Airlines That Belly Up

While the airlines keep evolving into a smaller number of large carriers, some of their smaller avionic brethren have ceased operations, leaving behind perplexed passengers holding unused tickets.

Can these tickets be used on other airlines? On a confirmed or standby basis? Is it possible to get refunds from failed airlines?

No default plan protects passengers holding tickets from bankrupt airlines. Despite various bills and other attempts, including a plan whereby passengers would pay a surcharge to create a default kitty, neither the travel industry nor the government found a solution.

In the past there was a default protection plan that permitted the passenger to use the ticket of a stricken airline if it was written by a travel agent.

But that plan ended when the major airlines decided, under deregulation, that they didn’t have to bail out all those new upstart carriers, which began operations with high hopes but less financing. (And some predatory pricing by the biggies helped deplete the coffers of the airlines that went bust.)

Reimbursed From Fund

Under a bill introduced to Congress, airlines accepting tickets of bankrupt airlines would be reimbursed from the Airline Aviation Trust Fund, a huge trove derived in large part from taxes on air tickets. But all attempts to use this money for its avowed purpose, which includes measures to improve air safety, have not succeeded.

As matters stand, if an airline declares bankruptcy it is not required to fly you or make arrangements for you on another airline. Nor is it obligated to refund tickets issued before its demise, whether it stops service completely or simply limits its flights.

Other airlines may accept or refuse the tickets of the bankrupt carrier. If an airline chooses to accept the tickets, it may do so on any basis it desires, including the standby option. It may also only accept tickets up to a certain cutoff point, which is not likely to be very long. Airlines may also only accept regular tickets, not the prepaid passes some carriers issue as a block of tickets to be used during a specific period (which is one way airlines try to raise capital).

Suppose you have booked through a travel agent. Theoretically, money paid to a travel agent belongs to the airline, but if the agent has not yet remitted funds (done on a weekly basis) to a central settlement bank, you may be able to get your money back. But if your booking with the agency was made more than a week before, forget it.

Ticked Can Be Voided

“If the ticket hasn’t been reported and we still have the agent’s coupon, this means that the money for that ticket hasn’t been paid yet to the airline,” says Martha Scott of Glendale Travel. “If the passenger returns the ticket to us, we can void the ticket and make a full refund.”

If you charged your ticket to a credit card, you may have better luck. Let the credit-card company know immediately that your ticket has been unused, and ask to be credited for the cost of the ticket. Find out from the issuer of your credit card what the deadline is for filing such a request.

Airline default coverage is also included in some traveler’s insurance programs.

If your flight on the defaulted carrier was to be part of an itinerary that included other airlines, and was bought from another airline or from a travel agent issuing an airline’s tickets, you should be able to get a full refund from the ticket issuer if you don’t want to use it for substitute transportation. This is an “involuntary refund” and you shouldn’t be assessed any cancellation penalty or service fee. But there’s no guarantee of that.

Protected by Carriers

Once an airline has declared bankruptcy, it is protected from creditors, including passengers.

If you want to file a claim, send photocopies of your tickets and other relevant documents to the appropriate U.S. Bankruptcy Court, along with a “proof of claim” form (B1034). The special courts are spread around the country. If you’re not sure which bankruptcy court is handling the matter, call the Department of Transportation in Washington, D.C., at (202) 366-2220.

In Los Angeles the U.S. Bankruptcy Court is at 312 N. Spring St., Room 906, 90012; phone (213) 894-3118. “Finding the right court can be a real problem for passengers since this is left in their hands,” says a spokeswoman for the bankruptcy court.

It’s best to get a proof of claim form from the appropriate bankruptcy court.

If you send a copy of the form and a self-addressed stamped envelope, the pertinent bankruptcy court will contact you to acknowledge receipt of your claim.

In the absence of a default protection plan, how do you protect yourself? One obvious measure is to take a hard look at any relatively young, unproved airline that promotes a succession of fare cuts.

If you have any doubts about how long an airline has been in business, ask a travel agent. Travel agents tend to shy away from carriers suspected of having problems.