It started small last month, if you consider stranding 900 people on the wrong end of the planet "small." That's when the airline Zoom, which made regular transatlantic runs to North America, zonked out unexpectedly.
The sudden death of airlines creates a ripple effect. Last week, another 2,500 English travelers were left high and dry in the Mediterranean when Seguro, a vacation packager, raised the white flag. You see, the Spanish flyer Futura suddenly folded, leaving the vacation packager that used its flights holding the bag.
The next day, Britain's third-largest vacation seller, XL, gave up the ghost, halting its self-run flights and stranding an astounding 85,000 people abroad. That's a lot of sunburned Brits pounding the counters at tropical airports. Some 10,000 of them, who booked their flights without packages, were not covered by the bond and had to pay more money to get back home. Another 200,000 people with advance reservations were also wondering where their down payments had gone.
Many of the victims of these collapses thought they were covered because they used their credit cards to buy their trips. That's just not the case.
Some customers made it back home thanks to a scrupulous British licensing program that keeps a little money aside for emergency flights home. That bond is required of many package tour companies, but by themselves, airlines are exempt. That means if customers booked their flights as part of a travel package, they were probably covered, but if they booked flights a la carte on their own, they're likely out of luck.
The British love their package holidays more than we do, but don't delude yourself into thinking American travel companies can't tumble down just as quickly. The situation Stateside is much the same: Many package sellers come with customer protections that require some emergency money in the bank, but airlines rarely do. Several airlines are already on the financial bubble, and with the price of fuel straining the industry further, the chance of a few untimely collapses is more than likely. (The airline Alitalia, for one, is making death-rattle noises as you read this.)
So how can you prepare to get your money back, or at least get back home, in the event of a travel meltdown? Start here (and bookmark this post):
- Whenever an airline serving America goes bust, the Department of Transportation's Aviation Consumer Protection Division uploads a brief page describing its understanding of what customers can do to get their money back, as well as which other airlines might be offering to help out the stranded. Usually, getting your money back involves hammering your credit card company for a refund (a good reason never to pay cash for an airline ticket).
- Keep in mind that American law doesn't currently give you protection if you have bought your ticket more than 60 days ahead of time. Within that 60-day window, though, you are still within your rights to get your cash back from your credit card provider. Credit card companies may decide to be nice and bend those rules, but they don't have to.
- Some American vacation packagers and tour operators are, like their British counterparts, indeed bonded for against bankruptcy, which will get you back home should the company go kerplooey while you're abroad. Member companies of the United States Tour Operators Association (USTOA) come with this guarantee and $1 million in protections. They preen their membership logo like the Good Housekeeping seal.
- Some vacationers shell out a little extra money for travel insurance to cover each trip they take, which may protect them not only in the case of insolvency, but often also if, say, they break their leg and can't take their trip after all. In this economic climate, insurance is not a bad idea. But does travel insurance always cover bankruptcy? No, and even if you buy a policy that does, insurers have been known to eliminate coverage of specific airlines that are on shaky financial ground, so always make doubly sure before buying a policy that it includes the companies you're doing business with.
- Don't buy your travel insurance through the same company selling you your tickets or reservations, as Frontier Airlines is trying to get people to do using AIG, another company Wall Street is nervously watching. Once an airline goes under, it's usually nearly impossible to get anyone on the telephone to hash out your claim, and besides, you may get a better price if you go through other channels.