Image: Boy with luggage in airport
Paul Sakuma  /  AP
Zachary Cunningham, 5, waits after his family's ATA Arilines flight for his two week vacation to Hawaii was cancelled at Oakland International Airport on Thursday.
By Christopher Elliott Travel columnist contributor
updated 4/3/2008 3:44:55 PM ET 2008-04-03T19:44:55

First it was Aloha Airlines . Then it was charter carrier Champion Air . Today it’s ATA . Within a week, three airlines have been grounded, leaving thousands of passengers stranded.

What’s next?

Well, there’s bad news — and more bad news. You don’t have the same legal protections you used to. And an air carrier that says it will accept your ticket may not be as helpful as it sounds. Worse, the wave of bankruptcies may be far from over.

“I am in a panic,” says Anita Fancon, who held 16 tickets worth a total of $6,500 on ATA at the time of its demise. “We are celebrating our 50th wedding anniversary this year, and we planned to take the whole family to Maui for one week. What happens now?”

Don’t look to the government for help. Federal law — specifically, Section 145 of the Aviation and Transportation Security Act of 2001 — required airlines to accept stranded passengers on a space-available basis. But the law quietly expired in late 2006.

As a practical matter, some airlines are coming to the aid of travelers. For example, United Airlines is helping Aloha Airlines passengers get to their destination. Some firsthand reports suggest there’s some confusion about the terms of its agreement, though.

“I talked to three different agents and I was getting a different story every time,” said Magdalena Platte, a passenger from Reno, Nev. “One of the options was to rebook the ticket at discounted price of $994 — which was laughable, since Expedia offers those same tickets at $945.”

But that’s not the worst of it. If you paid for your ticket with anything other than a credit card, your chances of seeing your money are slim to none.

For example, in ATA’s case, travelers who paid by cash or check are ineligible for refunds, according to a statement on its Web site. “These customers may be able to obtain a full or partial refund for their unused tickets by submitting a claim in ATA’s Chapter 11 proceedings,” it says. “Information about submitting a claim will be available at the following website.”

Note the use of the term “may.” In fact, passengers are usually at the bottom of the list of claimants in a bankruptcy court. Chances are, you’ll see pennies on the dollar — if that — after the carrier liquidates.

And what if you paid by credit card? Don’t listen to the talking heads on TV who assure you that you’ll be protected if you paid by plastic. Maybe you will. Maybe you won’t.

What these so-called “experts” often fail to mention is that when it comes to these kinds of disputes, the Fair Credit Billing Act technically only protects consumers who have made purchases in their home state or within 100 miles of their current billing address. (Some credit card companies regard these issues as “quality of goods and services” disputes rather than billing errors, so they refuse to reverse the charges.)

If you paid by credit card, initiate a dispute immediately. You’ll probably get all of your money back, but don’t count on it. If you’re working with a reputable card, have made the reservation recently, and contest the charges right away, you’re likely to see a full refund.

But what about your trip? Here are three tips for getting to your destination despite the recent wave of airline failures:

1. Get a plan ‘B’ … now. If you were planning to fly on an airline that’s grounded, call your travel agent immediately or try to make alternate arrangements with an airline that says it will accept your ticket. For example, Southwest Airlines, which had a codeshare agreement with ATA, says it will rebook its customers who were scheduled to fly on ATA, according to a statement on its Web site. However, that offer didn’t extend to ATA passengers who had been affected by their airline’s demise.

Here’s where having a good travel agent can help. “If a client has tickets on an airline that just ceased operations, the agent should be looking to get their client re-accommodated on another airline as quickly as possible without any poking from the client,” says Steve Cousino, a travel agent with Grand Crowne Travel in Branson, Mo. He also urges passengers to be patient, since it can take “hours of working with other airlines to get the client re-accommodated.”

2. Lean on a third party. No one is answering the phones at ATA right now, but if you bought a ticket through a tour operator or online agency, chances are there’s someone home. Remember, these are the agencies that took your money, so they shouldn’t leave you hanging.

Unfortunately, some are. Larry Kaplan booked a package through one of the major online travel agencies. When ATA folded, he phoned the agency. “After a one hour on hold they told me they could do nothing about the airline portion,” he says. “The call was being handled in India by someone whose English wasn’t very good. They claim they simply broker the money to others.” Kaplan is disputing the entire purchase on his credit card. But another option, if you have the time, is to ask the agency to reconsider a “you’re-on-your-own” attitude in writing. (Most online agencies have well-marketed warranties that promise superior customer service, and a friendly reminder should be all it takes for it to help rebook your tickets.)

3. Run a health check on your next itinerary … and act if necessary. Flying somewhere? Then you might want to check your airline for signs of imminent bankruptcy. Among the warnings: the recent removal of a top executive, a dramatic change or reduction in routes, staff cuts, and, of course, emphatic public statements by it top brass that things couldn’t be any better. By that measure, there are several airlines that could be on the precipice. Those include Sun Country Airlines, which recently laid off nearly 30 percent of its pilots and Skybus Airlines, which lost two key executives and has restructured its routes.

Determining if your vacation is at risk from an ailing airline is not easy. After all, struggling airlines sometimes recover. The advice of a good travel agent is helpful, but buying another ticket on a less unprofitable airline is a decision you’ll have to make after weighing all of the facts. If you decide to keep your plans, consider travel insurance. Some policies offer protection if your airline goes out of business.

The news is not all bad, when it comes to the recent airline failures. The current wave of bankruptcies is actually healthy for the airline industry in the long term. It’s weeding out the weakest air carriers and making room for new airlines with sustainable business models. This is part of a perfectly normal cycle we’ve seen many times before.

The trick, of course, is to not get stuck in the middle of the cycle.

© 2013  Reprints


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%