In the largest Chapter 11 filing in the airline industry, United Airlines filed for bankruptcy on Monday, December 9, 2002. Additionally, US Airways Group filed for bankruptcy in August and several smaller carriers have shut down altogether. On July 30 Vanguard Airlines suspended service on all flights. On November 6 National Airlines discontinued all flights. TWA was acquired by American Airlines in 2001. During this tumultuous time in the airline industry passengers need to protect themselves against losses when purchasing air travel. What does this mean for air passengers and how can they protect themselves against losses?
Passengers holding tickets for this holiday travel season are unlikely to lose their seats. United Airlines is currently attempting to raise money for creditors, and it is highly unlikely to cancel flights during the peak holiday travel season, when tickets are more expensive and flights are full.
I do recommend that travelers postpone booking post-holiday tickets on bankrupt airlines until new routes are set. To further protect themselves, travelers should:
Use A Credit Card: Under federal law, the Fair Credit Billing Act guarantees that you can get your money back if your airline goes under. Submit the ticket, itinerary, or receipt to your credit card company within 60 days of the bankruptcy, explaining that the airline went out of business before you could use the ticket. The credit card issuer is required to refund your ticket.
Buy Travel Insurance: But make sure your insurance specifically covers carrier default for the airline on which you'll be flying--many insurers have been cutting back on coverage. To read more about trip cancellation polices and other forms of travel insurance, go to this site's Travel Health Center by clicking here.
Get Paper Tickets: If another airline agrees to honor the bankrupt airline's tickets, it will be easier to make the switch if you have a paper ticket instead of an e-ticket.
Use Frequent Flyer Miles Now: If an airline ceases operation, it's anyone's guess what will happen to its frequent flyer program. If you have accumulated miles, use them now to buy tickets on one of their partner airlines.
If you have purchased tickets using a credit card on an airline that ceases operation, call your credit card company immediately. If the tickets were not purchased using plastic, check to see if another airline has "purchased" the same route (as in the case of TWA). The new airline is not required to honor your ticket--and given the financial situation of many airlines today, they are unlikely to do so. They may, however, offer a discounted fare.
If you're holding a ticket for an airline that closes up shop, and it's routes haven't been purchased by other airlines (as in the case of Vanguard and National), you have another option. Under current federal law (section 145 of the Aviation and Transportation Security Act passed in November 2001), both paper and e-tickets on insolvent airlines must be honored by other airlines that fly the same route and may charge ticket holders up to $25 each way for reticketing. Like the Fair Credit Act, consumers have 60 days from the bankruptcy declaration to reticket.
There are some words of warning regarding reticketing. If you choose to switch to another airline, you jeopardize your chances for getting a refund from your credit card company on the original ticket. Secondly, when carriers pick up the slack for failed carriers, valid tickets are rebooked on a "space available" basis. Since only the individual carriers know exactly how much space is available on any given flight, your chances for being shuffled around from flight to flight are greatly increased.