Increasing numbers of tour operators are closing and more holiday company failures could follow, according to the Civil Aviation Authority.

The heavy cost of fuel and falling passenger levels have plunged travel firms into downturn, spelling havoc for holidaymakers.

In the year ending in March, 25 firms that operate under the CAA's Air Travel Organisers' Licensing (Atol) bonding scheme failed. Under the scheme, tourists going overseas are protected from a company's failure.

But in 12 of the latest cases, there had to be calls on the Air Travel Trust Fund which is a back-up source of funding to assist the Atol scheme and which helps bring home holidaymakers stranded if a tour company suddenly stops trading.

The CAA said that although holiday bookings for summer 2008 had held up well, there had been an increase in the number of Atol-holder failures in the first four months of this financial year.

Air Travel Trust chairman Roger Mountford said: "While the current level of bookings for summer 2008 is broadly in line with forecasts, the signs for 2009 are less clear-cut. An increase in the number of insolvencies is an indicator of tougher trading conditions and may be an indication of a further deterioration later this year."

The CAA also said that the trust's overall deficit increased by £1m during 2007/08 to just over £21m.

The authority said that various new financial arrangements had been put in place including a £300m insurance policy to provide additional funds in the event of the failure of one of the larger tour operators.

Tour operators have been facing challenges since the beginning of the summer when air fares increased due to a continuing crisis in the aviation fuel market.

With high fuel prices affecting sales, the global airline industry is heading for losses that may exceed £3.3bn, according to the International Air Transport Association, which represents more than 240 airlines. At least 24 carriers have stopped flying or filed for bankruptcy in recent months because of higher fuel expenses, according to IATA.

Travel agencies are battling to stay afloat as the increased cost of fuel is passed on to passengers, and families who are already struggling with the rising price of petrol, heating and food, are also now paying more for their holidays.

So far this year 29 companies belonging to the Association of British Travel Agents have introduced surcharges on some of their package holidays. The annual average is eight.

Despite the uncertainty, Scottish tour operators said they have experienced little turbulence in the market.

Siobhan Hossack, manager of Cambuslang Travel in Glasgow, said: "We haven't been affected by the increases in aviation fuel prices and business remains very healthy. People are still buying holidays and although the forecast for the travel industry is uncertain, we certainly haven't been affected by the credit crunch or increased fuel surcharges."

Passenger fuel surcharges were introduced to help airlines with the rising cost of jet fuel and have come to make up a significant part of the price of an airline ticket.

In June, Flyglobespan, Scotland's largest airline, introduced surcharges of £20 to £25, blaming losses in revenue on the spiralling price of fuel.

With the cost of jet fuel rising 82% in the past year, British Airways also announced plans to raise its passenger fuel surcharge. Its customers now have to pay £60 more for long-haul flights. The company said that it expected to spend more than £2bn on fuel during the current financial year - its second-biggest cost.

Moscow most expensive luxury break
Those willing to splash out will find Moscow the most expensive capital for a luxury weekend - with the Russian capital's costs outstripping those of Paris and London, it was revealed yesterday.

A no-expense-spared weekend for two in Moscow will set a couple back around £3,400, according to a survey by lifestyle management company WhiteConcierge.

In a contrast of nine major world cities, Beijing offers the cheapest luxury weekend - at around £933 per couple. Paris is the second-dearest spot for a luxury break, costing around £3,275 for two, with London third at about £2,323 a couple.

The survey, which excluded flights, was based on one night at a Hilton hotel's best-available suite as well as a chauffeur-driven car for airport transfers, a three-course meal at a Michelin-starred restaurant and a night at the opera.

While Moscow is the most expensive city for Michelin-starred dining, champagne, a round of golf and a bouquet of flowers, it is the cheapest city for a visit to the opera.

Conversely, Paris is the most expensive city for opera tickets and also has the most costly luxury spa and Hilton suite.

In comparison, visitors to Beijing can enjoy a similarly luxurious experience for one-quarter of the cost of Moscow. The Chinese capital is the least-expensive city for a Hilton suite, spa treatment and golf - and for top-quality eating.