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mar 14

What to Do If Your Airline Shuts Down

(Courtesy davidreid/Flickr)


Today Direct Air has canceled its flights for two months, due to "failure to pay fuel bills." The six-year old airline, based in Myrtle Beach, S.C., had most of its routes between the Midwest and East Coast and Florida airports. The airline told ticket holders to ask their credit card issuers for refunds.

Direct Air is one of many airlines hurting because of spiking fuel prices. Currently US airlines face the highest average cost for kerosene-type jet fuel in decades, at an average of about $3.20 a gallon.

Foreign airlines are hurting, too. British carrier BMI has enough funds to last through the month, despite massive losses, says the Financial Times; British Airways is seeking approval to buy the airline by the end of the month, with rumored plans to eventually shut down the airline. That said, a BMI spokesperson told me: "we will be flying our summer 2012 schedule, so customers can continue to book with bmi with confidence." Elsewhere: India’s Kingfisher Airlines said today that it is “curtailing” its international routes because it’s been unable to pay staff salaries for several months.

What do affected travelers need to know? Here are some key points:

Don't expect other airlines to honor tickets from Direct Air. While that kind of courtesy has happened in the past, no rival airline I contacted said it would help passengers out.

If you buy a ticket for a flight service you don't receive—even if it's on a foreign carrier—you're covered under the Fair Credit Billing Act (details, here). Ask your credit card issuer to remove the charges from your bill.

By law, US airlines must have money to refund cancellations and Direct Air told the DOT that it has sufficient cash in its escrow account. But my calls to the airline weren't answered. Look to the Department of Transportation (DOT) to soon post instructions on its "cessations" page, with advice on what to do specific to each airline after it has officially shut down for good.

Credit cards offer protection. Debit cards don't.

Filing a credit card dispute is only worth trying if an airline has stopped flying its planes. Cancellations on individual flights don't count.

Write your credit card issuer within 60 days after you receive the first bill with the charge. Keep a copy of the letter (not an e-mail) in case you need it later to prove you sent it. Send the letter to your credit card issuer's special address for inquiries. Don't mail it along with your monthly payment. In the meantime, don't pay the portion of the bill that accounts for the charge.

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Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.

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