=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2002/09= /22/TR150948.DTL ---------------------------------------------------------------------- Sunday, September 22, 2002 (SF Chronicle) Large troubled airlines safer bet than small ones Ed Perkins "Should I buy a ticket on an airline that has gone bankrupt -- or one that's rumored as close to bankruptcy?" I'm asked that question a lot on call- in shows, for obvious reasons. And, surprisingly enough, my answer is that, for now, I believe you're reasonably safe buying a ticket on a bankrupt or shaky big airline -- but not necessarily on a small one. Airline bankruptcy isn't idle speculation anymore. US Airways has already filed for Chapter 11, and the trade press is full of rumors about possible bankruptcy by United and even American. The big airlines are all suffering, to one degree or another, and at least one additional Chapter 11 filing before the end of the year is probably more likely than not. Dismal as that scenario appears, I have three reasons to believe buying tickets is still reasonably safe: -- With a giant airline, bankruptcy does not mean shutdown. After filing, US Airways continued operating with hardly a blip. Down the line, you can expect some cutbacks in schedules and routes. But, for the most part, bankruptcy is transparent to consumers. Flights are operating and frequent flyer mileage is still good. That's not to say nothing worse will happen. But the idea is not for the airline to stop operating, it's for the airline to get out from under debts it can't repay and to lower costs that it can't cover out of current revenues. Before US Airways filed, it had lined up post-bankruptcy financing. Stockholders, bondholders, lessors, suppliers and employees may suffer, but not travelers. At least not the way the situation looks at the present time. But the story with smaller airlines might be different. Vanguard wasn't able to arrange any financing, so it had to stop operating -- at least for a while. I don't know of any other small lines that are in as much financial trouble as Vanguard was, but that too, can change. -- Even if an airline stops operating, you can still get to your destination. When an airline folds, the US Department of Transportation requires that any airlines still flying honor the failed line's tickets, at least on a standby basis. At most, the substitute airline can charge you up to $25 to cover reissue costs. Granted, you can't keep to your original schedule, but at least you don't lose all your money. -- You can protect your ticket purchase by using a credit card -- maybe. The papers and airwaves have been full of pundits advising travelers to use credit cards, but the chargeback provisions aren't as ironclad as some make it seem. In a recent report, Paul Hudson, executive director of the Aviation Consumer Action Project, noted possible problems: "Major credit cards such as Visa, MasterCard and American Express will credit your account if the vendor of the product or service you purchased defaults by failing to deliver. However, this may not hold when an airline is already in bankruptcy at the time of purchase. As of this writing, American Express has advised ACAP that it will not credit holders accounts for defaults on US Airways tickets, but Visa Bank of America has advised ACAP that it will credit customer accounts if there is a default on US Airways tickets. You need to check with your credit card company and try to confirm its policy in writing before purchasing airline tickets in the present environment of potential and actual airline bankruptcies." Hudson also recommends buying trip-cancellation insurance -- a protection that can add up to 10 percent more to your ticket but might well be worth the peace of mind. For his full report or more information on his consumer roup, visit www.acap1971.org. My comments about the three protections represent my best estimates. But I'm by no means 100 percent certain. If you're extra nervous, avoid shaky airlines, buy insurance, or both. E-mail Ed Perkins at eperkins@mind.net.=20 ---------------------------------------------------------------------- Copyright 2002 SF Chronicle