What to do when an airline, ferry, travel agent/operator goes bust? That can very much depend on the type of holiday you booked, how you booked it, and what redress options you have. In all situations, it’s important for consumers to act quickly in order to protect themselves.
When an airline suddenly ceases operation
The first thing to consider is travel insurance, but not just any policy!! There’s lots of choice out there with competing prices and the usual bells and whistles. To protect yourself from the all too real possibility of the airline going bust, you need to scrutinise the policy documents carefully to check that it will cover for financial failure.
When you’re searching online for travel insurance you should look for a link to the policy documents and then carefully scan the summary of cover to see if it includes ‘scheduled airline failure’ or similar; it should also give details of the cover limit and the excess to be paid in the event of a claim, if any. While you’re at it, you could also check for things like ‘strike’ cover as not all policies have this. Then, once you’re satisfied it has the cover that you want, it should be safe to go ahead and compare prices, and of course do all the usual checks that you would do with any online trader.
Normally, under Regulation (EC) 261/2004, when a flight is cancelled, the airline should offer rerouting or refund, however, this is not possible when the airline ceases operations. If you have been affected then there are a number of actions you can take:
Flight booked directly with the airline
- If you are already abroad, advice given by the Commission for Aviation Regulation (CAR) in situations like this has been to self-repatriate by booking directly with other airlines. Other airlines may offer flights at ‘special rescue fares’ and so it is worth checking if this option is available.
- Getting your money back – if you bought your flight directly from the airline and you used a credit/debit card to pay for it, then you should contact your bank or credit card provider immediately to request chargeback.
- Contact your travel insurance provider as soon as you can to see how to pursue a claim.
Flight is part of a travel package
- Under EU package travel legislation consumers can contact the travel agent or tour operator directly to arrange for an alternative flight out to be able to continue their holiday, or, if already abroad, arrange an alternative flight home. This should be done as soon as possible.
When a ferry company stops sailing
If a ferry company stops trading and your plans to sail away has been scuppered, then your options are very similar to the above:
If you booked the ferry on a standalone ticket directly from the troubled company you may only be able to seek redress via chargeback or insurance.
If the ferry service is part of a package, then you should be able to contact your travel agent or tour operator to make alternative arrangements.
Some ferry companies also offer package holidays and, in such cases, you may be able to seek assistence (including repatriation) and make a claim through the relevant bonding scheme.
When the travel agent closes
When consumers book a package holiday (a traditional package or a customised/DIY package consisting of at least two travel elements) with a travel organiser they have certain protections under EU package travel legislation if something goes wrong. However, if the travel organiser has gone out of the business then the consumer can’t rely on that trader to assist. This is when bodies such as the Commission for Aviation Regulation (CAR) step in.
In Ireland, all travel organisers selling travel packages orginating in Ireland to destinations overseas are required to be licensed and bonded with the CAR, unless the travel organiser is established in another EU Member State and has provided to CAR evidence of having sufficient insolvency protection in that country. The aim of this is to provide consumer protection for refund and, if necessary, repatriation.
Licensed firms are required to provide the CAR with a bond, which can be drawn down in the event that a license holder ceases trading, leaving customers stranded abroad or travel contracts unfulfilled before the due date of travel. On top of the licensing and bonding the CAR looks after the administrative aspects of any refunds and claims. So, if the travel agent or tour operator goes out of business, and this business is bonded with CAR, then consumers should be able seek assistance.
What steps to take:
If you’re yet to travel then it is advised to contact the airline and/or the accommodation provider to see if the flight/room has been paid for and is still confirmed. If the answer is affirmative, you should in principle be able to stick to your original travel plan.
It may be a case that only the flight is confirmed as it was paid for upfront but the accommodation has not been paid for yet. In this situation, you may decide to use the flight and go to the destination, pay for the accommodation again (after checking if this is possible), keep all receipts, and then, when you return, claim a refund of the original cost of the accommodation via the relevant bonding scheme. Another option may be to cancel the entire package altogether and make a claim.
There is often a time limit to submit a claim. For example, claims through CAR must be submitted using the relevant form 60 days of the date from which the travel organiser failed or was unable to meet their contractual obligations to the customer.
If you can’t rely on the above protection, then the other course of action available would be to seek refunds through your travel insurance provider or chargeback.
When all else fails
If you cannot get redress by following the above, then the only other option would be to go through company’s liquidation process (if applicable). However, going down this route may not result in getting your money back. Unfortunately, consumers are regarded as unsecured creditors. This means that other creditors, such as the taxman and staff of the company, will rank higher than consumers when it comes to dividing the company’s assets and, as a result, there may be little or nothing left for consumers after secured creditors get all or some of the money owed to them.