How to Rise Above a Belly-Up Airline


By Amy Tsao When US Airways (UAIR) filed for Chapter 11 bankruptcy on Sept. 12 -- just 18 months after it emerged from its 2002 filing -- it was another blow to an industry in which woe has become the norm. Small wonder the flying masses now seem numb to the carriers' troubles. Still, as much as endless reorganizations and talk of massive losses have become the status quo, travelers shouldn't fall into the trap of taking the industry's dramas and disruptions lightly -- not least because airline bankruptcies can force some unpleasant travel choices.

In the case of US Airways, or any other airline filing for bankruptcy, travelers will see the biggest disruption if and when a judge says the carrier must stop operating and begin liquidating assets. But they need to be wary long before that happens, if it does, since US Airways is only the latest airline to fall on hard times. Nor is the outfit likely to be the last. As long as fuel prices are sky-high and competition remains fierce, analysts say few airlines will be immune to potential bankruptcy. United Airlines (UALAQ) and Hawaiian Airlines are already in bankruptcy, with Delta (DAL) widely considered the most likely to go this route next (see BW Online, 8/24/04,"The Downdraft at Delta and US Air").

So, what's a sky jockey to do? Here are five things travelers can do to protect themselves from the troubles of bankruptcy-prone carriers:

1. Avoid buying new tickets on bankrupt airlines. While current flight schedules are supposed to be unaffected by Chapter 11 filings, there are no promises this will remain the case. When carriers are in bankruptcy, "airlines simply don't know if they can keep operating," says Edward Hasbrouck, author of The Practical Nomad and travel guru at air travel-services provider airtreks.com. "It's up to the bankruptcy court." US Airways could continue flying for weeks or months, analysts figure, but there's absolutely no way the airline can guarantee that.

2. If you're a ticket holder on a bankrupt airline, don't panic. Instead, prepare alternate plans. "Travelers will see no immediate change, nor do they need to be worried about an already booked ticket," says Michael Miller, partner at aviation consultancy Velocity Group. That applies to flights within the next six months, Miller says. However, anything after that time period is a gamble, he says, "since the airline is operating on borrowed time."

3. Meanwhile, figure out what alternatives exist. For example, if you are nervous about US Airways liquidating and your home or work is in, say, the Philadelphia area, you might consider flights out of Baltimore or Eastern Pennsylvania's Lehigh Valley. That may sound like a stretch, considering how far away those places are from one another. However, "it would be smart to know in a broad sense what your options are," says Kevin Mitchell, chairman of the Business Travel Coalition, which represents major corporate buyers of commercial aviation.

In some instances, travelers simply won't want to wait around to see if the ailing airline they are flying with will still be operating. People traveling for business may want to consider taking a loss -- and buy a new ticket on another airline -- to be sure that they reach meetings or conferences on time. Same goes for leisure travelers going to meet a tour, resort package, or cruise. Once those group vacations begin, they start with or without you.

4. Consider cashing in frequent-flyer miles. Miles aren't money in the bank, as many travelers presume. "Airlines can [legally] terminate a mileage program at any time, without notice, for any reason." Hasbrouck notes. The mileage-sharing contracts between airlines (i.e. Star Alliance) have been honoring their bankrupt member airlines' miles, but that, too, isn't a certainty. "People certainly should use them up ASAP," Hasbrouck says, even if it means using more miles to get around limitations set by frequent-flyer programs.

5. Know your rights. A provision in legislation passed after September 11 stipulates that, in the event an airline stops flying, other airlines are required to honor your ticket so long as they have a similar flights available at around the same time. This comes with challenges and conditions, of course: There's a $25 fee, and there may not be too many empty seats on flights that are already crowded. And don't expect airlines to be too keen to honor your ticket.

If the carrier you're ticketed to fly with goes into bankruptcy, you can get a refund from your credit-card company, in most cases. You should be able to get your money back, as long as you purchased the ticket within the past 60 days, and were charged by the airline directly. (Internet travel sites vary in how they charge passengers. For example, tickets bought via Hotwire.com and Priceline.com (PCLN) are not charged by the airline.)

In any case, be armed with your credit-card statement showing the record of purchase, a paper receipt for the ticket, and any copies of confirmation e-mails that the airline may have sent to you.

While the situation for US Airways and a lot of other airlines is dicey right now, air travelers don't have to press the panic button just yet. The best thing to do: educate yourself about your options as a consumer and keep a watchful eye on news about the industry. Tsao is a reporter for BusinessWeek Online in New York


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