Other Airlines May Honor Eastern Tickets You Bought Before Bankruptcy

The scene at New York’s La Guardia Airport was quietly chaotic. At 7 on a Monday morning, dozens of would-be passengers, tickets in hand, waited in line at the Eastern Airlines counter, hoping to get on flights bound for Atlanta, Miami and other destinations.

On the departure screen, 12 Eastern flights were listed: Seven had been canceled; the other five were “on time.”

Far More Damaging

But by 7:15 the other five flights had been canceled too. The strike against Eastern by its machinists union had been far more damaging to the airline than anticipated.

Eastern’s pilots and flight attendants also supported the strikers, and as a result, not enough crews reported to work. The airline had, in effect, been reduced to operating its shuttle service between New York and Boston, and New York and Washington.

And the passengers waiting in that ticket line--as well as in similar lines at dozens of airports Eastern serves throughout the United States, Canada, the Caribbean and South America--were sent to other airlines to try their luck.

It is a sad scene that has repeated itself often in recent history.

In May, 1982, thousands of travelers in the United States and South America were caught by surprise when Braniff ceased operations.

The same thing happened when Hawaii Express went out of business. In Hawaii, South Pacific Island Airways and Mid-Pacific Airlines have gone under. In 1987 the bankruptcy of two regional carriers resulted in $50 million of unsecured debt in the form of unused tickets held by frustrated ticket holders.

In the 10 years since deregulation there have been dozens of airline mergers, failures and consolidations. And thousands of passengers have been left holding their tickets.

Questions to Ask

If you’re holding a ticket on Eastern Airlines, what can you do? And, because the airline subsequently declared bankruptcy, what real protection do you have? Does your ticket have any value? Can you get a refund? Will other airlines fly you? And at what additional cost?

In almost all cases where airline service has been suspended because of labor or safety problems, bankruptcy or even liquidation, many competing airlines have agreed to honor the tickets of the troubled carrier on a standby, or space-available, basis.

No law requires the airlines to do this, but for each airline that does, it makes good business sense. It ultimately gets the revenue from the original ticket, and fills a seat that otherwise might have gone unsold.

Some airlines that have been accepting Eastern tickets have also stamped the back of the tickets with the following statement:

“In exchange for consideration received, I hereby assign to (airline) all my rights and claims against the carrier issuing and arising under or related to the coupon upon which the assignment is stamped.”

What this means is that if another airline accepts an Eastern ticket, it is, in effect, taking you off the hook as an unsecured creditor.

But there are some notable exceptions to this mutual aid behavior.

First, look at the type of airline ticket you are holding. What fare have you paid? Is it a full coach (Y), first-class (F) or any one of a dozen discount fares (with fare designations such as M, B, YE70 or XE70)?

The fare basis, or designation, may often determine which airline will honor your ticket, and in what order. Full Y or F tickets are usually honored with few hassles. Discount fares, especially those that carry restrictions, may be honored selectively by certain airlines, if the tickets are first endorsed by Eastern to the new carrier.

Some airlines--if seats are available--will honor them without imposing any new restrictions on a space-available basis. And yet other airlines may only honor the discount tickets up to the printed value of the discount fare, and may impose an additional cost, representing the difference between the full coach fare and the discount fare you paid on the troubled airline.

Some Exceptions

There are some tickets that no other airline will honor. If you are flying on a frequent-flier certificate, a free or a discounted ticket that is considered promotional, a voucher issued for travel as a result of an airline promotion, or any ticket that is endorsed “Good on Eastern only,” you’re out of luck until the airline resumes service.

If the airline does not resume service, then your ticket is, in effect, worthless.

Second, how much did you pay for your ticket?

If you paid cash and an airline fails, you might end up as just another creditor in their bankruptcy filing.

However, you do have some recourse if you paid for your ticket through a travel agent and/or used a credit card. Many travel agents sell insurance policies that protect passengers in cases of airline defaults or bankruptcies.

But if you buy one of the many trip cancellation or interruption insurance policies, be sure to check it carefully. There are specific provisions and time periods under which some companies will cover you.

For example, under the policy offered by Travelers Insurance, the company will refund your money if an airline fails “and stops all service completely 15 or more days after you have purchased coverage or while you are on the trip.”

Another company, Access America, offers a policy with few restrictions that covers “lost payment due to default or bankruptcy of any airline, tour operator or cruise line.”

But in most cases, trip cancellation insurance is only a worthwhile extra expense if you foresee other factors disrupting or canceling your trip--illness, for example. You won’t need extra insurance if you paid for your airline ticket with a credit card.

Dispute the Charge

If the airline suspends service or fails completely, you can easily dispute the charge with the credit card company. The company will then issue an interim credit on your account for the amount of the disputed ticket; after all, you paid for a service you did not receive.

Some other words of caution: If an airline says it will only honor your ticket partially, shop around. These decisions tend to be discretionary, and are often left up to local airline station managers and ticket/gate agents. Some will honor the tickets, others won’t.

Comparison shopping won’t cost you any more money, and may get your ticket honored elsewhere without incurring additional cost.

A recent memo sent by American Airlines to each of its sales representatives and ticket offices outlined specific procedures relating to the types of Eastern tickets it would--and would not--accept.

And yet, at the end of the memo, American also said “although ticket acceptance procedures are described above, there may be instances when good judgment dictates the acceptance of an Eastern Airlines ticket.”

What this means, of course, is that many of the decisions of ticket acceptance are left up to the discretion of individual airline personnel.

These ticket acceptance policies tend to change almost as rapidly as most air fares. In the case of Eastern, some airlines that insisted they would not honor Eastern tickets on March 3, the day before the Eastern strike, did honor them on March 6.