Five Steps for Buying Airline Tickets

A growing list of airlines have found themselves in financial troubles due to high fuel prices, falling demand and even credit card processor worries.

Aloha, ATA, Frontier FRNT, Maxjet and Skybus have all either stopped service or have filed for bankruptcy protection. Even more airlines are likely to join this list in the months to come. AirTran AAI stock plummeted last week on speculation that it may be one of them. (Delta and Northwest reached a deal on a merger. Full story here.)

Many people are surprised to learn that passengers have no government granted rights when an airline cancels a flight or an airline goes bankrupt. People have assumed for a long time that airlines would honor tickets from a bankrupt airline for a small fee or the bankrupt airline would continue to fly. While this was true in the past, it's no longer the case.

Even after deregulation when airlines were no longer required by the government to help passengers out with canceled flights, many airlines honored tickets of competitors that went out of business. That began to change after Sept. 11. Airlines, facing an industry-wide slowdown, began to refuse to honor tickets from airlines that went bankrupt.

In response, Congress wrote a new law in November 2001 that required airlines to rebook passengers from bankrupt airlines for a set handling fee. Originally this fee was $25 one-way, but the Department of Transportation raised the handling fee to $50 one-way in 2005. In addition to requiring airlines to rebook tickets, the law gave ticket holders the right to ride standby for $50 each way for 60 days on their ticket.

Unfortunately, after heavy lobbying from the airline industry, Congress let this law expire in 2006, meaning that there is no longer any law requiring airlines to honor tickets from competitors that go bankrupt. During this recent round of airline bankruptcies, many airlines have refused to accept the tickets of the bankrupt airlines, forcing ticket holders to purchase new ones.

Due to this, consumers need to be much more careful when picking airlines, especially for tickets bought months in advance. If you are planning a trip that involves air travel, here are a few things you can do to help protect yourself.

1. Use a Credit Card (Not a Debit Card)

Buying your ticket with a credit card can give you some protection and the possibility to get a refund if an airline goes bankrupt. The Federal Fair Credit Billing Act can help you get a refund since this act states that when consumers purchase something by credit card and then fail to receive it, the consumer can contest the charge with their credit card company. To do this, the consumer must contest the charge in writing within 60 days of the billing date which shows the charge. If you meet these requirements and the airline you had tickets on goes bankrupt, you should get a refund from your credit card company for the amount you paid for the ticket.

2. Don't Buy Too Far in Advance

Just because you pay for your airline tickets with a credit card, don't assume that you will be able to get a refund if the airline goes bankrupt . The important issue to remember is that you can make a claim with your credit card company if it's made within 60 days of when the charge shows up on the credit card bill.

This can be a difficult time limit to abide by for peak season travel which often requires booking far in advance. In these cases, you need to realize that even if you purchase your tickets with a credit card, you will likely not be able to get a refund from your credit card company if the airline goes bankrupt. If you want the protection that a credit card offers, you need to book your tickets within 60 days of your trip's return flight.

3. Consider Travel Insurance

While your credit card may protect your airline ticket, it won't protect your entire trip if you can't make it to your destination. If you are planning a costly or lengthy trip, it may be worthwhile to consider travel insurance to protect you from an airline bankruptcy in addition to other situations that may arise. If you choose to do so, make sure you understand exactly what the travel insurance covers as travel insurance coverage can vary from company to company.