When dead airlines rise, where’s my refund?

It's alive ... maybe! / Photo by Carb B - Flickr
Duncan Fox saw a glimmer of hope when Mexicana Airlines recently announced it would return to the skies. Back in 2010, he’d booked a flight from San Francisco to Puerto Vallarta, Mexico, but shortly before his trip, Mexicana filed for bankruptcy protection and then folded.

A subsequent email notification from his online agency, Yahoo! Travel, told him he should “rest assured” they’d request a refund on his behalf. But the $641 he paid never materialized. With Mexicana back, could he also expect his airfare to return?

Before I get to the answer, here’s what Yahoo! told Fox recently: Sorry, can’t help you.

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“This type of incident is very distressing for passengers as well as the travel industry,” a representative wrote. “We are very sorry for this inconvenience. Please let us know if we can provide any additional assistance.”

Sorry for the inconvenience? I wouldn’t call a $641 loss an inconvenience. Rip-off, maybe. But inconvenience? C’mon.

Yahoo! recommended Fox initiate a chargeback on his credit card. But that’s a long shot. In an email, the company suggested he invoke the Fair Consumer Credit Act, which would allow Fox to contact his financial institution to dispute the charge. I’m not familiar with any such law. There is, however, a Fair Credit Billing Act which covers chargebacks, but they must be made within 60 days and the purchase has to be made within 100 miles of Fox’s billing address.

There’s a reason it’s called bankruptcy “protection.” When an airline is goes Chapter 11 in the United States, it’s getting protection from its creditors, which would include passengers like Fox. The airline has Fox’s money but doesn’t have to return it. Mexicana filed for Concurso Mercantil which is roughly the same thing as going Chapter 11 in the States.

But that’s the old Mexicana. After the airline ceased operations, it was reportedly sold to Grupo Med Atlantica, and if and when the airline starts up again, Fox and others will have a difficult time getting their money back from the new owners.

Paula Dwelly is one of those others. Two years ago, she booked a ticket between Sacramento, Calif., and San Jose Cabo, Mexico. But before their vacation, the airline grounded itself.

“We were told by a Mexicana representative by phone that we would be getting a refund,” she says. “We didn’t. When we call its number, it doesn’t even ring or give a recorded message.”

Will Dwelly and Fox ever see their money — or even a voucher — after Mexicana has been revived? Probably not. I’m reminded of Noah Markewich’s luggage claim with Alitalia. Back in 2008, the airline lost his wife’s bag on a flight to Italy. It promised to compensate her for the bag, as required under international law. But it didn’t.

Markewich asked Alitalia for an explanation, and it sent him an email saying it wouldn’t pay. The reason? Alitalia filed for bankruptcy protection that year, and is now a “new” company.

“Therefore,” it added, “any claim you may have against Alitalia is enjoined from being pursued or commenced because it arises from transportation provided before August 30, 2008.”

(I checked with Alitalia, and it confirmed its position — rules are rules.)

I can think of a few ways of avoiding this mess, besides not booking a ticket with a money-losing airline. Don’t make a reservation too far in advance, because no one knows the future. Always pay by credit card, and remember the 60-day window for disputes.

Long-term, this might be the time to ask if current rules and regulations offer enough protections to passengers. Maybe the Fair Credit Billing Act needs an amendment to address air travelers, which specifically waives the 60-day/100-mile rule. Or maybe we need to take another look at bankruptcy laws, to find a way to prevent folks like Dwelly and Fox from losing their tickets.