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.
Expect the unexpected and never take anything for granted are bywords for business travelers, stranded at airports by delayed or canceled flights and dislocated schedules. How many times do I need reminding that an optimist is simply a pessimist who is badly informed? Planning for things to go wrong is the best way to make things go right.
One of the worst things is a cancelled flight, or missing a connection, resulting in a cascade of broken appointments and concomitant recriminations.
Take the other day. I had stayed over in London specially for a morning meeting with a publisher who was flying in from Denver via New York. He planned to head back that afternoon: We both had heavy schedules.
Readers may identify with the message that came through from New York just an hour before we were due to meet:
‘I was flying MaxJet to London and after several hours of delays they finally cancelled the flight around 11 pm local time. How will they help? Next flight next evening… And that does not work for our meeting since I had to get back on Friday. So I am holed up in this flea-bag Ramada at JFK (all the other hotels were sold out). Very sorry. Interesting that most people on the flight were connecting from Stansted to Shannon in the morning and were obviously going to miss. Most said the hell with it and
canceled their trips.’
Twenty years ago, I made a foolhardy attempt to show that one could take the morning Air France Concorde from Paris to New York, have lunch in Manhattan, and be back for dinner that same evening.
We left Charles-de-Gaulle on time. But an hour and a half later, while I was enjoying a preprandial lunch, we suddenly lost height, and a brusque call came from the flight deck to return to fasten seat belts. We had lost a hydraulic system and so limped back to Paris at subsonic speed.
Three hours later we left again on Air France’s ’stand-by’ Concorde. Although we still arrived at JFK before the Boeing 747 that had taken off before our original flight, I lost my story. But a fellow passenger, on a less frivolous missions than mine, had a fruitless journey through missing a crucial bank meeting in Manhattan.
Victims of cancelled, or seriously delayed flights, are able, under United States and European Union rules, to claim a refund of their ticket, along with a free flight back to their initial point of departure, or an alternative flight to their final destination. Or claim on their travel insurance. But that is no compensation for a lost business appointment.
The ground rules are: Always book a flight before the one you really need to take; and never fly with an airline, or from an airport, that only has one or two flights a day - especially if it is crucial for you to arrive on time. Make sure your ticket allows you to switch to another carrier. Unless you hold serious plastic, don’t count on a discounted or frequent flier award ticket, to get you priority in the scramble for an alternative flight if yours gets canceled. Look for a frequency of four to six flights a day.
This is the downside to the brave all-business-class startup airlines operating between New York and London: MaxJet (one flight a day) and Eos (up to three flights a day) between Stansted and JFK; and Silverjet (up to two flights a day) between London Luton Newark. (American Airlines will commence a once-daily service on October 29 between Luton and JFK.
Travelers seeking more choice and flexibility will have to brave the notorious Heathrow, where British Airways, American Airways and Virgin Atlantic, collectively offer around 26 flights a day to New York.
Travel management company Hogg Robinson Group reports in its half year hotel survey 2007 that room rates are continuing to rise throughout the world - most sharply in Europe, the Middle East and Asia. Only Africa showed a decline in average room rates. The HRG survey is based upon a combination of industry figures, actual room nights booked and rates paid by its British-based clients during January-June 2007.
Moscow remains the most expensive city to stay in with an average room rate of #236 ($475), about #80 more than London prices; followed by New York City with an average of #180 per night; Dubai, #166; Paris, #166; Bangalore, #162; Milan, #160; Stockholm, #156; Hong Kong, #153; London, #152; and Rome, #151.
Mumbai showed the largest increase of 30 percent during the last six months; Barcelona rates rose by 18 percent; rates in Berlin were up by 17 percent, Stockholm by 10 percent. London rates rose by 5 percent.
HRG director of global hotel relations, Margaret Bowler, says, ‘We have seen a solid increase in commerce between East and West during the past 10 years, and can see that demand is outstripping supply, pushing up room rates at a steady level. A key finding of the survey is the ever-growing importance of booking in advance, particularly for travelers looking to secure the best rates.’