: “For AAC members this is a major opportunity to emphasise that they always protect package holiday sales through the ATOL scheme.

“The AAC has always strongly supported the view that customers should be protected by an ATOL licence when buying an air based holiday but this outcome simply adds to the confusion.

“Many customers of failed companies such as the XL Group last year and Freedom Direct in 2009 thought they had protection when in fact they didn’t’

“Bringing clarity to financial protection must be a priority for the entire industry, this decision, whilst only a magistrates decision, is likely to encourage more agents to dynamically package without explaining the consequences to their customers.”

 

On Holiday Group CEO Steve Endacott said the ruling demonstrated that ATOL regulations were fundamentally outdated for retail agents.

"The problem is that the agent atkes whole liability when an airline collapses," he said.

He backed calls for ATOL reform but warned about what will happen while the estimated year to 18 month process takes place. Insurance schemes could fill the gap,

Bob Atkinson, travel expert at travelsupermarket.com, said: “Today’s ruling in favour of Travel Republic in the CAA’s test case has made it clear that the online agency has not been selling package holidays outside of the rules set by the CAA's ATOL scheme.

“However, the underlying issue for the industry as a whole remains  - consumers are still exposed to the risks of purchasing unprotected holidays and travel arrangements online and in high street agencies with no financial backing from the official scheme which was designed to protect the consumer.

“Beyond Travel Republic’s customers, this ruling means that agents can continue to dynamically package holidays on behalf of the consumer and expose them to the financial risk of all or part of the trip going wrong due to company collapse.

“In light of a number of high profile collapses such as XL, the industry needs to wake up and work harder to ensure innocent holidaymakers are protected.

“Travel Republic do indeed have their own protection scheme in place, making a mockery of the point of the ATOL system and confusing the customer even further as to what cover they have.

“Consumers should remember that if they are booking a holiday or travel arrangements which are not ATOL protected, the prudent thing is to book using a credit card or visa debit card at all times.

“Given today’s ruling, which may still be appealed, travelsupermarket.com is calling on the EU commission to review the outdated Directive on Package Holidays and for Government to reform the current ATOL scheme.

“They should ensure that however consumers book and pay for their holidays, flights and accommodation, they are adequately protected.”