When airlines go bust

The recent economic structure has brought with it a whole host of problems for the airline industry leaving them more vulnerable than ever. The rising cost of fuel has resulted in a number of budget airlines feeling the effects.

With the collapse of many airlines recently, (which include; Silverjet, Oasis, Eos, Maxjet, Zoom and XL) we thought it best to inform you of what to do should you find yourself in this situation

Refunds: Getting a refund on ticket costs for a failed airline depends on how you bought the tickets and which card you used to pay for them.

If you paid on a credit card, then you should contact your credit card company immediately. They will first try to arrange a Visa or Mastercard ‘chargeback’ to get your money out of the airline's account.
If a company has gone under, however, then it is likely its accounts will be frozen (if they have any funds), so this may not be possible. In this case the credit card company will give you a refund through the Section 75 clause of the Consumer Credit Act (see below).

What is Section 75?

An advantage of using a credit card is that, under section 75 of the Consumer Credit Act 1974, customers who have a claim against a supplier for breach of contract or misrepresentation will generally have an equal claim against the card issuer.

For section 75 to apply, certain conditions must be met:

Most credit card purchases will be covered, but the cash price of the goods or services must be more than £100 and not more than £30,000, and purchases are not covered if they are made by debit cards or by charge cards (where the monthly bill has to be settled in full).
Where customers use a credit card to buy airline or other travel tickets from a travel agent, they cannot normally claim against the travel agent if the airline delays or cancels the flight. This is because the travel agent is contracted to supply the ticket, not the flight. So the customer would not have a claim under section 75 either.
However, things are different if customers use a credit card to buy the travel agent’s own ‘package’ of travel arrangements. In such instances the agent is the supplier of the holiday package.
If you paid for tickets on a Visa debit card, then a refund through Section 75 isn't available, so any refund would have to be through the chargeback system.
This option is unavailable for those who paid on Maestro debit cards. They will have to join the list of creditors.
If you bought your ticket through a travel company with an Air Travel Organiser's Licence (ATOL) and have an ATOL receipt, then you may be able to claim under the Civil Aviation Authority's ATOL scheme. This applies by law to all air packages, i.e. where you've bought another part of your holiday such as accommodation along with your flight from the same company.
* PLEASE NOTE: If you just book a flight with an airline, you are not covered.
Some travel insurance policies include cover for scheduled airline failure. The Post Office will cover you up to £1,500 only for flights booked in the UK. EasyJet also offers cover on its travel insurance.

Am I at risk?

BBC news have said there is widespread agreement that the big, low-cost airlines in the UK - the likes of Ryanair, Easyjet and BMI - are well-financed and in no danger.

These carriers - and the likes of British Airways and Virgin Atlantic - have been making changes to their routes, however, such as cutting back on flights over autumn and winter as they try to ensure that their overheads are controlled and their planes are as full as they can manage.

To find out who is covered by (ATOL) visit here

To read more about Section 75 of the Consumer Credit Act click here

What to do if your airline goes under