Holidaymakers should not be put off booking flights with United Airlines, which is hovering on the brink of Chapter 11 bankruptcy, though they need to be aware of a vital loophole in consumer protection on scheduled airlines, said watchdog group the Air Transport Users Council.

'Consumers can carry on buying tickets with United but they need to be streetwise,' said chief executive Simon Evans.

Chapter 11 bankruptcy in the US allows airlines protection from their creditors while they continue to operate at the same time as they restructure. United moved a step closer to filing for bankruptcy last week when the US government turned down its appeal for a £1.15 billion loan guarantee.

While Evans said there was no suggestion that United Airlines would cease trading, he added that consumers should always protect themselves when travelling with scheduled airlines either by paying with credit cards or by taking out special insurance against airline failure.

That is because a loophole in protection means that while passengers on package holidays are covered against airline failure by Air Travel Organisers' Licensing, they are not covered on flight-only deals with sched uled carriers booked direct with the airline.

The Association of British Travel Agents said it had received calls from consumers worried about whether their air tickets would be honoured. A spokeswoman added that the association had for some time been advising travellers on all scheduled airlines to take out extra insurance or pay by credit card, which covers consumers for anything above £50.

A United Airlines spokesman said it was still 'not inevitable' the company would file for bankruptcy, and even if it did so, its international operations would not be affected. 'People will be able to buy and fly and redeem miles in the way they have always done,' he said.