Bankrupt airlines
There are a number of airlines that would file for bankruptcy however it would not mean that the customers would have to go through a mess and the assets of the company would be liquefied. Airlines are corporate and hence file bankruptcy under Chapter 11. This type of bankruptcy is also called as reorganization and does not involve liquefaction of assets. However liquidation can be considered as the last step in Chapter 11 bankruptcy.
When airlines file for Chapter 11 bankruptcy it would mean that they are facing a difficult financial crisis. The Chapter 11 bankruptcy is considered only when the value of the debts has increased more than the value of the assets. There are many bankrupt airlines that have sent requests to the bankruptcy court to release them from bankruptcy. Bankrupt airlines usually promise to operate but you should not believe, as the process is not in their hands.
The bankrupt airlines would hope to remove their debts and start all over again to make profits but they might not be successful in doing so. In case the bankruptcy court feels that the airline would not be able to recover the profits then the court asks the airline to shut down. In such cases the assets are liquidated and the creditors are paid back. The court is the whole and sole responsible to decide whether the airline should function or should shut down. Hence the airline cannot be sure whether they would be functioning in the future or not.
When an airline files for bankruptcy then there are three possibilities that can take place.
1. The airline can return to business and make profits
2. The airline can be taken over by another airlines after seeking permission from the court.
3. Under the direction of the court the airline can be put on auction.
People are concerned with the fact that if the airlines has filed for bankruptcy then what would happen to their tickets. In most of the cases where the airline has filed for bankruptcy they would arrange for tickets with other airlines at no extra charges.
It is usually seen that people do not wish to travel with airlines that have filed for bankruptcy and most of the customers would like to have refunds. But according to the rules the money cannot be refunded unless the customer has a genuine reason like the schedule of the other flight does not meet with his timings etc. If you feel that the rescheduling is not meeting with your timing then you can submit a refund application with either the airline authority or the travel agent from whom you have purchased the ticket. If you have used your credit card to purchase the airline ticket then you are required to submit an application 60 days prior to the schedule of the flight with your credit card company. But in case you have booked your ticket 60 days prior and the airline goes bankrupt after this then you would lose your money.
If the assets of the airline company are to be liquidated to make payments to the creditors then the customers can also opt for getting their money and would be termed as unsecured creditors. If the airline is supposed to pay to all the creditors then the customers are the last one to obtain their refund if there is amount remaining after paying off to the other secured creditors. The government does not take any guarantee for the money that people would lose in tickets for bankrupt airlines.
The other option can be that the airline would be taken over by another airline. In such cases people may or may not get tickets, as it would depend on the contract signed between the two airlines. In such a case if you have the frequent flyer miles then you should forget about it, as you cannot reimburse it again. It is hence advised that you use your frequent flyer miles as soon as you can if you think that the airline would file for bankruptcy. You should also stop making any investments in any of the mileage programs offered by this airline and avoid booking any other tickets through them.
When you know that the airline would file for bankruptcy and you are buying the ticket from this airline then you should use your credit card to buy the ticket rather than using your debit card. In case the airline goes bankruptcy then at least you can get the money from your credit card company. You should also opt for getting paper tickets even though they cost a bit more. In case you are buying an e-ticket then in such cases also you should consider taking a print of these tickets to have evidence.
You should be careful when you buy tickets from bankrupt airlines. Make sure that you read your flyer miles terms and conditions and if you think that the airline might go bankrupt you should consider using these miles as soon as you can. Make sure that you never use your debit card for buying a ticket and use your credit card. In this way you can be sure that you would get your refund in case anything goes wrong.
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