Guidelines for minimizing losses caused by airline failures
Year 2012 began with the failure of two airlines: the Spanish company, Spanair, and the Hungarian national carrier, Malev. As a result of their collapse, tens of thousands of passengers were left without flights and many of them were also left without their money.
In light of these developments, the Consumer Council has assembled some guidelines that will help minimize the losses to the traveling public, should an airline cease operations.
The ability to minimize losses depends largely on the way in which the payment to the airline has been made.
• In the case of tickets purchased on credit, with installment payments: if the flight is cancelled or does not take place, the consumer should contact the credit card provider in writing, by fax, and request that future payments be cancelled; it should be stated that this is due to concern that the service will not be received due to the airline ceasing operations.
The credit card company can stop the future payments, but cannot return money that has already been transferred to the airline company.
• In the case of tickets purchased on credit, with a single payment that has not yet been paid: the consumer should contact the credit provider in writing, by fax, and ask that the payment be cancelled; it should be stated that this is due to concern that the service will not be received due to the airline ceasing operations.
However, the chances of stopping the payment and retrieving the money depends on the ability of the credit card company to offset the charge against other sums that it is supposed to transfer to the company.
• If the consumer has already been charged for the transaction, and the airline is based in Israel, the consumer should file a claim for the money that was paid with the receiver or liquidator appointed by the court to administer the company or arrange for winding it up.
In this case, the chances of receiving a refund are poor, since, if and when the company’s creditors are reimbursed, the rights of the company’s secured creditors (, the banks, the employees, and so on) take precedence over those of unsecured creditors, which includes the company’s customers.
• If the consumer has already been charged for the transaction, and the airline company is registered overseas, then the bankruptcy proceedings will also be taking place abroad. This makes it more difficult for customers in Israel. In this case, the money is almost certainly lost.
• In the case of a ticket purchased through a travel agent, it may be possible that the agent has not yet transferred the payment to the airline. In that case, we would recommend writing to the travel agent through whom the booking was made, asking that the money not be transferred, but rather returned to the customer.