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Fuel costs soar: could prepaid holidays bankrupt small travel agents?

ended 01. October 2026

Diesel has hit £2 a litre at more than one in four UK forecourts, and jet fuel has roughly doubled since January. For a small travel agent, that lands on holidays customers paid for months ago, at prices set before the rise.

The law limits what they can pass on. A fuel surcharge is only allowed if the contract provides for it, it must be notified at least 20 days before departure, and above 8 per cent of the price the customer can walk away with a full refund. The organiser cannot cancel just because the trip now costs more to run. So on many prepaid packages, the extra cost comes straight out of a thin margin.

For travellers, a package holiday must be protected if the organiser goes bust, covering refunds and, where flights are included, getting you home. A flight and hotel booked separately may not be.

  1. Are we heading for a wave of small travel company failures this winter, and which firms are most exposed?
  2. If your travel company went bust tomorrow, would you know whether your holiday was protected?
  3. Should small agents surcharge customers who have already paid, or absorb the cost and risk the business? Please share any examples you have seen.

3 responses from the Newspage community

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Harvey DhillonVerified
Founder & CEO at Zmartly
Will more small travel agents fail this winter? I expect so, and fuel will be the trigger rather than the cause. The cause is selling at last year's prices and paying this year's costs. We act for travel agencies, and as travel agency accountants we see where the squeeze lands: on packages sold months ago. A surcharge above 8 per cent lets customers walk away, so most agencies swallow the rise. Then comes the cost few owners see coming, TOMS VAT. Agencies selling packages in their own name pay VAT on their margin under the Tour Operators' Margin Scheme, and on UK trips the VAT paid during the year runs on a percentage set from last year's margins. An agency absorbing this year's fuel cost can pay VAT on a margin it no longer makes until the year-end sum catches up. Rework the numbers on every package still to travel, now, while there is time to act. A full order book is not the same as a healthy one.
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
I would not predict a wave of failures from fuel costs alone, but the pressure on smaller travel firms is obvious.

The most exposed businesses are those operating on thin margins, with lots of prepaid packages and little cash buffer. They priced the holiday months ago, but the fuel bill arrives now.

Legally, they cannot simply dump every extra cost onto the customer. Any surcharge has to be allowed for in the contract, justified and notified at least 20 days before departure. If the increase exceeds 8%, the customer can walk away.

That means some firms face a horrible choice: absorb the cost and destroy the margin, or surcharge and risk cancellations.

For travellers, check whether your package is ATOL protected and keep the certificate.

Cheap holidays are great. Cheap holidays booked with a financially fragile organiser can become very expensive very quickly.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
A tsunami of business failures is heading for the travel industry. Surging fuel prices alone are a massive threat to small travel agents as packages are sold months ahead at fixed prices, so operators absorb every spike in jet and road transport costs. And it lands on top of two years of rising costs. Vertically integrated giants like TUI and Jet2 hedge their fuel and absorb increases to protect market share. Independent and niche operators like long-haul tours, European coach trips, dynamic flight packages have no such buffer. On thin margins, that threatens solvency. Under the Package Travel Regulations, agents can only pass on a surcharge if the contract explicitly permits it, with notice at least 20 days before departure. Go above 8% and customers can cancel for a full refund, so agents eat the loss or lose the booking. Package travellers have ATOL and ABTA protection; those who booked flights and hotels separately have no insolvency safety net.