PASSENGER PROTECTION AGAINST AIRLINE FAILURES
When a tour operator or a travel agent goes bankrupt, there are financial guarantees in place to protect passengers, under the EU Directive on package travels and in the framework of the IATA Passenger Agency Programme. However, no such mechanism is in place for airline failures despite the increasing number of airline failures, which cause serious detriment to passengers.
Since 2010, ECTAA has been stressing to the European institutions the importance of introducing in European legislation provisions obliging airlines to protect passengers in case of bankruptcy.
In 2014, IATA announced a new arrangement to help passengers impacted by airline bankruptcy. There has been a voluntary agreement on behalf of its members flying to, from and within Europe covers the repatriation of passengers unable to return home due to an airline ceasing operations as a result of financial failure.
Airline goes out of business, you can ask for a refund
It is always safest to pay for airline tickets by credit card, because if the airline goes out of business, you can ask for a refund from your credit card company instead of the airline’s liquidators. Passengers who have purchased a travel package enjoy a stronger position in these circumstances than passengers whose tickets are for a scheduled flight only. It is also good to remember that normal travel insurance does not usually cover financial risks relating to airlines. If you cannot pay for your airline ticket by credit card, it is worth considering insurance against the airline going out of business.
Refund from a credit card company
The best way to protect yourself against an airline going out of business is to pay for your ticket by credit card. In these circumstances, the credit card company has an obligation to refund the cost of your ticket if the airline goes out of business. If you paid by debit card, you should contact your bank. The terms and conditions of most banks stipulate that similar refunds are also available for debit card payments.
Prepare yourself for a long wait
The position of an individual consumer in the event of an airline going out of business is tenuous, because the airline is likely to have a long list of creditors. Creditors’ receivables are recovered in an order of priority, and individual consumers are usually at the bottom of the list, by which time there may be no funds left to distribute. The process usually involves fees and can take up to several years.
Passengers who have purchased a travel package enjoy a stronger position
If you have purchased a travel package consisting, for example, of flights and accommodation through a travel agency, you can ask for your money back from the tour operator.