Airline Bankruptcies: How They Happen and What Can You Do
Last year was very rough for the aviation industry. Many airlines had gone bust in 2018. However, 2019 doesn’t seem to be better. We have already seen as many airline bankruptcies as the entire 2018 – and the year isn’t over yet! So how does an airline go bust – and what can you do in those circumstances?
by Skycop team
- 2019-10-04
- 12:50 PM GMT
Airline bankruptcies: how do they happen?
How does an airline go bankrupt? Let’s look at the more recent examples. Germania was launched in 1978 and stopped its operations on February 5 2019. It became unable to pay out salaries in January before closing doors a month later. Germania, first crippled by rising fuel prices, high fleet maintenance costs and compensations they had to pay for the disruptions in the summer of 2018, failed to attract investor interest. It closed doors abruptly, with German airlines offering discount flights for stranded passengers.
WOW air, founded in 2011, spent the last six months before its closure looking for a buyer – but failed to find one. The airline faced stiff competition in Northern Europe and had to compete with settled companies like Norwegian for transatlantic flights. Like many other collapsing companies, it tried operating flights till the last possible second. An Irish family on a delayed flight from Detroit to Dublin even had pizza delivered (as airlines are required to feed passengers on extended delays) and promised a flight in 15 minutes immediately before the airline ceased operating. Currently, WOW air is being resurrected as WOW 2, with flights between Keflavik and Washington Dulles to start mid-October.
Thomas Cook Group started out in 1841 with the aim of carrying temperance supporters by railway between Leicester, Nottingham, Derby and Birmingham. Thomas Cook Airlines came to be in 2001. And when it fell, it made its passengers suffer probably the biggest fallout of all recent bankruptcies. As the parent travel company Thomas Cook Group went under, so did the airline. It stranded 600,000 travellers worldwide, with British CAA organizing repatriation flights for UK citizens as well as working to reassure hotels that it will reimburse them the money the tour operator owed them.
Norwegian has currently won some reprieve by postponing debt repayment for two years (it owes $380 million). However, other airlines may not be so lucky. Fuel prices have been increasing over the years – and the costs grow even higher when you factor in the attack on Saudi oil fields. A strong dollar doesn’t help, as it’s the currency used to pay for both fuel and plain leases. Meanwhile, as airlines are competing with slashing prices, it’s not easy to add more revenue (even if they try doing it via ancillary revenues).
| Airline bankruptcies in 2018: | Airline bankruptcies in 2019: |
| Primera Air | Germania |
| Saratov Airlines | California Pacific Airlines |
| Small Planet Airlines | Flybmi |
| Privat Air | Insel Air |
| Skywork Airlines | Asian Express Airline |
| Cobalt | WOW air |
| VLM Airlines | Aerolíneas de Antioquía |
| FlyViking | Fly Jamaica Airways |
| Dart Airlines | Air Philip |
| Nextjet | Jet Airways |
| OneJet | Wisdom Airways |
| Wataniya Airways | Avianca Brasil |
| PAWA Dominicana | Avianca Argentina |
| LC Perú | Al Naser Wings Airlines |
| Bassaka Air | Aigle Azur |
| Air Bagan | XL Airways |
| Zoom Air | Thomas Cook Airlines |
| Orient Thai Airlines | Adria Airways |
What to expect when an airline collapses
So, what happens if you find yourself with tickets to a flight operated by a bankrupt airline? If you’re stranded, the best you could hope for is repatriation organized by your country’s CAA. UK’s “Operation Matterhorn,” organized to bring back people stranded by Thomas Cook’s collapse, is the biggest peacetime repatriation effort. It actually turned out well for some passengers, as Britons holidaying in Spain and Baleares got the rare chance to fly back home on an Airbus A380 jumbo.
Other times, you may not be so lucky, as it happened when WOW Air collapsed and repatriation tickets were offered at a measly 25% off. When Thomas Cook went bankrupt, some passengers accused airlines like Jet2 of price gouging. And when Aigle Azur went bust, at least one woman was stuck in Sao Paulo, unable to afford the ticket to Paris that cost between €750 and €1750.
The airline went bust. What can you do?
When it comes to getting your money back, passengers from the UK are probably the luckiest, as ATOL and associated Air Travel Trust Fund exist to cover reimbursement and repatriation for travellers affected by the bankruptcy of an ATOL member. For those travellers that don’t have such protection offered at the state level (such as passengers from the US), the best hope is travel insurance, which should be ensured before you fly. A lot of policies in the US don’t cover airline collapse, so you have to be really careful when choosing your policy.
Credit card holders may be privileged in this case, as some of them have premium travel protection. Make sure to find out if your bank hasn’t dropped it and maybe seek a new card. Another benefit is that credit card holders can request charge-back as the bankrupt airline has clearly failed to prove the agreed-upon services. Again, this isn’t guaranteed to work every time, but it’s something.
There’s also Regulation (EC) 261/2004 and its protections of air passenger rights. However, asking the airline for flight compensation isn’t the easiest of tasks on even the best of days (otherwise Skycop would have no raison d’etre) – and trying to claim flight compensation from a bankrupt airline or its administration is nearly impossible.
The last measure you can take is being careful while ordering a flight. This means not only taking out travel insurance but also checking out how the airline is doing. This may not always be easy, as many airlines function until the moment they don’t. Sometimes, the planes are still in the air. It also doesn’t help that airlines don’t disclose their flight compensation debts in statements to their shareholders, making themselves look more profitable.
“With the accelerating pace of airline bankruptcy, something has to be done to protect the air passengers. However, regulatory bodies aren’t even playing catch up,” said Lukas Raščiauskas, CEO of Skycop. “We have previously stated that Regulation (EC) 261/2004 is not enough for dealing with regular flight disruptions. Now you can add airline bankruptcies to its list of blindspots.”
So that’s the terrible world of airline bankruptcies. However, if your flight was disrupted by something less earth-shattering, we can help! Claim flight compensation for delayed, cancelled or overbooked flights via Skycop! With up to €600 in compensation on the line, there’s no reason not to do it.
Related articles:
Thomas Cook Goes Bankrupt, Stranding 600K
Adria Airways Will Operate At Least For Another Week
WOW Air Financial Crisis Causing More Flight Disruptions
11 most outrageous things that airlines don’t want you to know
