In the United Kingdom, Regulation UK261 provides compensation for delays and cancellations while airlines remain operational. Should an airline cease operations, protection may be available under Section 75 of the Consumer Credit Act or the ATOL scheme for package holidays. AirAdvisor advises using credit cards instead of debit cards as a precaution.
In the European Union, EU Regulation 261/2004 protects passengers if cancellations occur, unless an airline declares bankruptcy. Under the EU Package Travel Directive, passengers who booked package holidays can request refunds or rebooking. Direct bookings require reliance on credit card companies or travel insurance for reimbursement.
The United States offers limited protection for passengers if an airline declares bankruptcy, with few guaranteed rights if operations cease entirely. U.S. passengers may have a small chance for rebooking or refunds if airlines file for Chapter 11.
Australia has no mandatory compensation scheme for airline bankruptcy after the abolishment of the Travel Compensation Fund in 2014.
To navigate these challenges, AirAdvisor suggests considering travel insurance that covers airline bankruptcy or financial default, seeking rescue fares from other airlines, and using credit card chargeback options. In the UK, the ATOL scheme is available for package holiday refunds. Filing as an unsecured creditor in the U.S. may also be an option, but reimbursement is unlikely.
Anton Radchenko, International Lawyer and Founder of AirAdvisor, states, “If you book directly with a credit card, you may be entitled to a chargeback or Section 75 protection if the airline goes bankrupt. This gives passengers an extra layer of protection, especially if the airline isn’t part of a package holiday scheme.”
Historical examples include Thomas Cook Airlines' collapse, affecting over 600,000 passengers, and WOW Air's sudden closure, stranding 10,000 travelers. Eastern Airlines ceased operations in 1991, initially promising refunds that became unlikely once bankruptcy proceedings began.
AirAdvisor recommends several preventive measures, such as using credit cards, booking package holidays in the UK/EU, obtaining comprehensive travel insurance, staying informed of airline news, and keeping detailed records for filing claims or disputes.
“Think your flight might qualify for compensation? Check your flight now with AirAdvisor.”
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