Reforms to the Atol scheme will add further barriers and overheads to smaller independent agents and new business start-ups, further eroding consumer choice.
The warning comes from John Howell, boss of travel software firm Multicom, who has raised his concerns with the Civil Aviation Authority.
He fears the government has legislated in a “ham fisted” way that will give airlines a competitive advantage and a more dominant position in the market.
Speaking ahead of the April 30 introduction of the new Atol rules, Howell said: “I really do believe the government has taken a sledgehammer to crack open a nut with its approach to this without realising the potential impact of their proposals.
“They have tipped the balance in favour of the airlines by giving them a £2.50 advantage in the market on every booking they make.
“I’m sure this was never their intention but is a consequence of the ham fisted way they have addressed the issue.
“Equally, the plans create a barrier to entry for small and new agents coming into the market which in itself could also damage consumer choice in the long run.”
He added: “Surely there are ways this could have been tackled that are far less complex than what we are seeing now?
“For example, much as we all hate the increases to Air Passenger Duty, that could have been the mechanic for collecting a flat rate levy per passenger which would have avoided the need for Atol bonding all together.
“I have shared my concerns with the CAA at a recent workshop on the reforms but have yet to have a response from them.
“There is still such a lack of clarity and confusion, not to mention the potential distortion to the market the reforms will create, that I think even at this late stage the government should go back to the drawing board.”