You have options if the airline can’t help.
Earlier this week, Australian low-budget airline Bonza entered voluntary administration, meaning they appointed an external administrator in case of financial distress. The airline canceled all flights, stranding passengers across Australia. It’s not the first airline to go belly up with no notice to customers, leaving them with worthless tickets. If your airline goes bust, what are the options you have?
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Bankruptcy Doesn’t Mean the End
Scott Keyes, founder of Going (formerly Scott’s Cheap Flights), tells Fodor’s that there’s a difference between airlines going bankrupt and going out of business. “Airlines frequently go bankrupt, including all three major U.S. carriers a decade ago. Some even go through bankruptcy multiple times. During the bankruptcy process, the impact on travelers was relatively minimal. Flights still operated just fine. Instead, the bankruptcy process is largely a matter of negotiations between the airline and creditors/shareholders, many of whom will end up taking a haircut in the process.”
The U.S. Department of Transportation also highlights that “bankruptcy doesn’t necessarily mean your flight has been canceled or that you can’t be compensated for canceled flights or travel disruption.” It may still be operational in whatever capacity, so you should first talk to them. If they significantly change or cancel your flight, they may offer alternatives, or other airlines may step up to offer free tickets or discounts to stranded customers.
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It is also true that bankruptcy and liquidation can make refunds complicated. In the U.S., if a company has filed for bankruptcy, it may not be allowed to offer refunds. It’s even more complicated when it’s an international airline because American laws don’t apply. Bonza didn’t operate in the U.S., so all refunds and cancellation procedures are in accordance with Australian law. Thankfully for customers, other airlines operating in the country, Virgin and Qantas, have offered to accommodate stranded passengers for free.
Check With Your Credit Card Company
In case the airline refuses to offer refunds or can’t operate flights anymore, you should write to your credit card company to ask for a refund if you used the card to book your tickets. Under the Fair Credit Billing Act, if a company doesn’t deliver goods or services, customers are entitled to a refund by their credit card company.
Keyes elaborates, “Banks have the dispute process for matters precisely like this, when you make a purchase but the merchant doesn’t provide the good or service you bought. In most cases, the credit card company will refund you and then they will try to recoup the money for themselves directly from the airline.”
DOT advises customers to share your account number and a copy of ticket or receipt with the credit card company and state that the airline went bankrupt and you are requesting a credit via the Fair Credit Billing Act.
Debit card purchases are not similarly protected, but you can still talk to your issuer and find out if you are eligible for a refund.
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File Insurance Claim
Travel insurance—especially when flying international—is an essential component of a trip for these reasons. If your flight is canceled due to an airline going bust, you can file a claim with your insurer and get your money back (depending on the policies you opted for).
Meghan Walch, Director of Product of InsureMyTrip, says that comprehensive insurance plans may offer coverage for trip interruption due to financial default and bankruptcy. “It’s important to read the details of the coverage to make sure the specific situation meets the requirements to be covered. Travel insurance plans also have emergency assistance services that can help in the event your flight is canceled and you need help rebooking another.”
Keep an Eye on Early Signs
It may help to keep an eye on the news and see if an airline is giving any signs of trouble or if the aviation industry is failing customers. Is the airline you are booking with in the news for financial issues? Are their operations being affected? Are stakeholders/investors making any headlines?
After the pandemic, many airlines around the world faced troubles, but governments bailed them out. Bonza isn’t the only one that has failed to bounce back. The market is particularly difficult in Australia, where Qantas and Virgin Australia dominate. The regional, low-budget airline was the first to launch since 2007 in the country. Creditors have allegedly repossessed its fleet of Boeing aircraft and the transport union is discussing how the closure will impact workers. Regulatory delays didn’t let it the airline fly until 2023 despite the brand launch in 2021. Aircraft shortage and failure to enter the Sydney market added to its financial troubles, grounding the airline 15 months into service.
Airlines going out of business may come without notice. Your best bet is to book flights with a good credit card company and consider travel insurance.