Holidaymakers travelling with the UK's three biggest tour operators will benefit from improved rights after intervention by the Office of Fair Trading.

Thomson, Airtours and First Choice are to improve cancellation rights and lost luggage compensation.

OFT director general John Vickers said: "Holidaymakers with these companies now have greater peace of mind that they will get fair treatment." He added that the OFT was still working with a number of other operators to change their contract terms.

Booking conditions that are to be changed by the companies include:

· Allowing the imposition of a surcharge if the company's costs rose (but denying a reduction if they fell)

· Giving no cancellation rights after a holiday had started where there was a change to the holiday arrangements if the company offered a "suitable alternative"

· Preventing the transfer of bookings to another person where the consumer is prevented from travelling

· Company liability for lost or damaged baggage to be increased from £400 to £1,000 per person

· Requiring the consumer to pay the difference in price on taking a more expensive substitute holiday when the original one was cancelled through no fault of the consumer.

The OFT said today that Thomson, Airtours and First Choice had all agreed to make the changes in the next reprint of their brochures and not to enforce the disputed terms in existing contracts.