Passengers' Rights if an Airline Collapses

What Can Travellers Do if their Holiday Firm or Airline Goes Bust?

Sep 13, 2008

In the last few months, several airlines and tour operators have gone under, leaving thousands of people stranded and having lost money. What can be done about this?

The ‘credit crunch’ and escalating fuel prices have caused 26 airlines to fold this year, and some experts expect 30 more are expected to follow. So what are passengers’ rights, and what can one do in such a situation?

What is Really Happening with the Airlines and Tour Operators?

XL Leisure Group, Britain’s third largest tour operator, went into receivership on 12th September. This was just a few weeks after the low-cost airline Zoom went into administration. Other airlines which have gone out of business include South African-based Nationwide, Oasis and Eos.

Three US airlines folded in April; including Maxjet and Silverjet. Other airlines and tour operators which are no longer trading include Excel Aviation, Aspire Holidays, Freedom Flights, Travel City Flights, and Kosmar Villa Holidays.

Most of these collapses are due to the so-called ‘credit crunch’, and the steadily increasing fuel prices that have also played a large part. But smaller players are now struggling, because customers are starting to panic and book only with well-known and large airlines. This could create a vicious circle, making life even harder for the small companies.

What are Traveller’s Rights if an Airline Goes Bust?

If passengers booked their flight and accommodation through an ATOL/ABTA or AITO bonded agent or operator, they will get a full refund. For those who are abroad, they can continue enjoying their vacation, and return journeys will be sorted out for them. For those who booked through a travel agent or third party website the situation is less clear-cut, and they may or may not be entitled to a refund.

For those people who booked using a credit card, there is probably protection under the Consumer Credit Act, as long as the transaction is for over £100. However, there is no provision to cover the cost of getting home. Some debit cards offer a similar protection, but not all.

Will travel insurance cover this sort of situation? Sadly, for many, it is unlikely. A standard policy generally will not, but it is worth checking. And it’s worth asking, in advance, if such insurance is possible.

Refunds and travel insurance claims can take several weeks to come through, so if an airline goes bust and passengers want to book another flight immediately, they will probably have to fund it themselves.

Which Companies are Safe?

No-one can say for certain. Again, booking through one which is bonded at least gives passengers some comeback it everything goes wrong. Rumours abound, with Alitalia and SkyEurope sometimes being named as airlines which are struggling.

At the other end of the scale, famous names such as Qantas, British Airways, Air France, and Lufthansa are expected to weather the storm. Large low-cost airlines such as Ryanair and Easyjet will also probably cope by virtue of their size.

Many people would say that the age of cut-price holidays is over, and long distance travel prices will now return to a more realistic level. Others feel that it is too early to say, and that the present situation is just short-term. But travellers should be careful, at least at the present time.

Of course, the only completely safe alternative is to stay home, or travel by some other means!

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