news flash on airlines accepting tickets from out-of-business carriers
 

Congress approved an amendment extending the law that carriers must accept tickets from out-of-business airlines. That doesn't mean the reg has passed -- yet. The amendment is part of a larger bill that still has to be voted on.

BTW, they have until Nov. 19 to renew the reg.

I'd like to see the specifics of that....especially who would pay the cost.

For example, assume that before an airlines goes out of business they have a HUGE sale. The money they collect goes into their operating funds and is spent before they shut down. After they have closed, why should another airline be compelled to honor deeply discounted tickets.

Dick,
I suggest you leave the windmills for another time. This law was orginally passed in December of 2001 and has been renewed at least once in early 2003.

In terms of who pays, all the money, the value really, doesn't simply go away. If an airline liquidates, it has assets that will be sold to pay off debts. A bankruptcy judge has the ability to create "preferential creditors" who effectively go to the front of the line and get paid back the first dollar of the liquidation.

I don't know whether or not airlines who provide the service from a ticket on a defunct carrier get that preferential treatment, but certainly there is a mechanism to pay them and 99% of the time, value with which to generate a payment.

Ryan,

Do you know where I can get specifics on this law?

As for bankruptcy, it is the secured creditors that are in line first. In the case, for example, of USAir, I doubt that there will be much left after the secured creditors. I think that their previous loans mortgaged almost al of their assets.

Dick,
The secured creditors are first in line EXCEPT when the Bankruptcy Judge rules in favor of those petioning for Preferential Status. Typically, that is the IRS (who ALWAYS gets paid first), employees owed wages, suppliers deemed as critical, and surprise, surprise, the bankers and advisors to the bankrupt company. Whether or not airlines who provide the alternate service are given that treatment, I can't say. But, every single bankruptcy case has preferential creditors and one of the first petitions that a company who files bankruptcy makes is to the judge to carve out a preferred claim for "essential" parties.

In terms of the secured creditors, you're assuming that they are lending to the last dollar of value. It's rare that they are. In many, many cases there is residual value above what the secured creditors have deemed as their "advance rate." There is almost always cushion between the lendable value and the liquidation value.

In terms of where to get specifics, check the Congressional Record. I believe this provision was originally passed as part of the Airline Industry Relief Act of 2001.

Y'all are way smarter than me, but I would assume that AA would treat the situation as space available.
Currently US Air passengers that are being accomodated on AA due to a mechanical problem (for example) are positive space if there are empty seats on a plane... only stand by if the flight is booked.
Don't you think that this would be managed as stand by?
If so, it is not taking away paid space so the extra costs are related to labor, weight/fuel and food/beverage.

Rb,
Definately is done as space available. The airlines are required to accept the ticket, but I don't think they have the same obligation to guarantee a seat as with one of their own passengers.

The airlines can charge a $25 fee for accepting the ticket. I guess the real question is how much of the incremental cost of adding an additional person onto a flight is covered by that $25, if the alternative was an empty seat.

Rb, sorry make that TX.

I'm not that familiar with the law, but I'd guess it's a space-available situation.

I have read that most viable carriers are opposing the bill (no shock there) while the travel agents are supporting it. Southwest Air is officially "neutral."

Dick, from my understanding it is United that has mortgaged most of their assets not USAirways.

One of their most valuable assets is the Shuttle.

The Retirement Systems of Alabama invested $240 million in exchange for about a third of USAir. I'd be shocked if that wasn't secured, as much as posssible.

I think it USAir had anything left to mortgage, they wouldn't be having a problem raising more money.

Ryan,

Thanks for the info..

I did find this on Hoovers

"The new extension would see healthier airlines required to pick up some of the slack should passengers become stranded or left with worthless tickets if an airline goes under. An amendment to the Senate intelligence bill will see the current 2001 airline bailout law extended for a further year, meaning that healthy airlines would have to help as long as seats were available and they would not be able to charge more than USD50 for the service"


I'm not sure what was meant by "pick up some of the slack"

Waht the amendment also extends is the requirement that other airlines ONLY have to honor such tickets on a space available basis.

Dick,
Hope you aren't an Alabamian, 'cause you're not going to like this.

http://money.cnn.com/2004/09/13/news...ir_bankruptcy/

I'm not from Alabama...but can't believe that the head of their pension fund too equity only and didn't secure collateral.

I booked a couple of FC tix on United and Lufthans using some of my mile...and will just hope that the tix will be honored.

Afraid that's one of the characteristics of an equity investment, you're the last in line in a liquidation.

There are some limitations to this law:

As already posted, it's standby ONLY.

This applies to US based carriers only.

This applies to stranded passengers ONLY. In another words, if you have not begun your trip, you are on your own.

I believe it also has to be the same routing. So it only applies to US based airlines that fly the same route.

And NO, they will not send an empty plane to pick up stranded passengers.

So, basically, if you get stranded by a banckrupt airline in a popular destination at the height of the season, prepare yourself for a looong journey home.

In the past, many people just opted to suck it up and purchase a ticket, instead of sleeping in the airport for days.

<b>One correction</b>

I just saw some more info on this, and I'll have to correct one of my above statements.

You will have 60 days to arrange the trip with another airline. So, apparently you do have a chance to still take your trip, but it's on standby basis only, so you better be very flexible with your plans.

I was going to question you on that because you're first statement didn't sound right. Good info.