My airline is grounded — now what?

By | April 3rd, 2008

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 now?

Well, I’ve got bad news and more bad news. Federal law doesn’t require another airline to accept your ticket. (A temporary law enacted after 9/11 forced airlines to accept stranded passengers on a space-available basis, but it quietly expired).

As a practical matter, some airlines are coming to the aid of travelers. For example, United Airlines is helping Aloha Airlines passengers, but firsthand reports suggest some United employees are confused about the terms of accepting Aloha’s tickets.

“I talked to 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 wait … there’s even more bad news. If you paid for your ticket with anything other than a credit card, your chances of seeing your money or miles 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 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.

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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 only protects people 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.)

In other words, you might get a refund. But don’t count on it.

Same thing goes for tickets bought through award miles. Might as well kiss ’em goodbye.

So what should you do?

Get a plan ‘B’. 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. At the time of this writing, no other airline had come forward to say it would help stranded ATA passengers, but I imagine a carrier like Southwest Airlines will probably do what United has done for Aloha.

Run an airline ‘health check’. Is your airline showing signs of imminent bankruptcy? If it has removed its top executive recently, scaled back routes or issued an excessively cheery press release in the recent past, chances are you’re flying on a distressed carrier. You might consider making alternate plans. I can’t guarantee your airline will be there when you need it.

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Get professional advice. A competent travel professional can help you navigate the ins and outs of a bankruptcy-ridden airline industry. Before you book your next airline ticket, check with a travel pro and find out what you should do. It’s advice worth paying for.

One other thing that’s worth noting. The current wave of bankruptcies are healthy for the airline industry. They’re 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 it.

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