When dead airlines rise, where’s my refund?

It's alive ... maybe! / Photo by Carb B - Flickr
Duncan Fox saw a glimmer of hope when Mexicana Airlines recently announced it would return to the skies. Back in 2010, he’d booked a flight from San Francisco to Puerto Vallarta, Mexico, but shortly before his trip, Mexicana filed for bankruptcy protection and then folded.

A subsequent email notification from his online agency, Yahoo! Travel, told him he should “rest assured” they’d request a refund on his behalf. But the $641 he paid never materialized. With Mexicana back, could he also expect his airfare to return?

Before I get to the answer, here’s what Yahoo! told Fox recently: Sorry, can’t help you.

“This type of incident is very distressing for passengers as well as the travel industry,” a representative wrote. “We are very sorry for this inconvenience. Please let us know if we can provide any additional assistance.”

Sorry for the inconvenience? I wouldn’t call a $641 loss an inconvenience. Rip-off, maybe. But inconvenience? C’mon.

Yahoo! recommended Fox initiate a chargeback on his credit card. But that’s a long shot. In an email, the company suggested he invoke the Fair Consumer Credit Act, which would allow Fox to contact his financial institution to dispute the charge. I’m not familiar with any such law. There is, however, a Fair Credit Billing Act which covers chargebacks, but they must be made within 60 days and the purchase has to be made within 100 miles of Fox’s billing address.

There’s a reason it’s called bankruptcy “protection.” When an airline is goes Chapter 11 in the United States, it’s getting protection from its creditors, which would include passengers like Fox. The airline has Fox’s money but doesn’t have to return it. Mexicana filed for Concurso Mercantil which is roughly the same thing as going Chapter 11 in the States.

But that’s the old Mexicana. After the airline ceased operations, it was reportedly sold to Grupo Med Atlantica, and if and when the airline starts up again, Fox and others will have a difficult time getting their money back from the new owners.

Paula Dwelly is one of those others. Two years ago, she booked a ticket between Sacramento, Calif., and San Jose Cabo, Mexico. But before their vacation, the airline grounded itself.

“We were told by a Mexicana representative by phone that we would be getting a refund,” she says. “We didn’t. When we call its number, it doesn’t even ring or give a recorded message.”

Will Dwelly and Fox ever see their money — or even a voucher — after Mexicana has been revived? Probably not. I’m reminded of Noah Markewich’s luggage claim with Alitalia. Back in 2008, the airline lost his wife’s bag on a flight to Italy. It promised to compensate her for the bag, as required under international law. But it didn’t.

Markewich asked Alitalia for an explanation, and it sent him an email saying it wouldn’t pay. The reason? Alitalia filed for bankruptcy protection that year, and is now a “new” company.

“Therefore,” it added, “any claim you may have against Alitalia is enjoined from being pursued or commenced because it arises from transportation provided before August 30, 2008.”

(I checked with Alitalia, and it confirmed its position — rules are rules.)

I can think of a few ways of avoiding this mess, besides not booking a ticket with a money-losing airline. Don’t make a reservation too far in advance, because no one knows the future. Always pay by credit card, and remember the 60-day window for disputes.

Long-term, this might be the time to ask if current rules and regulations offer enough protections to passengers. Maybe the Fair Credit Billing Act needs an amendment to address air travelers, which specifically waives the 60-day/100-mile rule. Or maybe we need to take another look at bankruptcy laws, to find a way to prevent folks like Dwelly and Fox from losing their tickets.

Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at chris@elliott.org. Got a question or comment? You can post it on the new forum.

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  • http://flyicarusfly.com/ Fly, Icarus, Fly

    This situation totally sux. Sometimes companies advertise discount rates for flights way in advance. How is the general public supposed to know the financial situation of every supplier we deal with?

    When a company goes into bankruptcy and is bought out by someone else, don’t they assume at least part of the debt (cents on the dollar?)

    As an aside, I just found a ton of your other articles at Frommers, some I hadn’t read before. You’re a busy man! How about a post one of these days about a Day in the Life of Chris Elliott? I’d love to know how many complaints you receive a day, how many you actually take on, how much time it averages to resolve each one, how many stories you have on the go at any given time, whether companies ever try to cut any type of deals with you personally, etc. Inquiring minds want to know!

  • johnb78

    “When a company goes into bankruptcy and is bought out by someone else, don’t they assume at least part of the debt (cents on the dollar?)”
    Usually, the new owner pays the administrator for whichever assets (brand/goodwill, planes, offices, etc) they’re taking on, which the receiver will then put toward paying off the old company’s debt.

    So the Mexicana passengers in this case would have needed to put in a claim as creditors in the Mexican bankruptcy court. At which point, if there’s any money left over after the sales (including the sale of the brand) have been completed and the secured creditors (ie banks) have been paid, *then* you might get your claim paid at cents in the dollar.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Bankruptcy sux for anyone who has money in a sinking ship.  There’s nothing special about air travelers as opposed to any other customer who prepays for goods and services.

    Bankruptcy is a necessary evil.  If a new company, or acquiring company was liable for the debts of the former company, the new investors would be very wary about investing.  That makes it much harder on everyone.

  • http://elliott.org Christopher Elliott

    I like that idea. I’ve thought of doing that either as a video or a post … I’ll see if I can work on something.

  • Pdoggs

    I was in the same boat with Mexicana and filed a chargeback. It was beyond the time limit but American Express gave me my money back within a week, I had it back before my vacation was due to start (I read about the bankruptcy exactly 1 week before I was due to fly). I don’t have a fancy Amex card either, just a normal, no annual fee card.

  • absherlock

    I don’t know much about bankruptcy, but I would imagine most companies know pretty far in advance that they’re planning to file. If that’s the case, how can taking money for reservations with that kind of knowledge but not making that knowledge public not be a kind of fraud? Perhaps the laws should be changed so that any transactions made 60 days prior to the filing aren’t protected under the filing.

  • emanon256

    I voted no.  But I am not sure what the government can do to help.  It’s hard to get a claim in on a bankruptcy without wasting a lot of your own time and money.  I don’t like the “Yes” response, I know I always say people need to do their doo diligence, but spending hours and hours reviewing financial records of an airline before buying a ticket is where I draw the line.
    Correct me if I am wrong, but can’t someone dispute a charge within a certain number of days of the date of the service?  So if I bought something and it didn’t work and the company wouldn’t take it back, I have 60 days from when I bought it.  But if I bought a ticket 90 days in advance, don’t I have a certain number of days after the date the flight was supposed to occur?  Perhaps that sonly certain credit cards.  But I did that with ATA airlines once when I used to live in Indiana.  I bought a ticket months in advance, and when I got to the airport I was told they ceased operations in IND.  I disputed the charge and got my money back no questions asked. 

  • john4868

    I vote “None of the above.”  I don’t like or support either option. I don’t know of anyone who hasn’t been burned in some way by a bankruptcy. Some its just losing out on gift cards others its losing out on their livelyhood and the voiding of promises / contract made be the company (I used to work for GM at an IUE facility. Do I need to go any further?).

    At the same time, I think its a necessary evil occassionally. I also think that some companies have started using bankruptcy like individuals did before Congress changed the law. I don’t see any reason to be able to go into bankruptcy repeatedly.

    I feel sorry for the OP but the best protection is to use a credit card and file a chargeback.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Good point.  Fortunately, there are several thresholds between 90 days to two years by which a debt is excluded from bankruptcy.  In fact, incurring a debt with the expectation of filing for bankruptcy within 90 days can cause criminal liability for fraud.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

     That’s a contractual matter.  Basically, the credit card used its holdback amount to reimburse you.  That holdback money never made it to ATA so it wasn’t part of the bankruptcy estate.  That’s one of the reasons to do transactions via credit card.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Under the current law, bankruptcy is much more severe and difficult than before.  Few do repeated filings.

    For Chapter 7 filings, by far the most common, individuals only get a discharge, the so-called clean slate once ever 8 years.

    For business, a Chapter 7 filing is a death sentence.  The business immediately ceases operations, its assets are seized and sold, and it does not get a discharge.  The business dies but the debts remain and are enforceable against co-debtors, guarantors, etc.

    Also, when a business or a person files a Chapter 7 bankruptcy, it cannot terminate the proceedings without court approval, and the law only enumerates a limited number of reasons to terminate the bankruptcy.

    The remaining forms are bankruptcy are long and drawn out, very expensive, and requires strict court supervision. 

    Its pretty serious stuff.  People, and especially businesses, do not do bankruptcy easily.

  • john4868

    Most card agreements allow for a dispute when the service or product isn’t received as in your case.

    I wouldn’t get hung up on the 60 days either. I’m a VISA vendor and got a chargeback months after the fact because the woman didn’t recognize our name (long story).

  • Jeanne_in_NE

    Umm . . . aren’t *all* airlines financially troubled to one extent or another?

  • emanon256

    I used to work in A/R for a university and fortunately for me credit card disputes were far and few in between.  We were a state school and our average charge was around $3,000.  Most often, they were cases where husband used card, wife didn’t recognize charge, so she disputed it rather than ask her husband or call.  Very annoying.  I got another one where a guy came in a few months after he paid, and wanted me to refund his card so he could put the charge on a different card because the new card had a better points program.  I refused and he did a charge back.  Fortunately we document everything, so in all of these cases we won the disputes.
    Chris got me thinking, I actually had a lot more people who owed money file for bankruptcy than dispute a charge.  We had a general council, so we put in a claim on every bankruptcy, and our debt got discharged 100% of the time.  It was quite frustrating to provide a service, not get paid for it, and then be ordered to forgive the debt.  It was amazing what I would see on the creditors list on some of these filings.  People would owe tens of thousands of dollars to all types of shop-at-home companies and credit cards.  The shop at home debts baffled me.  It was amazing how much money we lost to personal bankruptcy.  I know bankruptcy has its place, but working in A/R it seemed rampant.

  • sirwired

    I don’t think writing a travel-supplier default exception into the FCBA is a solution.  Any recoveries under such a provision will just be priced into the fee structure and/or interest rates for the card.  That means all cardholders pay, not just the ones that book travel.

    Sometimes life happens, and it isn’t the job of the government (or your credit card bank) to bail you out of every unfortunate circumstance.  If this really bothers you, purchase trip insurance with a default protection clause.

  • Alan Gore

    Chargeback would be the way to go here, so long as you book within 60 days of the flight to stay within the chargeback window.

  • mom_in_amarillo

    I voted “no,” but I agree with other posters that the gov’t can’t “fix” everything for you either.  That being said, while chargebacks suck, and bankruptcy sucks, the OP is out $600 that they entrusted Mexicana with.  I’ll forgo the obvious “Who goes to Mexico during a drug war?” questions and just point out that this is a crummy situation for all involved.  We recently  bought tix to Disney World in Florida, and I cannot imagine finding out mere weeks before we’re due to leave (in September) that the airline had gone bankrupt, taking our money with it.  Hate this.  

  • Michael__K

    I’m no expert on bankruptcy laws, and even less so when it comes to Mexican bankruptcy laws.

    But I’d like to think that ticket holding passengers would have priority in the bankruptcy process over other creditors like lending institutions. 

    The latter had the advantage of being in a position to perform due diligence on the airline’s financials and to factor in the risk of default in their negotiated terms.

    I’d also like to think that ticket holding passengers ought to be contacted and provided with a simple process to get at least partial compensation on their unusable tickets without needing to hire a lawyer or needing to travel to the bankruptcy court.


  • Chasmosaur

    Wow – a company coming out of bankruptcy isn’t refunding pre-bankruptcy funds?

    I’m shocked!  Utterly, completely shocked!  Shocked, I tell you, sho….oh, who am I kidding.  Why is this even a story?  It sucks, it happens across industries, not just travel.

    The company where I registered for my china and crystal for my wedding entered Chapter 11 and wasn’t fulfilling its’ orders.  It was only through my family’s dogged persistence that we got a contact at the company people could contact to get refunds for the supposed place settings and such I’d been sent.  Without that individual contact, everyone would have paid money for goods I never would have received (I did, though, receive little pieces of paper saying my very common patterns were on backorder…). There were plenty of stories of other brides who went through the same thing.

  • $16635417

    I thought the Fair Credit Billing Act 60 day window referred to “errors”. 

    If you purchase a ticket and the airline does not deliver, you should get your money back. The “holdback” process is where those funds come from. This is what almost brought down Frontier a few years ago. (Link Below.)


  • jerryatric

    This is an old dodge. Things go wrong, shut down & re open with “new” owners. This way you avoid creditors of all descriptions, including clients.
    If your concerned about a carrier, check with the many financial reports out there, but you will never really know for certain.
    These are very difficult financial times & everything is at risk.

  • BillyGe

    The fact is that it’s really a new company using the old name.  if the government stepped in they would simply change the  name one the assets.

  • TonyA_says

     Didn’t we have a similar discussion sometime ago? I think I used this same link about holdbacks.

    Nevertheless the bulk majority of travelers are really SOL when an airline or travel company goes bankrupt. Many times we will hear about STRANDED travelers for this very same reason.

    Some travel insurance will cover for this unfortunate event.

  • TonyA_says

    Isn’t it amazing how so many airlines (all over the world) pretend they can stay in business without government (or taxpayer) support? And, bankruptcy seems to happen whenever they just want to shuffle the cards.

  • IGoEverywhere

    The travel agent preacher is-a- preachin’. If you buy a ticket online and it goes through your account as Yahoo Travel, you become a plaintiff against Mexicana along with 10 gazallion others. When an ASTA travel agent issues the very same ticket, the billcomes through as “MEXICANA! Now you can go to your credit card company and file a letter of complaint and during the last 45 years, I have never seen a person lose moey from their credit card purchase. We find the original ticket receipt, copy it for the customer, and print the IATA information for the cessastion os service. Never fails to get a refund.

  • sirwired

     Well, in the past, with a domestic airline liquidation other airlines that fly the same route would, as a courtesy, honor the tickets of the former competitor.

    That said, they don’t do it for “low-fare” airlines, and we haven’t had a “major” liquidate for many years.  I have a funny feeling they wouldn’t do the same thing now…

  • sirwired

     Unsecured creditors are unsecured creditors.  Everybody wants a piece of the disappeared pie, and their other vendors want their money back just as much as you do.  After all, the caterer, fuel company, office supply store, whoever… all provided services they haven’t been paid for, and are out money that is just as real.

    Sometimes a judge will toss unpaid employees a bone for at least a portion of their back pay, but that’s about it.

  • bodega3

    Ok Chris, why are you not telling these people, if they live in CA, which I am assuming based on their city of depature, to file a claim with the CA Seller of Travel Law?  Also, the credit card company should be notified immediately, regardless of the 60 day limit, as a purchase was made and not able to be used.  There are consumer protection laws in many states regarding travel purchases and a travel Ombusman should know about and be relaying this information.

  • bodega3

    If they live in the State of CA there is the CA SOT program that is set up just for this purpose.  However, they will need to have contacted their cc company first, which should be refunding them their money.  I went through this myself a couple of years back.  Odd how the SOT laws are being mentioned in this article and they were established as a consumer protection.  EVERY traveler should be looking for the SOT number by the vendor and checking with their state to see if there is a program. 

  • TonyA_says

    You are deceiving the readers — it is not ASTA that matters. It is the fact the ARC has billed the passenger’s credit card on behalf of the airline. This has NOTHING TO DO WITH ASTA. Your plugs of ASTA are so shameful.

  • TonyA_says

    Bodega. Do you think Mexicana contributed to the CA Travel Restitution Fund for every CA resident they sold tickets to if they are an out-of-state business? If so, what should the screwed customers do? We don’t have such a thing in NY State so I don’t know.

  • bodega3

    Yahoo Travel was the seller for one of the travelers and the other doesn’t state where they purchased the card.  Regardless, if they live in the state they should contact the Attorney General’s SOT office.  They can do a vendor search BEFORE purchasing.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Really.  How often does any given carrier declare bankruptcy.  I doubt its very often.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

     Correct.  Creditors fall into basically three categories.  Priority (taxes, wages, etc.), Secured, and Unsecured.  That’s it..

    Secured gets back the collateral. Priority gets paid pro rate of what’s left.  Unsecured gets the remainder which is often nothing.

  • jm71

    I really don’t understand why people are so reluctant to file a credit card chargeback in cases like this — as soon as it’s clear a transaction has gone bad and you’re not going to resolve it with the vendor (and any flight shutdown, including bankruptcy, makes this abundantly clear), your *next* call should be to the credit card company.

    It’s generally illegal for the credit card company to charge for a service not delivered.  Yes, there are restrictions, but the laws rules for when and where chargebacks can be done are just not as simple as “60 days from the charge”; whether you’ve paid the bill, etc.  In many cases the 60 days is interpreted as the time from when you discover the “error”, in this case the cessation of service.  And many credit card companies will honor a chargeback even if the strict letter of the law doesn’t require them to. 

    There just isn’t a downside to trying it, and it does a great disservice to not recommend that people in this situation start one *immediately*.  I’m not advocating people file frivolous chargebacks when they don’t like something, but this is a clear cut case as far as the service not being delivered.  Let the bank, Yahoo, the airline, and the creditors fight it out on their own time if they want.

    In every airline bankruptcy I’ve heard about in the past, people who paid by credit card were protected, while those who paid other ways were not.  Does anyone have *personal* experience of being denied a credit card refund in a simple case like this?

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Full disclosure. I know nothing about the California Seller of Travel Laws.  But my gut instinct is that unless these laws requires that money be kept outside of the carriers control at all times, e.g insurance policy in which the carrier is NOT a beneficiary, federal bankruptcy laws will rip through them like used tissue paper.

    Updated: A very cursory reading suggests that Airlines are not covered by the CA Seller of Travel Act.

  • bodega3

    Why don’t you know about the CA SOT law?

  • bodega3

    It happens a lot. 

  • TonyA_says

    Bodega, I am a little bit confused here.
    The Seller of Travel (SOT) in this case is Yahoo! Travel most probably on behalf of Travelocity or one of Yahoo!’s travel providers.
    Mexicana is an airline and is EXEMPT from CA SOT law.

    The OP books and pays for a Mexicana airline ticket from Yahoo! Travel. Yahoo settles all the payments via ARC. The OP gets a valid airline ticket.

    As far as I know, once Yahoo! has paid ARC (and ticketed the pax), it has delivered on its responsibilities. If the airline goes belly up later, Yahoo! is off the hook. The way I understand it, the CA SOT was made to protect the public from crooked Sellers of Travel and not airlines that might go into bankruptcy.

  • bodega3

    This is why we recommend ot all client to pay for their travel with a credit card.  I got my money back quickly after having to fill out a form and send it along with my reservation confirmation.  This was with a TO that closed down. 

  • Nigel Appleby

    5 years ago we booked a trip on Zoom airlines which suddenly folded while we were away. When we got home I disputed the return portion of the fare for non-supply and got the amount back on my Mastercard in time for the next statement. British Airways ran a special that if you were stranded by Zoom they would only charge half the regular return fare not the higher one way fare.
    As an aside all TAs in BC pay into a fund which compensates customers in the event things go wrong with a supplier as a last reosrt. I don’t know whether it would have covered the difference between Zoom and BA. I was just happy to get back what I did.
    So pay by credit card and file a dispute, if nothing else it’s on file.

  • bodega3


  • sershev

    There are different rules for airline disputes with credit cards, they are an exemption from 60 days/100 miles policy. As soon as the company goes under contact credit card and you should get refund.

  • TonyA_says

    Here’s a list for the AMERICAN ones:

    As you know, there has been quite a number of well publicized European ones lately. More to come due to the economic meltdown over there.

  • TonyA_says

    Not to mention, when a big one goes down it also has a lot of unpaid commissions and obligations to large ticket consolidators and tour companies. When Northwest Airlines declared bankruptcy the following travel companies got hit hard:

    See   http://news.findlaw.com/wp/docs/nwa/nwa91405c11pet.pdf

    Carlson Travel $4,167,586
    Travelocity $1,854,169
    Gateway Travel & Tour  $1,062,163
    Mill-Run Tours $805,914
    C & H International  $744,282
    Orbitz $656,033

    So before you sue your travel agency, think twice. They may be VICTIMS, too.

  • TonyA_says

    Chris, do you know if the OP tried to dispute his Credit Card charge or tried to recover money through the Card Company?

  • http://elliott.org Christopher Elliott

    From the OP: “I can’t dispute this directly with my bank as I only had 2 billing cycles from the charge date to do so.”

  • emanon256

    Sounds like they used a Debit card and not a Credit card.

  • Cybrsk8r

    It seems to me that the law SHOULD BE (and maybe it is) that the 60 day chargeback clock should not start until the scheduled date of service when you’re dealing with travel companies.  This would be the date of your flight, or hotel stay, or your cruise departure.

  • TonyA_says

    Carver, just to be clear, Mexicana filed for Chapter 15 bankruptcy protection in New York and Mexico.

    For non-lawyers you might want to read this   http://www.uscourts.gov/federalcourts/bankruptcy/bankruptcybasics/Chapter15.aspx 
    to understand what Chapter 15 means. Well, I did not understand it at first reading. That means your money is SOL :-)

  • TonyA_says

    Michael_K, the real question is should they be allowed to resurrect [from feigned death] without honoring the tickets they sold earlier. In my opinion, NO.

    A creditor who lends the company money or sells the company goods or services on terms, knows they are risking something in order to gain profits on sales. They gain some idea how sound a company is the way it pays its debts. A passenger has no clue what is going on. There is no reason the DOT should allow an airline to fly if it is not financially sound.

  • Lindabator

    This is where travel insurance came in for some of my clients.  ONCE the airline goes into bankruptcy, any NEW insurance purchases will NOT be covered.  For instance, Mexicana filed on 8/3/10 – TravelGuard listed them as restricted against coverage later the same day.  Howver, if you booked them the day before, you WERE covered. 

  • Lindabator

    Amex has historically been pretty good about that.

  • Lindabator

    Correct it is ARC – but I think he gets a kick-back from ASTA!  HAHA!

  • Lindabator

    True – airlines are not covered by the law.

  • Lindabator

    Correct.  Airlines are exempt because of federal oversight laws, where the SOT was put in place to cover you from fraudulent SELLERS of travel.  Yahoo, here, would not be considered the seller, as it was in effect an airline ticket, and falls under that jurisdiction. 

  • Michael__K

    I agree with your general sentiment, but I’m not sure how to practically apply it.  No matter when an airline stops flying because it crosses some “financial viability” threshold, there will always be passengers holding (potentially useless) tickets for future travel.  Unless ticket revenue is “held back” like mikegun pointed out may be the case (at least for U.S. carriers?).

    If the resurrection issue is a by-product of general  bankruptcy law, then maybe that’s what needs to be tweaked.  I’m not sure it makes sense to have separate rules just for airlines.

  • Michael__K

    Thanks for clarifying.  Maybe I’m suggesting that the law/process has room for improvement.  

    I agree that everyone loses “real money” but vendors have more leverage to avoid a total loss (e.g. by requiring deposits and by cutting off services when payments are not made).

    IMHO employees (especially payroll for work performed) and customers are the most vulnerable and deserve the most protections, but based on what you and others have posted it doesn’t work that way.

  • TonyA_says

    No airline can fly (in or ) to the USA without FAA/DOT approval. So IMO the FAA/DOT should not allow a (foreign) airline to fly here is they screw American passengers. I’m not sure why that is so hard to do. Your e-ticket is heavily documented. It should retain its value if the airline screws up. In Mexicana’s case they were blaming HIGH LABOR COSTS. But why penalize the innocent passengers? AA is going through a similar re-org and will also try to lower its labor costs (by junking contracts). Yet, your AA ticket is still good.

  • TonyA_says

    Bingo!  An Excellent Reason to Buy Travel Insurance.

    Now just to be sure, here are the words in the TravelGuard policy:

    The Insurer will pay a benefit, up to the Maximum Limit shown on
    the Schedule, if an Insured cancels his/her Trip or is unable to
    continue on his/her Trip due to the following Unforeseen events:

    (b) Financial Default of an airline, cruise line, or tour operator
    provided the Financial Default occurs more than 14 days
    following an Insured’s effective date for the Trip Cancellation or
    Trip Interruption Benefits. There is no coverage for the
    Financial Default of any person, organization, agency, or firm
    from whom the Insured purchased travel arrangements
    supplied by others. This coverage applies only if insurance
    was purchased within 15 calendar days of Initial Trip Payment

  • Lindabator

    Yep – and you can easily check those NOT covered before purchase, so no “gotchas!”  (This has been a boon in some cases, especially after 9/11 and after the banks’ meltdowns).  :)

  • Michael__K

    If you mean withholding FAA/DOT approval for the newly re-orged Mexicana (or Alitalia, etc.) unless they agree to honor old passenger tickets, that’s an interesting idea and certainly better than nothing, even if it doesn’t undo the pain inflicted on passengers who were holding unusable tickets for two years.  

    There’s also the question of whether and how FAA/DOT could prevent a re-orged airline from circumventing such an obstacle by re-branding/re-naming itself (perhaps under new management).

    If you mean revoking FAA/DOT approval for Mexicana earlier than the bankruptcy date in 2010 (which is how I interpreted “There is no reason the DOT should allow an airline to fly if it is not financially sound“)  then I’m not sure what that would have accomplished.

  • TonyA_says

    Actually both may apply. The latter if done early enough might have prevented future sales gone bad. Actually, at the time this happened, the FAA downgraded Mexico airports and that forced American to stop codesharing Mexicana. So if airports and airlines can be downgraded,  then why allow financially weak operators in the first place? Banning them will protect Americans more.

  • Michael__K

    It’s tricky because if they cut off “financially weak” operators (some of whom  might ultimately have avoided bankruptcy) then what happens to the passengers who already have tickets for future travel?

  • TonyA_says

    then you will need to buy insurance to protect against financially unsound airlines

  • AUSSIEtraveller

    the more legislation you have, the higher the fares & the more airlines WILL go out of business !!!

    It is that simple.

    Shoot the dodgy US bankers, not the businesses who have to try & survive, in the wake of the mess the bankers have left  !!!

  • AUSSIEtraveller

    fly icarus fly what a sily comment …

    “When a company goes into bankruptcy and is bought out by someone else, don’t they assume at least part of the debt (cents on the dollar?) ”

    If what you’re saying had to be the case, the new airline wouldn’t use old airline name.

  • AUSSIEtraveller

    without chapter 11, the US aviation industry would probably look like pre-deregulation days, right now.

  • Michael__K

    Then it’s basically back to the status quo — buy insurance or tough cookies.

  • bodega3

    Yahoo is certainly the Seller of Travel.  They are the agent of record.

  • bodega3

    But once bankruptcy is filed, you often can not purchase travel insurance protection.  You do need to check the list that each travel insurance company has for noninsureable companies.

  • TonyA_says

    @bodega3:disqus  @Michael__K:disqus
    Bodega said:

    But once bankruptcy is filed, you often can not purchase travel insurance protection.

    Well true, but not exactly.
    Once an airline files for bankruptcy, travel insurance companies will not cover FINANCIAL DEFAULT but they may still cover other reasons. So, I was referring to protect yourself from WEAK airlines before they go under.

    Anyway, I want to point out some very weird stuff. Below is link to TravelGuard’s Alert List.    http://www.travelguard.com/customerservice/alertlist/
    Note that American Airlines was added to the list  11/29/2011.
    Therefore, Travel Guard will not cover you for financial default by AA.

    But go ahead and price a ticket for AA on Travelocity. Note that they will still offer you travel insurance from TravelGuard, but they do not disclose that financial default is no longer covered.

    So buying travel insurance is not for dummies doing DIY. You need to do more research.

  • TonyA_says

    They can also write it off as a loss. You the poor traveler might not.

  • TonyA_says

    Wow, I thought Yahoo was just a search site. Didn’t know they are now some kind of travel agency. Hope google does not become a seller to travel, too. Looks like conflict of interest to me.

  • bodega3

    Airlines and hotels don’t contribute.  Sellers of their products contribute.  Your company needs to register if you sell to CA clients.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    In theory this is true.  In practice, its a very small class of vendors that can do what you are suggesting.  Most vendors will have a total loss as they generally provide goods and services before getting paid.  Employees are much higher on the food chain than vendors

    Customer can ask the credit card company for assistance. Also, individual customers generally lose the least amount of money.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Actually there are very sound reasons to allow an airline to fly when its not financially sound.  Business go through Chapter 11 bankruptcy for the purpose of getting stronger.  Regulators have to walk a fine line.  When they pull the plus, alot of people will be out of work, the vendors won’t get paid, etc.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

    Because despite my best efforts, I have not yet acheive omniscience.

  • http://pulse.yahoo.com/_OEPJGQPIEB75YYDE5CJY6R3VFE Carver Clark Farrow II

     You’ve been able to use Yahoo to purchase airline tickets and cruise, and rent cars and hotels since at least 1999.  They even had their own rewards system.  I used to use them until I decided that I was only buying directly from the actual travel provider.

    Out of curiosity, what’s the conflict of interest.  Yahoo (travel.yahoo.com) was just Travelocity with a Yahoo logo.

  • TonyA_says

    IMO if a search engine site accepts advertising money from other sellers of travel or ranks popularity of searches and displays the search results according to popularity, then it can manipulate the search results if it sold the products or services being searched.

    I thought Yahoo only private labeled Travelocity or other OTAs. I wonder if that made them a seller of travel.

  • TonyA_says

    My company is registered as a Seller of Travel in California. But since we are in New York and we are not based in California, then we are not part of the CA Travel Restitution Fund. We must have, and we do, a trust account where all monies collected from Californians are deposited first prior to paying travel providers or operators. But since we only do 100% of non walk-ins by credit cards and settle with providers immediately then really no California money goes into the account. Consider an airline ticket  sold over the phone or the net. We never really collect any money since we simply key in the credit card for ARC to charge on behalf of the airlines. So, I can’t see how the CA SOT system can help if an out of State vendor simply forwards billing information to another company owned by about 17 airlines and that company, ARC, actually collects the money on behalf of the airline who validated the ticket. The money is not with the Seller of travel, it is with the airline. If the airline goes bankrupt and stops operating both the passengers and agents are screwed. The ticket is no good and agents may lose commissions and other trade amounts. Since neither are withheld or deposited to a third party in trust until an airline actually provides service, then only the airline has the money for refunds.

  • Michael__K

    Customer can ask the credit card company for assistance

    The OP’s case demonstrates that this doesn’t always work (maybe the purchase was too far in the past?)

    Looks like major credit/debit cards are the only methods of payment accepted on Yahoo Travel.

  • http://www.facebook.com/bjorn.hallberg.1 Bjorn Hallberg

    If you pay with your creditcard you are normally covered by the card. One great airline to fly with is SAS, Scandinavian, very high ratings.
    I am a Swedish translator at http://www. the-business-translator.co.uk/ a global translation agency.

  • bodega3

    IMHO, the law was written by lawyers who know nothing about how the industry works, so your questions are good ones.  With the use of a credit card there is additional recourse for the client.  This really becomes more of an issue when people pay cash/check for travel.  I don’t get how this program was designed.  Not sure why only in state agents/agencies pay into the fund.  My guess is out of state moneies pay for running the program?  There really isn’t a lot of teeth in it and they certainly are not monitoring it well.

  • TonyA_says

     How are you guys coping with the recent closings of 2 regional carriers over there – Skyways and Cimber Sterling?

    Also didn’t SAS own a chunk of now defunct Spanair (closed end of Jan 2012)?

    SAS is 50%-owned by the governments of Sweden, Denmark and Norway. That’s a real good example to Americans :-)

  • bodega3

    Interesting as I have mentioned it several times on this site.  As a CA resdient, it would behoove you to read up on it since you handle your own arranging. Maybe since you are a lawyer you can understand the way it is written better that most of us who have read it.  They are constantly tweaking according to my contact at that office due to the confusion some of the wording has caused.

  • Joe Farrell

    Why didn’t the OP just submit a credit card dispute?  What am I missing here?  You someone waited for YAHOO to get him his money?  Really? 

    I understand being ignorant of the law but to sit on ones hands after an airlines goes belly up and not contact ones credit card company seems the height if ignorance  . . . .

    As for the legal issues – NO – none of the ‘new’ entities are liable for the old entities debts unless they specifically assume them –

    Airlines do not work like social security – there is not an account with your name on it where they hold your money until you fiy [ok = thats a joke, everyone knows social security is a tax, not a benefit] =-

    But the airlines sell you a seat on a future flight they are planning to operate.  They then SPEND that money immediately.  What you get is a promise to fly you in the future – its called ‘air traffic liability’ on their balance sheet – its the cost of flying you in the future.   But  your money was spent the moment you gave it to them -and probably sooner since most airlines are using credit lines against future sales to operate. 

    Anyway – back to the OP – does anyone know if Yahoo really did file a claim?  If they didn’t = well – then THEY are liable . . . they should be anyway.  He gave the money to YAHOO who then took the money and then gave it to the airline . .. 

  • Joe Farrell

    The new owner buys the ASSETS of the company – leaving the unsecured holders with nothing since the secured debt holders – the airplane and engine financers and the banks that run the lines of credit – get priority and everyone knows there is nothing left after that – 

  • Joe Farrell

     and in my experience bankruptcy is usually not filed with the advance knowledge of the party doing it – meaning they are having issues – keeping looks at their cash reserves and then one day realize ‘this ain’t gonna work.’

    If  the airlines plan a prepackaged affair then the need to discuss it with their senior creditors usually means the little guy gets protected or they’d scream bloody murder for not being told after advancing them more credit or forebearing collection . . .

    Moreover, Visa and Mastecard routinely hold millions of dollars in charged ticket money to protect them against charge backs – this number threw United BACK into bankruptcy AGAIN very shortly after coming out because the credit card processors refused to turn over money charged b y passengers because THEY did not think that the business plan was going to work – IIRC

  • bodega3

    It depends on how the ticket was issued.  We issue tickets through a GDS but the charge you see on your cc statement isn’t from us, but the carrier.  Net and bulik tickets are usually charged inhouse and then Yahoo would be the name on the cc statement.

  • Theodore Rosenberg

    Unfortunately, that is Bankruptcy, airlines or drug stores.  However in most bankruptcy situations, the new company will make some accommodation to old clients in the hopes of recapturing their business. In bankruptcies I have been involved in, a typical offer would be a voucher good for about 10% of the loss on the original transaction  non-transferable, time limited, not much, but better than nothing