What Do You Do If You Have Tickets On A Bankrupt Airline?

What do you do if you have a flight planned on one of the three airlines, ATA, Champion and Aloha, that filed for bankruptcy and terminated all flights this week? First thing to do is if you paid with a credit card company, call them up and ask for a refund. An ATA insider tells us, “When an airline bills you for your ticket, they don’t receive payment–the money’s escrowed until you fly or the terms of the contract are met, i.e. one year validity limit, so the bankruptcy doesn’t affect those customers.” Elliot.org has the run-down of other options: On the press release level, United Airlines has agreed to take on Aloha Airlines passengers, but anecdotal evidence suggests the ground-level customer service reps are bungling the hand-off. Southwest has agreed to rebook ATA passengers, but the language suggests this deal is only good for flights that were codeshares between the two airlines. Lastly, if you bought your ticket with ATA by check or cash, you can claim a refund, for probably a fraction of its value, after the airline is liquidated.

My airline is grounded — now what? [Elliot]
(Photo: $arah Murray)

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  1. AMetamorphosis says:

    If you paid via credit card then you can contest the charges because you effectively are not getting what you paid for.

    Let Visa eat the charge …

  2. RandomHookup says:

    I have a Braniff ticket if anyone needs one.

  3. The Great Aussie Evil says:

    While I usually abhor credit cards, they are useful in the case of turbulent industries, like the airlines. Make sure you’re able to pay them off if the airline fufills its promise.

  4. NightSteel says:

    Yes, these seem like good circumstances for a chargeback.

  5. bananaballs says:

    This happened to me when I flied Varig. It was a complete nightmare, there and back. Luckily, United took care of us for our return flight, but it’s not a situation I would want to find myself in ever again. I saw people in JFK who were bumped from flights they were supposed to be on days ago, and the service reps were terrible, in part because I doubt they had even been paid for weeks. Why is there no accountability for airlines? It seems they can basically take your money, be abusive, and get away with it. I hate flying.

  6. bananaballs says:

    This happened to me when I flied Varig. It was a complete nightmare, there and back. Luckily, United took care of us for our return flight, but it’s not a situation I would want to find myself in ever again. I saw people in JFK who were bumped from flights they were supposed to be on days ago, and the service reps were terrible, in part because I doubt they had even been paid for weeks. Why is there no accountability for airlines? It seems they can basically take your money,be abusive, and get away with it. I hate flying.

  7. Keep them, frame them, and sell them on eBay in 20 years. You might recoup something that way.

  8. m4ximusprim3 says:

    Yeah, would a chargeback work?

    Even though you technically agreed to the airline’s draconian contract stating that they get to rape you and use your money as toilet paper? You still didn’t get what you paid for.

    Does anyone know what stance the CC companies take on this one?

  9. Parting says:

    @AMetamorphosis: Visa doesn’t have to ”eat the charge”. Credit card will chargeback the amount to the seller + chargeback fee. So maybe Visa even will get something out of it, if there is enough money left after liquidating bankruptcy assets.

  10. Parting says:

    @bananaballs: By law, if company bankrupts, employees has to be paid first, then everyone else.

  11. AMetamorphosis says:

    @Victo:

    You’re right … but most likely since these airlines are in bankruptcy, the CC company will lose out …

  12. Tux the Penguin says:

    @m4ximusprim3: I’m actually not that sure of the law in this situation. The agreement upon condition of sale was basically to take you from point A to point B. Now, if no other airline were stepping in, you’d have a case. But since United has decided to honor those tickets, they’ve basically taken over the contract (similar to novation I would assume), removing the old carrier and replaced themselves. So you still are getting what you paid for, a trip from point A to point B. So I could see Visa/Mastercard fighting that. Unless you can find that the terms of sale do not include a “the carrier may alter the terms of this contract at any time without your consent” or similiar language. If it doesn’t have that, then that’s a breach of contract and standard contract law applies.

    If you can’t fly on United and you can’t get a chargeback, then you’re just another unsecured creditor of the airline. Good luck, you might get 5% back if you’re lucky.

  13. Jim says:

    @RandomHookup: Believe it!

    According to the news here in Indianapolis, home of the building formerly known as ATA’s headquarters, this morning, everyone who paid with a credit card is being refunded, but they made no mention of anyone else.

    It’s a pretty odd deal, the news this morning said that when ATA employees started showing up for work at 4 this morning they found out there was no work. The headquarters building is being guarded by off-duty police officers and only letting employees in and out through the back door to get their boxes of stuff out. So, there’s about 500 new job seekers today in Indy, very sad.

  14. sethom says:

    Having a business that runs credit cards and knowing a few that went out of business, this tends to happen a lot. Most times the customer is screwed and will never recoup their money (in larger businesses like these the credit card company may get it back, but they might not even have anywhere to chargeback to given all the accounts are probably frozen).

    My advice do the chargeback now and hopefully you used an American Express.

  15. Starfury says:

    My parents were flying in from Hawaii to visit. My mom asked me what she should do and my response was: chargeback. She’s working with Visa to get a refund.

  16. LorneReams says:

    When Sunrocket died, I was able to charge back the unused portion of my prepaid bill. The CC company had absolutely no problem doing this.

  17. bananaballs says:

    @Victo: Yes, but Varig is a Brazilian airline. Not sure what the bankruptcy laws are there…

  18. punktlich says:

    Nothing would prevent an airline from holding unearned funds for tickets in trust, and thus unavailable to creditors. But they never do. A few mail order firms have done so, and the customers of such firms that went bankrupt got 100% of their moneyh back.

  19. Coles_Law says:

    I was left holding a ticket when Independence Air went under a few years ago. They stated up front everyone affected would get a refund, and I had mine in less than a month. Good show on their part, even when the proverbial ship was sinking.

  20. NoWin says:

    @RandomHookup: +1

    I have a few old Eastern, PanAm (the original), Peoples Express, Mohawk Air and New York Air tickets.

    Gosh, those were the daze (or days; take your pick)…

    Time to update the out-of-biz list again:

    [www.aviationexplorer.com]

  21. ChrisInSF says:

    My girlfriend is in a jam over this ATA debacle. She has a $200 credit voucher, which looks like it’s now worthless. The real problem, though, is that at one point she accidentally overpaid on an ATA credit card statement and was going to be issued a refund by them. But, does the shuttering of ATA make this refund impossible now? Or should the issuing bank on the card be separate from the actual airline?

  22. jasondragon says:

    I have an Airtran flight booked for June. Should I rebook with a seperate airline? Or will it be likely that another airline will honor these flights?

  23. JustAGuy2 says:

    @ChrisInSF:

    Credit card was issued by Barclays Bank, and should be 100% fine. Any frequent flier points she earned with the card are worthless, but the card’s fine.

    The $200 voucher, on the other hand, is likely going to be nice decoration.

  24. snazz says:

    ive got two $200 vouchers from ATA, was going to use them this summer… bummer! i wonder if i can get southwest to honor them.

  25. Fly Girl says:

    I emailed Consumerist about this yesterday, but it never got posted.

    I have it on very good authority that the majority of CC companies are NOT processing chargebacks for the unhonored plane tickets from Aloha Airlines. I imagine it’s going to be the same deal for ATA.

    I’m a travel agent and I have been trying to work with my clients who are affected by this and the pretty standard answer is that, unless they had travel insurance that covers travel supplier financial insolvency, they’re SOL.

    Since the accounts are frozen, the CC companies can’t/won’t process the chargebacks. Not to mention that they don’t want to– they’re never going to get that money back through the bankruptcy court– and neither are you.

    Some people that booked through consolidators are lucky and have had their money refunded to them as a good faith gesture. Otherwise, the Aloha tickets are good for face-value (and face-value only) on United and the ATA tickets are good for face-value (and face-value only) on Southwest.

    What if you’re flying somewhere Southwest or United doesn’t fly? Too bad for you. What if the new ticket on United or Southwest costs a lot more than what you originally paid? Too bad for you.

    This is a terrible, terrible situation and unfortunately, I don’t have any sage advice… Other than BUY TRAVEL INSURANCE.

    (Oh, and people who had vouchers or mileage accumulated? Yup, too bad for you.)

  26. SisterHavana says:

    @NoWin: Oh man, that list brings back memories. My family used to fly the old Midway Airlines all the time. (first incarnation, which actually went out of business in 1991, not 1981)

  27. FDCPAGuy says:

    This happened to me with United and Aloha airlines this week and I can confirm that the customer service reps/supervisors and customer service reps/supervisors are not trained properly in regards to handling stranded Aloha passengers. I basically called up the originating carrier and after AA fighting with United (while I was on hold) for 4+ hours AA said screw this. They put an even exchange order in through the computer taking me from a flight with 2 connections for the direct UA 3 flight right home. United in true karmic fashion then proceeded to lose record of my flight from SFO to KOA 4 times in 3 days almost leaving me in SFO without tickets. Aparently the United system does not like me but their outsourced phone ‘help’ is worthless. (Posting this from SFO right now)

  28. trujunglist says:

    So basically, I could start a giant corporation where as CEO I will get paid millions of dollars yearly, then after taking a crapload of credit card/cash orders for my companies product, have the corp. file for bankruptcy, and still get paid my millions (since according to another post, bankruptcy means the company must pay off employees first) while everyone who purchased my product is SOL?
    Really?

  29. ecwis says:

    @trujunglist: A bankruptcy court wouldn’t accept your deceleration of bankruptcy since you would have substantial assets. If you spent the money already on coke and whores then you could possibly get away with it.

  30. jgiel says:

    I bought tickets on ATA for travel from Phx to Honolulu. Since I bought them from Southwest through their codeshare agreement with ATA, Southwest re-booked me on another airline for no additional charge despite a $250 per person increase in fare. Lesson: always book through the stronger airline when buying a ticket on a codeshare. Granted, I could have simply relied on AmEx for a chargeback, but I would have been stuck with the $250 increase in fare.

  31. Kierst_thara says:

    This happened to my boyfriend and I up in Canada when Jetsgo went under. Visa was mostly helpful, and confirmed that they would refund our tickets, but the catch was that they wouldn’t refund it until the date of the flight had passed in order to ‘prove’ that Jetsgo wasn’t going to provide the services we paid for.

    Luckily we had enough available credit to purchase new tickets through WestJet, but it sucked that we had to have an extra $1000-plus charge sitting on our Visa for several months.

  32. mpines says:

    Help! I’m one of the people stranded by ATA in Hawaii. I was supposed to return to California on the 9th. I’ve already done a chargeback but all flights (to anywhere in CA- I’m not being picky) are booked until the 17th. Anyone have any advice on getting back?
    Also, I’m trying to figure out if travel insurance through the credit card (visa/ credit union card) will cover cost of the extra week + of hotel stay or the upgrade to 1st class I would need to get out of here before the 17th, but have not been able to get through. Does anyone know how those programs work?