Image copyright PA Image caption Thomas Cook has promised more stringent safeguards
Lawmakers have scrapped plans to force airlines to issue refunds to customers who lose their money in flights.
The business and international affairs committee had been expected to approve the plan on Thursday, but Labour and the SNP voted it down.
The last Conservative MP to support the idea had resigned earlier in the week to avoid a rebellion.
Under the scheme, money spent by customers on delayed or cancelled flights would be returned – but airlines could also settle claims under reduced value terms.
The government says the plans would not apply to “recoveries made from third parties” such as the air hostess who claims compensation for missing her child’s birth, or the airline itself.
But the committee dismissed the point, saying that a million passengers could receive the same result.
“Unless it is made clear that all flights are covered by this initiative, the positive impact of the proposal on airlines will be lost,” the committee said.
“It is not clear what exactly compensates the public for a third party payment and legislation would not be needed to establish that payments are recoverable,” the panel said.
Earlier this week, Transport Secretary Chris Grayling dismissed suggestions that a new scheme would force airlines to play fair by making the air travellers’ money back.
He said passengers already had statutory rights to a full refund – including delays that increased cost of a ticket, and cancellations or changes to the plans of the airline.
Image copyright PA Image caption Britain’s airlines have been making profits under pressure from Brussels
Under the panel’s changes, any airline that did not offer such a claim would be liable to pay compensation back under reduced or no value terms.
The committee said this measure would cost the Department for Transport £25m – but claimed airlines could also pay some of the claim under a lower value of return tickets to passengers who are delayed.
This may discourage airlines from cancelling flights without a full reason, as they would have more choice of paying back money than having to open up their accounts.
The airlines argue they would have to alert the on-board crew to the compensation system and the refund if it came up.
However, committee chairman Iain Wright said it was “greatly disappointing” that the measures were now likely to be dropped.
“Unless the UK authorities strengthen their checks to help airlines ensure their payment terms are not misleading, the £25m the proposed scheme will save each year may be more than offset by the number of times consumers are misled,” he said.
Analysis by Gary Chappell, BBC News
The three hundred or so petitioners that delivered the signatures to Westminster may have lost their battle but, one way or another, this issue is far from over.
So while it’s down for now, will it go back on?