What do airlines and banks have in common? Answer: They are likely to go bust overnight. What are the airline equivalents of Lehman Bros. and Goldman Sachs? Will governments bail out failing carriers in a similar way? If not, what can I do if I have booked a ticket with an airline that collapses?
The prospect of airline failure looms large for many travelers. High fuel costs and the credit crunch have already seen more than 20 airlines go bust this year. (Alitalia’s future had looked doubtful until a last-minute agreement appears to have rescued it from bankruptcy.) And, in the early hours of September 12, XL Leisure Group, the third largest UK tour operator collapsed, leaving 90,000 customers people stranded abroad, and 23,000 holding advance bookings.
XL customers who had booked a package holiday (flight plus accommodation) were protected under Britain’s Air Travel Organizers’ Licensing scheme for tour operators, which is overseen by the Civil Aviation Authority; those abroad were repatriated; those who had not yet traveled got their money back.
But people who had simply bought tickets direct with XL Airways were not covered by ATOL, or an alternative bonded scheme, and had to pay their own way home.
Whether or not you can get reimbursement from an airline which has gone bust depends on where you buy your ticket, how you pay for it – and the small print of your travel insurance. Trip cancellation terms of most travel insurance policies do not cover scheduled airline failure.
Credit cards offer the best protection, whether you pay for tickets direct with the airline, or through a travel agent. Should the airline be grounded, you can claim the money back from the card company, or bank, if you were due to travel. If you are left stranded abroad, the card company should refund the cost of the flight home.
Debit and charge card transactions are not protected in the same way, and you are most likely to lose your money; although Visa debit card holders are covered by a ‘chargeback’ procedure on the basis that goods or services have not been delivered, or are not as they were described. According to Visa Europe, in such cases the chargeback rules allow its card issuing banks to recover money paid on all Visa debit and credit cards from the retailer’s bank. Visa chargeback claims must be made within 120 days of the purchase or from the date the goods or services were due to be delivered.
If you book flights through a travel agency, whether online or terrestrial, make sure that it is a member of the International Air Transport Association (400 airlines and 6,000 travel agents around the world) and participates in its ‘billing and settlement plan’ – through which agents remit money from ticket sales to airlines. The BSP facilitates the cash flow between passengers, agents and airlines, and processing refunds.
‘When Alitalia appointed an administrator, we, according to the rules of the system, secured a deposit allowing the airline to continue participation in the BSP,’ says Lorne Riley at IATA in Geneva. ‘This minimizes the risk to participants, the airlines, the travel agents, and by extension their customers.’
So is it better to buy tickets through a travel agent rather than an airline? ‘You could make that speculation,’ Riley says. ‘I wouldn’t.’
Some travel agents now offer ‘Scheduled Airline Failure Insurance,’ either free of charge or for about $10 for a business class round-trip flight. Two big providers of SAFI are brokers Marcus Hearn in London (www.scheduledairlinefailure.co.uk), who sell only to agents; and International Passenger Protection, a company that offers insurance directly to travelers through its Web site – www.protectmyholiday.com.
The long-haul travel specialists Trailfinders.com in London, guarantees ‘that clients will not lose any money paid to us for travel in the event of a collapse of an airline, tour operator, or any other provider.’
‘This pledge has been honored since our foundation over 38 years ago,’ says Nikki Davies, PR & marketing manager of Trailfinders in London. ‘It makes no difference at all how they pay; we put client’s money into a trust fund; if an airline goes bust, we’ll give them a full refund, or sort them out on the next best alternative, whichever they prefer. They will not lose any money.’
Monica Beaupre, a manager for public affairs at American Express in New York, says, ‘The best travel companion you can take along is travel insurance. We offer a wide variety of travel insurance benefits here in the U.S. Global Travel Shield is for card members and non members; Travel Assure is a package of protection just for card members.’
Both policies provide cover ‘if a covered trip is cancelled or interrupted due to… financial default or bankruptcy of a tour operator, hotel, resort, rental car company, other travel supplier or Common Carrier Conveyance.’
I would argue that this covered ‘scheduled airline failure;’ But if I were buying the policy, I would like it to be spelled out, in a ‘what if?’ scenario.
The devil, after all, is in the small print.
Resolving a key glitch of the electronic era
In the beginning were paper tickets, books of flight coupons that you exchanged at the airline check-in desks for a paper boarding pass (green for economy, red for first class); heaven help you if you lost them; each coupon carried a serial number like currency bills. In 2000, 285 million paper tickets were security-shipped to 53,000 travel agency locations worldwide - at a cost of over $20 million.
Back in 1996 I opined that the benefits of the new-fangled electronic tickets would be for airlines, through lower costs and productivity gains. But what was in it for the traveler? You still had to show up at a desk, show your passport, check your bags, get a boarding card and walk to the gate. Ticketless travel might be fine for point-to-point travel, but surely not for complex trips with connecting flights on different airlines. Try arguing with a blank computer screen in Mogadishu - or the dreaded Heathrow for that matter - with a fugitive electronic itinerary. Give me the reassurance of a paper ticket any day, I said.
Ten years later we take for granted the convenience of on-line check-in, printing our own boarding cards on our own PCs, dropping off our bags at a self-service kiosk, and going straight to the gate. Although I’d still feel a tad uneasy embarking on a round-the-world trip, or a multi-sector itinerary without a paper ticket, especially if I might need to change flight times en route.
According to Giovanni Bisignani, director general of the International Air Transport Association, the paper airline ticket is set to be ‘put in a museum’ when, on June 1, IATA hopes to achieve its target date for 100 percent electronic ticketing across the world. Back in June 2004, only 18 percent of tickets issued were e-tickets; by the end of March this had risen to 94 percent.
‘We are entering a new age for air travel,’ Bisignani says. ‘Travelers love the convenience of e-ticketing and now want to combine it with self-service options to have more control over their journey. Online and kiosk check-in are at an all time high; mobile phone check-in is rapidly gaining popularity.’
IATA is campaigning for even more self-service options, such as self-tagging of baggage, baggage drop-off points and collections; machines for registering baggage mishandling; and self-boarding gates, and a self-service option for the processing of passports and ID cards.
‘It is an incredible industry success story,’ Bisignani says. ‘When we began over 28 million paper tickets were issued each month; we have reduced the number to less than 3 million. The airline industry will save over $3 billion a year by offering the passenger a better service.’
Well, yes. But several readers have reported cases where the IATA ‘interline’ system has broken down when a carrier to which they are connecting on a ‘through ticket’ refuses to check their baggage through to their final destination.
I have always warned that if you buy two separate round-trip tickets with the aim of saving money, do not expect to have your baggage transferred, nor to expect quarter should you miss your onward connecting flight.
The time-honored interline system dates back to 1930, the year the 1929 Warsaw Convention (replaced by the Montreal Convention of 1999) came into force.
‘Interlining is simply a contractual obligation between two carriers for providing end-to-end service for passengers,’ says Bryan Wilson, ET project director and chief information officer at IATA in Geneva. ‘If an airline is late in arriving, the second airline doesn’t say, “I’m sorry, you’ve missed your flight,” but will rebook you on another flight to get you to your destination; your bags are transferred automatically, that’s the commitment. With interline tickets one set of baggage rules predominates, so that if a passenger makes a trans-continental flight, connecting to a domestic or a continental flight, the superior baggage offer will apply right the way through.’
Wilson adds, ‘Competition doesn’t come into it. Airline alliances with varying degrees of anti-trust immunity have filed lower-cost through fares that are not generally possible for other carriers. Interline agreements go far beyond the boundaries of alliances and partnerships. You could start a trip with an airline belonging to one alliance and make an interline connection with an airline from another. A very large number of passengers do that every day.’
In the new world of e-ticketing, airlines must re-establish the current interline agreements by building up new ‘electronic interline ticketing agreements’ with one another.
‘This is more than simply filing a piece of paper,’ Wilson says, ‘airlines need to feel confident they can offer an electronic ticketing product with another airline; it’s making sure messages flow and are received through airline accounting systems. Right now 3,400 interline electronic ticketing agreements have been built up between airlines; by the end of May there will be pretty close to 4,000 in place. This will enable 90 percent of previous interlining journeys to be ticketed.’
What happens to the other 10 percent?
‘Airlines are prioritizing, working down the scale; at some point they say, we’ve got such small volume on this route, we’re not going through this additional effort,’ Wilson says. ‘There are a number of solutions. First, a travel agent will look at routing a passenger in different ways and issue an electronic ticket, or, if they cannot find that, they can issue a prepayment advice and send the passenger to an airline; and although, on June 1, IATA will not support travel agents having paper tickets, airlines will still have their own private paper tickets, for the one percent of itineraries that cannot be issued by electronic tickets. In which cases travel agents can make the booking and take the payment; passengers will need to pick up the ticket from the airline desk.’