Fasten your seat belts as the airline industry continues to nosedive. Less than three weeks after the collapse of Canadian budget airline Zoom, the UK’s XL Airways has gone bust. Over 85,000 passengers – including plenty of thrifty family travelers – have been left stranded in 50-odd destinations around the world, many scrambling to make alternate arrangements and to cough up unexpected expenses. Over 20,000 more consumers who made advanced bookings have basically pre-paid for a trip going nowhere. Imagine breaking the news to junior that the dream beach vacation is off.
This was not some no-name fly-by-night starter airline that one might expect to go belly-up. It had been around for 14 years and was part of XL Leisure Group, a specialist in low-cost charter flights and package vacations and the third largest holiday operator in the UK. However, in this fragile economic climate where big-name banks, brokerage firms and corporations are toppling like dominos, nothing is surprising. In fact, the airline industry is particularly vulnerable to business failure due to rising fuel costs and the credit crunch. It’s no wonder we’re being nickled and dimed by most airlines with new charges for baggage, food, blankets and other previously complementary basics (can pay toilets be far behind?).
In the past few months, about 30 carriers have gone out of business including Silverjet, EOS, Futura, Aloha, ATA, and Maxjet. The question is, who’s next to go down (Alitalia is teetering on the brink), and what can we as consumers do to protect ourselves from being caught out of country and/or out of pocket?
Well, for starters, pay for your airline tickets and holiday packages by credit card rather than cash, check or debit card. That way you’ll have some recourse for reimbursement through Visa or Mastercard – you have 60 days to request a “charge back” for goods or services not delivered. However, with more and more of these claims coming down the pipe, I wouldn’t be surprised if some new legalese loophole will materialize to shield these credit behemoths from this pesky obligation.
Seriously consider purchasing financial default travel insurance to to protect your family’s pricey holiday investments. Buy this shortly after finalizing your tickets/package, because if an announcement about your travel supplier’s financial instability is made no insurance company will touch you. Don’t assume your standard garden-variety travel policy includes financial default coverage. You’ll have to dig around to specifically seek this, and as always, read the fine print (written in gobbledegook, of course). Further advice – get your travel insurance from an independent source rather than through the travel agency as these in-house policies often don’t cover their own financial default.
So how do you and the kids get home if your airline goes out of business while you’re mid-way through your vacation? There used to be a US federal law that required other carriers to accommodate ticket holders of failed airlines, but sadly that law is no longer. Now it’s done on a voluntary basis where some of the larger airlines will step up to the plate to offer stand-by spots or seats at a discount – but don’t count on it. This kind of aviation philanthropy is sure to dry up as the scenario of stranded passengers becomes more and more commonplace. Hope for the best, but prepare for the worst (i.e. having to shell out for new tickets). Here’s a great FAQ about airline bankruptcies from The Practical Nomad.
More often than not, my family and I have opted to fly on bargain charters and low cost airlines – with four seats to purchase every trip, we can use every price break we can get. However, I think for the time being we’ll stick with the more mainstream, well-established, financially solvent carriers (are there any left?) as we ride out this economic turbulence.