How Not to Be Left With a Useless Airline Ticket : Consumers: With more companies facing an uncertain financial future, passengers can protect themselves by using credit cards to purchase tickets.

At midnight on Jan. 18, when Eastern Airlines ceased flying, it inconvenienced thousands of passengers. By the airline’s own estimates, 37,000 travelers had reservations for flights the next day, and most of them were holding tickets.

And many more passengers were already holding tickets for future flights on the defunct airline. In fact, Eastern officials said that there were more than $80 million in outstanding tickets being held by passengers.

What rights do consumers have when an airline goes bust? Are tickets suddenly worthless? Are the passengers out of luck? And what happens to all of your accumulated frequent flier miles?

Questions such as these have taken on even greater meaning recently, what with the aggravated troubles--due to the recession and war in the Middle East--of several airlines that were already fighting for their lives.

How consumers are protected depends on how they paid for their tickets, where they were flying and the dates of their travel.

Historically, there’s been a sort of gentlemen’s agreement between major airlines that in the event of an individual airline ceasing operations, other carriers would honor its tickets on a standby basis.

Some passengers aren’t waiting to find out if an airline will survive. In the last few weeks, many airlines report a surge in the number of frequent fliers redeeming mileage.

“We’ve seen a heavier run on our frequent flier program,” says TWA spokesman Don Morrison. “People are reluctant to hold on to their miles as long as they have in the past.”

A number of TWA frequent fliers, concerned that TWA might fail as well, have used their allotted frequent flier miles to secure tickets from the airline’s international partners, including Philippine Airlines and Air New Zealand. Why? The thinking is that if a frequent flier redeems his TWA miles on an international partner airline, and then TWA fails, the international ticket issued by that partner airline will still be honored.

It’s not a bad contingency plan.

For those worried about traveling overseas at the present time, I’m not suggesting that you redeem your mileage now to fly now. What I am suggesting is that you can protectively plan ahead by redeeming your mileage now for overseas flights later this year on international partner airlines.

In the past, passengers holding tickets on airlines that failed have been protected, albeit with certain conditions attached. In May, 1982, when Braniff ceased operations, major airlines, including United and American, immediately announced that they would honor Braniff tickets--but for just a month.

Braniff ticket holders who were scheduled to fly after that 30-day period still had two choices: They could fly earlier on a standby basis or, if they had paid for their tickets with a credit card, they could dispute the charge and have a credit issued to their account. But for those passengers who paid cash for their tickets, they joined a long line of creditors.

This wasn’t the recent scenario at Eastern, however. When that carrier originally filed for bankruptcy in March, 1989, it established a special $50-million ticket refund escrow account to allay passenger fears.

But with $80 million in outstanding tickets, that left $30 million worth of worthless tickets, yes?

Not necessarily.

Within hours of Eastern’s demise--and in some cases a few hours before it--a number of airlines announced that they would honor most Eastern tickets. Continental and American said they’d accept Eastern tickets on a standby basis.

And on the day Eastern announced that it was shutting down, Northwest announced it would offer confirmed reservations for passengers holding Eastern tickets, provided the airline had an available seat in the same class of service as that listed on the Eastern ticket. (If not, then Northwest said it would still accept the tickets on a standby basis).

And last October, when Pan Am agreed to sell its London routes to United Airlines, there was an additional clause in the agreement. In the event that Pan Am ceased operations (in fact, it declared bankruptcy on Jan. 8), United committed to honor up to $100 million worth of Pan Am tickets.

But with the exception of the Pan Am/United arrangement, honoring tickets of a dead airline remains a courtesy, with no guarantee that this behavior will always be repeated.

The best thing to do is try to purchase your tickets with a credit card. That way, if an airline, travel agency or tour operator fails, your rights are protected. An airline ticket is a contract for services. If the services aren’t performed, you have the right to dispute those charges with the credit card company. In situations where companies have either filed for bankruptcy or ceased operations, card holders have not been assessed charges for tickets purchased via credit cards.

Still, while this may protect you financially, it doesn’t guarantee that you’ll get where you’re going when you want to go there if your airline stops flying.

At this writing, there are a number of troubled airlines.

Continental is in bankruptcy. TWA just laid off 3,000 employees and cut its transatlantic schedule in half. Midway Airlines already has reduced its work force by 10%. And even healthier airlines, like American and USAir, have cut back flight schedules and in some cases have withdrawn completely from certain markets. It all sounds like the beginning of a very depressing garage sale.

And what about members of an ailing airline’s frequent flier program? What recourse do they have?

Are your rights--and in some cases, your miles--protected if the airline fails? Can you protect your tickets earned with frequent flier miles? Or the residual miles themselves?

Not necessarily.

It all depends on the individual airline, its domestic or international mileage partners--if any--and how fast you move.

Financial analysts at Shearson Lehman Brothers estimate that more than $6 billion in free travel is currently owed by airlines to frequent fliers. (In the event of an airline bankruptcy, these frequent flier miles could still have value, as long as the airline continues to operate.)

United tops the list, owing more than $1.2 billion in travel. American is a close second, at $980 million. And when Eastern stopped flying, it was estimated that the airline owed more than $460 million worth of free travel.

What happened to all those Eastern miles?

So far, frequent fliers who earned miles on Eastern are protected. Continental announced that it would honor frequent flier mileage earned on Eastern, its partner in a mileage award program called One Pass. In spite of its own bankruptcy, Continental continues to award free airline tickets and other perks.

However, if Continental ceases to operate, those mileage points accumulated in the frequent flier programs become essentially worthless.

(Pan Am’s mileage program currently has no international partners. However, if the United deal is approved, Pan Am miles will be accepted as part of United’s Mileage Plus program, so members of Pan Am’s program should be safe if they transfer their miles to the United program.)

Let’s say you have built up 50,000 miles in the Continental program. Under current program rules, that should qualify you for a free coach-class ticket to Europe from the United States on most of the international partner airlines that participate in the One Pass program, including Air France, Alitalia, KLM, Iberia, Lufthansa, Sabena and SAS.

If you order your 50,000-mile award now to your European destination, you should then receive an award certificate that you could exchange for a ticket issued by the international partner airline. (In some cases you will get the ticket directly from the international airline when you cash in your miles.)

This is not advice for Continental only; rather, for any troubled airline that has a frequent flier program with international awards. That way, you will have a ticket you can use when--or if--the U.S. airline on which you originally earned the mileage fails.

Continental officials stress, however, that while they are indeed operating under Chapter 11, they don’t see a need for a run on their frequent flier “bank.”

“We are not operating an Eastern-type scenario,” says Continental spokesman David Messing. “We are not downsizing like they did, and we are not going out of business during the bankruptcy. We don’t plan on ceasing operations. We do not see our future unfolding that way, and our mileage program remains strong.

“In fact,” he says, “we believe we can go forward indefinitely into the future.”

However, as most airline industry observers will tell you, the future is not what it used to be. It’s wise to assume nothing, and to protect yourself when you purchase your airline tickets as well as when you redeem your mileage.