Failed-airline protection is now a law of the past


The law requiring surviving airlines to carry travelers with tickets on any failed line expired and Congress did not extend it. If you hold a ticket on a line that fails, you can usually get your money back. But other airlines are no longer required to accommodate you—what air service you can get is strictly voluntary on the part of those lines.

The risk of airline failure has diminished greatly since the original law was passed, and I haven’t seen much about the question in the last year or two. But the recent failure of all-business-class Maxjet should remind you that even when most big lines are making money, some airlines can be risky. And the combination of factors that killed Maxjet—high fuel costs, credit problems and a cloudy market outlook—could strike other financially weak airlines. Even though the law expired, the problem definitely did not.

The old law required that a surviving U.S.-based scheduled airline honor a failed line’s ticket, on a standby, space-available basis, for an additional fee of no more than $50. Now, with bailouts strictly voluntary, consumers face far greater uncertainties.

In the current Maxjet case, three airlines came up with quick responses:

•Maxjet says it contacted Eos Airlines (also all-business-class) to return stranded travelers from London to New York (or New York to London).

•Continental allowed Maxjet ticket holders to fly standby for a two-week period for a fee of $50 per flight (plus taxes) on non-stops to/from Newark and connecting flights to/from Las Vegas or Los Angeles. However, as far as I can tell, this offer applied only to economy seats.

•Silverjet, a competing all-business-class airline, offered replacement tickets between London and Newark for the same fares travelers paid Maxjet—typically a bit under Silverjet’s regular fares.

•Some big lines waived the advance-purchase requirement on replacement tickets.

Maxjet was a relatively small player, so total disruptions were probably limited to fewer than a thousand individual travelers. But failure of other lines is still a distinct possibility, so you might want to think about your alternatives if a larger airline were to fold. This question really has two distinct parts.

Protecting your money is the easy part. The failed airline may still have enough cash to refund unused tickets. And even if it doesn’t, you can usually get your money back through a chargeback to your credit card.

Salvaging your original trip is tougher. Even if you get your money back, a replacement ticket on another line might cost substantially more than you originally paid—and that’s only if you can find seats on short notice.

If you have a ticket on a line that fails, and you’ve already started your trip, here are my suggestions:

•Check to see whether the failed line has made any alternative arrangements for your return—as Maxjet did with Eos.

•If not, see if any other airlines are offering standby seats, as Continental did, and if the offer is at all reasonable, take it.

If you haven’t yet started your trip, figure on getting your money back at some point, and try to rebook. Forget about any standby offers; they’re too risky. Instead:

•Check to see if a surviving airline is offering any break—on prices or restrictions—to ticketholders on the failed line, as Silverjet did for Maxjet.

•If not, make the best deal you can find.

In the future, outright failure is more likely with a small line than with one of the giants. In the past, when any giant line approached failure, some other giant line at least partially bailed it out, through merger, acquisition, or purchase of routes and planes. For the most part, travelers faced little or no disruption. And that’s the most likely scenario for the future as well.

Still, total failure remains a possibility. Weak as it was, I’d like to see Congress renew the expired law—or something like it—just in case the airlines hit another rough patch.