Travel law: If the airline goes out of business

Tips for airline passengers and those going on package holidays

What can you do if the airline you have bought tickets from files for bankruptcy? Can you still get to go to your holiday destination; if not, what are the chances of getting a refund for your ticket?

The flight information portal has compiled some tips on how customers of airlines that go out of business can minimize the damage as much as possible or to avoid it altogether.

Package tour

Anybody who books a package holiday would not have any problems. The package would comprise the flight and at least one other service, such as accommodation. The legal partner is the tour operator, not the airline. The former must arrange and pay for replacement flights. If the tour operator does not offer to arrange replacement flights, the affected customer can book a new charter or scheduled flight himself. The costs incurred for this action, as well as for additional overnight accommodation or catering, must be borne by the tour operator. In addition, if the time difference between the original flight and the new flight is substantial, the travel price should be lowered.

Sometimes, holidaymakers are given a substitute package for lost holidays. It must be pointed out that holidaymaker can only cancel free of charge if the “purpose” of the trip is not fulfilled; for example, if the substitute package offered is not equivalent to the original. This would be the case, for example, if the substitute flight to the weekend trip takes place in the evening, if it had been originally planned to take place in the morning.

Flight-only passengers

Those who book only a flight usually do not receive any compensation if the airline files for bankruptcy. This applies to passengers who book directly with the airline or via a travel portal, as well as those who purchase a "flight-only" ticket from a tour operator. The ticket is worthless, and the money for it lost.

Anyone who wants to go on the trip anyway has to make their own arrangements for another flight and pay for it themselves. Only in exceptional cases do the customers of travel agencies get their money back. If a travel agency sells airline tickets from an airline that may file for bankruptcy at the time of the booking, the customer can take the agency to task for the bad advice. If the impending insolvency could not possibly be foreseen at the time of booking, the customer, as well as fellow passengers on the flight, will not receive any compensation.

Theoretically speaking, you might be able to get back some of your money at the end of the lengthy insolvency proceedings. In reality, this is highly unlikely as you would be at the end of a pretty long „queue“. Before the money reaches you, it will be used to pay for wages, salaries and social contributions, as well as large-scale creditors such as banks.

Normally, at the end of the day, there is no  money left for individual passengers. Should the airline file for bankruptcy when you are on holiday, the ticket for the return flight is becomes invalid. You would then need to fork out additional money for the return flight (and additional nights at the hotel, if necessary).

Protection for everyone

The situation may be a little better if the ticket has been paid for with a credit card. Depending on the bank that issues the card, the cardholder may be able to receive reimbursements. Unfortunately, there are no uniform rules. Every bank has its own regulations.

The simplest way to protect oneself against an airline's bankruptcy is to insure the ticket price against insolvency. An insurance company can cover a passenger for just a few Euros. But beware: Not all airline tickets can be insured.

There is a blacklist of airlines with massive economic difficulties. No insurance company would want to insure tickets from these airlines. There is a link to this list on the homepage of some insurance companies.

Ensure that the airline you intend to use is not part of the list before you buy the insurance cover. The list provides a good guideline for all passengers, so  they would not be caught off-guard by airlines that goes bankrupt.

Tip: If you buy your ticket at a travel agency or via an agent, you should ask if it includes scheduled airline failure cover. If necessary, obtain an official statement that guarantees this.