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Bankruptcy Hits Fliers

May 08, 1988|TONI TAYLOR | Taylor, an authority on the travel industry, lives in Los Angeles.

The recently announced bankruptcy of Aeromexico is a sad reminder that travelers still have little protection when an airline goes under.

There is no consumer default protection plan for passengers holding tickets on bankrupt airlines, although legislation has been introduced in Congress to create such a program.

There used to be a default protection plan that allowed passengers to use the ticket of a bankrupt carrier if the ticket had been written by a travel agent. That plan ended when the major airlines, under deregulation, didn't want to help new carriers.

With the major airlines still not favoring such a default plan, neither Congress nor the travel industry has yet met this problem that obviously hasn't gone away.

Protection Act

A proposal before Congress now, the Airline Passengers Protection bill, does, however, include a provision that calls for other airlines to fly passengers holding tickets on bankrupt carriers on a space-available basis without any additional payment.

If an airline files for bankruptcy, it isn't required to make arrangements for ticket holders on another airline. Neither does the carrier have to refund the cost of tickets. Carriers declaring bankruptcy are protected from creditors, including passengers.

If offices are still staffed and functioning, the personnel of a bankrupt carrier may try to help reroute passengers.

But other airlines don't have to accept the tickets of the bankrupt carrier. Or they may only accept tickets up to a certain date, and then only regular tickets, not discounted tickets such as bulk fares sold by travel consolidators. Even if tickets are accepted, it may be only on a standby, not a confirmed, basis.

For example, Aeromexico tried to reroute passengers through Delta. "We're flying passengers on a standby basis, depending on the type of Aeromexico tickets they had, if they were ticketed prior to April 15," said Vince Durocher, district director of marketing for Delta in Los Angeles.

Passengers stranded in Mexico were flown back to the United States by various methods, including standby on other carriers.

Mexicana Taking Tickets

Mexicana is accepting Aeromexico tickets issued before April 12 for return flights to the United States from its on-line destinations. "This is not on a standby basis, and tickets that were discounted for more than 50% are not being accepted," according to a Mexicana spokeswoman.

"At this point I'm telling clients ticketed on Aeromexico that they have to buy new tickets to Mexico," Martha Scott, manager of Glendale Travel, said. "This type of situation is precisely the reason to pressure Congress to create an airline-default plan."

Aeromexico also has been attempting to provide refunds to passengers holding unused tickets, the DOT spokesman said.

Here are general guidelines to consider if you are involved with a bankrupt airline:

If you have booked through travel agents, you'll find that agents remit funds on airline tickets to a central bank weekly. If the money for that ticket hasn't been turned in, you may be able to get a refund.

If you charged your ticket to a credit card, inform the credit card company immediately that your ticket is unused and ask to be credited for the ticket's cost.

Suppose your flight on the bankrupt airline was to be part of an itinerary that included other carriers and was bought from another airline or a travel agent. If you don't want to accept substitute transportation, you should be able to get a full refund from the ticket issuer.

You shouldn't be assessed any cancellation penalty or service fee for such an "involuntary refund," but there's no guarantee.

Find the Right Court

To file a claim you have to find the right U.S. bankruptcy court handling the stricken carrier, which may not be easy. Bankruptcy courts are located around the country. If you're not sure which is the correct court, call the Department of Transportation in Washington at (202) 366-2220.

If a foreign airline is involved, the DOT also should be able to advise you. At this writing, the DOT was in the process of determining the appropriate Mexican court in the Aeromexico case.

You also need to get a "proof of claim" form (B-1034) from the appropriate court, to which you also send photocopies of your tickets and other pertinent documents. If you want acknowledgement of your claim from the court, include a self-addressed stamped envelope. After that, expect to wait a long time.

The U.S. Bankruptcy Court in Los Angeles is at 312 N. Spring St., Room 906, Los Angeles 90012, (213) 894-3118.

Meanwhile, barring passage of an airline default protection plan, travelers may protect themselves in these ways:

--Be aware that travelers' insurance plans include coverage of airline defaults.

--Travel agents tend to know which are the shaky airlines.

--Be wary of any new or unproved airline, especially if you see a procession of fare cuts that might be created to raise capital.

--Payment by credit card may help avoid a loss.

--Be alert to newspaper and other media stories about airlines experiencing problems.

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