The Commons Transport Select Committee has said that independent travellers ought to be offered the same level of protection as those who book package holidays.
The Air Travel Organisers' Licensing (ATOL) scheme covers travellers against the collapse of airlines or tour companies providing the travel arrangements are booked through tour operators.
All licensed tour operators are required to be members of ATOL, which is administered by the Civil Aviation Authority (CAA).
The CAA is scheduled to present its proposals on the reform of ATOL later this month.
In the 1990s around 95 per cent of travellers were covered by ATOL but the growth of low cost airlines, the Internet and independent travellers, mean that only around 69 per cent of travellers are now covered.
The committee suggests that an inclusive system should be developed with a levy on each ticket so that all passengers are protected.
However, in a separate development, the existing status of ATOL has been questioned. Figures released today from the Air Travel Trust (ATT)- which provides financial backup to the ATOL scheme and is its ultimate guarantor- show that the ATT is £9.7 million in the red.
In its annual report ATT's trustees expressed their "profound concern that the Fund, which supports a major consumer protection system, had remained in deficit for such an extended period.
"The trustees believe that the introduction of new legislation for levy powers to replenish the Trust is vital but have again been informed that no time will be available in the next Parliamentary session."
The ATT has been in deficit since 1996 after it was required to meet a large number of claims and has been supported by a credit guarantee from the Government.
The Air Travel Insolvency Protection Committee (ATIPAC), today urged the Government to act urgently "before its hand is forced by a crisis."
John Cox, ATIPAC's Chairman, said: "The Committee has pressed Government for 12 years for legislation to provide a levy to replenish the Air Travel Trust Fund. It is completely unacceptable that there is still no Parliamentary slot available and that there has been no explanation for the delay.
"When tour operators collapse, the impact on their customers is instant. If not enough liquid resources are available to the CAA to manage the consequences of a major failure then the result will be members of the public stranded abroad, very probably in some distress, with insufficient funds to assist them."