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By David Stevens Personal Finance Correspondent
Tuesday, 2 September 2008
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OF all the sobering lessons last week’s collapse of trans-atlantic airline Zoom has taught us, the most pressing is that for the forseeable future you’d be mad not to book any flights with any airlines on anything other than a credit card.
Stranded passengers soon came to realise that there are few safeguards for failed scheduled airlines and only consumer credit law provided any form of financial cushioning.
Astonishingly, most travel insurance policies do not cover airline failure. There is also no statutory cover provided by the government in these instances.
With threats that even more airlines are likely to go under in the next few months, what lessons can we draw from the Zoom fiasco to ensure you do not get stranded and out of pocket?
Lesson 1: Don’t assume it won’t happen to your airline
There was little indication that Zoom was in trouble and the airline continued to sell tickets right up to the point of collapse.
There were some indicators though, as some travel insurance firms refused to cover Zoom for failure.
Other popular airlines on the blacklist include Olympic Airlines and Alitalia (which co-incidentally filed for bankruptcy on Friday).
Lesson 2: Your insurance probably won’t cover you
While most travel insurance policies make grand claims about what they’ll pay out should you be delayed or miss your flight, many of them exclude airline failure (ie. if an airline goes bust) as a claimable reason.
Even travel insurance offered by credit cards such as Barclaycard will not cover you for airline failure.
Lesson 3: There are no umbrella bodies nor is there any legislation to protect passengers from failed scheduled airlines
Passengers whose failed flights are part of a package can smile, as all package holidays are covered by ATOL regulations which ensure the tour operator bears the brunt of the airline failure, and not the passenger.
Passengers who paid for their tickets with cash or – avoiding any credit card booking fees – with a debit card receive no such protection from any civil or government body.
Lesson 4: Always buy scheduled airline tickets with a credit card
The Consumer Credit Act ensures that passengers left stranded by a failed airline can reclaim the cost of the failed service from the credit card company.
This only applies for transactions over £100.
The other benefit of booking your flight with a credit card is that your card may offer other forms of assistance and insurance, should you land up stranded on foreign shores after the collapse of an airline that was supposed to take you home.
Many credit cards, such as the Barclaycard range, can provide emergency cash advances as well as worldwide assistance such as interpretation or sending a message home on your behalf.
 See all Barclaycard credit cards
Lesson 5: Credit cards offer the safest form of payment, but even they aren’t perfect
You may be legally entitled to a refund should your airline go bust before you’ve flown (or worse, half way through your holiday) if you bought your ticket with a credit card, but even here there are limitations.
The cost of your transaction must exceed £100. In the case of low cost airlines, this could amount to all, or most, of the entire ticket cost.
Some credit cards will also ask you to pay out the first £100 in the case of airline failure, which again could amount to the lion’s share of your ticket price.
Remember though, credit card companies are often more lenient than you’d imagine and a polite, reasoned call or letter to the company may result in them reimbursing you the full amount.
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