The Next What-If: Tour Company Bankruptcy

To the uncertainties of travel these days, we can add one more: What if your airline, tour operator or cruise line goes bankrupt?

This question has lately been more than theoretical as travel companies struggle to survive the post-Sept. 11 downturn in tourism. Among those that filed for bankruptcy or reorganization this fall are Renaissance Cruises, American Classic Voyages (operator of the Delta Queen riverboat and Hawaii cruises), Swissair, the parent company of Alamo and National car rental agencies and tour operator Jet Vacations International Inc. of El Segundo.

The folks who sell you travel insurance are worried that more companies will founder. Confronted this fall with millions in claims, some no longer cover financial default. In other words, you--not they--will be left holding the bag if the cruise line you entrusted with your money sails off into the sunset. “It’s very scary,” says Patricia Campbell, owner of All About Travel in Northridge.

Here are some ways to make it less scary, gleaned from travel agents and other experts:

* Choose a reputable company. You want your cruise or tour operator to have been in business awhile; some experts recommend five years or more. Ask whether it belongs to the U.S. Tour Operators Assn. or the National Tour Assn. These groups require members to post bonds or otherwise demonstrate financial responsibility.

Also ask to see the company’s California Seller of Travel registration. State law requires companies that sell travel to Californians to register and prove they have a consumer protection plan. If the company is also based in California, ask to see its registration as a member of the California Travel Consumer Restitution Corp., or TCRC, a private, nonprofit organization that administers a fund financed by fees paid by travel sellers. (More on this later.)

Use a travel agent, especially for large transactions such as a cruise or a European vacation. It’s in an agent’s self-interest to avoid problems by shunning shaky companies. Such information travels fast. Weeks before Jet Vacations filed its bankruptcy petition, “we had heard rumblings” about unpaid commissions, says Jill Brooks, manager of Dimensions in Travel in Novato, Calif.

But even travel professionals can be surprised. “It’s not always easy to find out a company’s financial situation,” Campbell says.

Regardless of how solid the company seems, it’s a good idea to:

* Pay with a credit card. Major credit card companies generally will refund your money if you pay for a product or service you don’t get or that is defective, such as an aborted around-the-world cruise that leaves you stranded in Tahiti. (This happened last year to customers of the now-defunct World Cruise Co.) And that protection is free with your card.

The policies vary. “It’s not that we have any hard and fast rules,” says Marc Levy, director of global marketing communications for MasterCard International, and issuing banks may differ. But in general, he said, “if you pay in advance for services and the services were not rendered,” you have 120 days from the date that the service was due to begin to request a refund from the bank that issued your credit card.

Policies for Visa cards also vary by bank, but at the minimum, you have 60 days beyond “the point at which the service is not rendered” to make a claim, says Rosetta Jones, director of Visa U.S.A. At American Express, “you’re covered as long as the purchase is not delivered,” and “we don’t have ... a time period after which you cannot dispute a charge,” says spokeswoman Nancy Muller.

I’ve heard some travel experts claim that credit cards balk at refunding your money if you paid for the cruise or tour more than 60 days before you were scheduled to embark on it. This would be a problem because cruise lines, for instance, typically require full payment 75 to 90 days in advance. But Levy, Jones and Muller insist this is not the case.

The documentation required to get a refund can be extensive. “My advice: Save everything,” Levy says.

So for extra protection, you might want to:

* Buy travel insurance. Premiums for this typically are 5% to 8% of the trip cost. These policies can insure you against an array of situations that could interrupt your trip or keep you from taking it, such as illness or a terrorist attack. (Some insurers cover attacks only outside the U.S.) But you may be out of luck if it’s your travel provider that’s having the crisis.

The first rule of thumb: Travel insurance provided by your tour or cruise operator usually doesn’t cover the company’s own financial default. Travel experts recommend so-called third-party insurance, provided by a company other than the one you’re traveling with.

The second rule: Insist on seeing the full policy agreement before you buy the insurance, and read the fine print. In the last two months, such major insurers as CSA Travel Protection in San Diego have stopped covering financial default; others have stopped covering certain companies. On Nov. 13, Richmond, Va.-based insurer Access America tried a different tack: It issued a list of 89 airlines, cruise lines and tour operators that it would cover for default. (The list, updated regularly and posted at https://www.accessamerica.com, had grown to 135 companies.) As of last week, at least two major insurers, Travel Guard International of Stevens Point, Wis., and Travelex Insurance Services of Omaha, Neb., continued to cover financial default, with a few restrictions. In any case, look for policies that pay in the event of “cessation of services” (or use similar wording) and that do not require that the company file for formal bankruptcy (Chapter 7) or reorganization (Chapter 11). Some companies don’t file for bankruptcy in a timely way--or at all. They just disappear.

And finally:

* Know your rights in California.

If all else fails, there’s the California Travel Consumer Restitution Corp. If you book your travel in California with a California-based travel agent, tour operator or other provider that belongs to the TCRC, you may be able to collect from that fund if the provider fails to deliver what you paid for. To request a claim form, write to Travel Consumer Restitution Corp., P.O. Box 6001, Larkspur, CA 94977-6001 or fax to (415) 924-2033; there is no phone number or Internet site.

In the end, “there’s no way you can be protected against everything,” says Northridge travel agent Campbell, who is also president of TCRC. “Once in a while you’re going to lose something.” And if you weren’t willing to take a little risk, why would you leave home at all?

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Jane Engle welcomes comments and suggestions but cannot respond individually to letters and calls. Write Travel Insider, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail jane.engle@latimes.com.