When Continental Airlines filed for Chapter 11 bankruptcy protection on Dec. 3-the second time in seven years-the airline reassured its passengers that operations would continue normally.
And when cash-starved Eastern Airlines received a transfusion last month from the U.S. Bankruptcy Court, the early Christmas present helped ensure that the carrier would continue flying through the busy holiday season and into next year. What happens next is anybody`s guess.
Eastern and Continental aren`t the only airlines that could find themselves struggling for survival in 1991, and this could affect the financial protection of passengers.
Analysts say jet-fuel prices, which have skyrocketed since the Mideast crisis began in August, could spark an industry shakeout, with weaker carriers selling off routes, cutting back service or filing for bankruptcy. And if an airline does go out of business-as more than 175 mostly regional or commuter carriers have done since deregulation began in 1978-passengers may end up holding worthless tickets.
Then, too, temporary fare wars such as the ”free companion ticket”
promotion that surfaced last month could increase as weaker airlines use lower ticket prices to fill seats at a time when all carriers are struggling to fill their planes.
But airlines that simply close up shop or attempt to reorganize under the protection of a bankruptcy court can hurt passengers, who are considered unsecured creditors. Congress has voted down several bills that would have forced the airlines to come up with a consumer protection plan if a carrier goes belly up.
Even paying for a ticket on a credit card is of limited value because while federal law protects consumers against paying for something that wasn`t delivered, there`s no guarantee a stranded passenger will be able to fly standby on a competing airline.
Travel agents sell more than 80 percent of all airline tickets, and they often steer clients away from airlines they think may be in danger of imminent collapse. That trend will no doubt intensify as courts broaden the definition of agents` responsibilities.
Thomas A. Dickerson, a New York travel lawyer, says agents could be held liable if they didn`t disclose information that might have prevented their clients` choice of a doomed airline.
For example, some agents steered clients away from Continental this fall when reports surfaced that the airline had considered, and then dismissed, filing for Chapter 11 bankruptcy. Continental has since tried to reassure agents by noting that it has received court permission to pay refunds on tickets and to pay competing airlines if Continental passengers want to fly on other carriers.
But steering clients away from weaker carriers such as Eastern, Continental, Pan Am and TWA can be a ”double-edged sword,” one travel agent notes.
”We need alternatives,” says Leslie Pontious, of Ancient Mariner Travel in Tustin, Calif. ”(By booking away), you`re playing into the hands of the Big Three (American, United and Delta),” and higher fares could be the result.
In the meantime, wary would-be passengers can take some precautions against being grounded:
– Charge your tickets on a credit card. It won`t cover the cost of a new ticket if you can`t fly standby for free on another carrier, but federal fair- credit billing laws can protect your original investment.
– Consider buying trip-interruption/cancellation insurance, which costs about $5.50 per $100 worth of coverage, for an amount that would cover the cost of a new full-fare ticket if your original airline suspended service.
But be aware that some policies require official declaration of bankruptcy to take effect, and others won`t cover an airline, such as Eastern, that already is in bankruptcy court but still flying.
– Be especially leery of paying for flights that won`t take place for months, or of flying troubled carriers over such heavily booked periods as Christmas, when finding a seat on another airline may be difficult.
