What Happens When an Airline Shuts Down?
It's not exactly the same every time.
On September 23, 2019, the British travel company Thomas Cook suddenly declared bankruptcy, meaning that their airline shut down, too. Hearing about thousands of stranded passengers, and the Civil Aviation Authority launching a repatriation effort, probably has you wondering what exactly happens when an airline shuts down.
How often do airlines shut down?
More often than you might think, actually. While people flying large, worldwide, big-name airlines probably have nothing to worry about, you might be at a higher risk if you’ve booked through a smaller airline. In March 2019, Iceland’s WOW Air shut down, also leaving passengers stranded. When that happened, Business Insider pointed out that it was the fifth European airline to go under since October of 2018. And sometimes airlines are in the position to close, but another, larger airline buys them, saving passengers the headache of not having a way home. This is what happened when Virgin America was purchased by Alaska Airlines in 2016. Plenty of these weird and wacky real airlines also ended up failing.
What happens to the passengers?
Well, in short, you don’t want to be a passenger on an airline that shuts down. All of the future flights, as of the shut-down date, are cancelled, which, yes, does strand the travelers who were on a trip at the time. In the case of Thomas Cook, “the UK’s Civil Aviation Authority is overseeing a large-scale, coordinated repatriation effort,” Stan Sandberg, co-founder of TravelInsurance.com, told RD. The reparation flights for Thomas Cook will be happening through October 6.
But Sandberg stresses that sometimes this won’t even happen. When the Danish Primera Air, and Iceland’s WOW Air, shut down, “passengers were left to fend for themselves,” Sandberg said. “In those circumstances, there may be little travelers can do. In the past, healthy operating airlines have offered stranded passengers discounted repatriation fares. And some travelers may be able to turn to their credit card companies for a credit. But neither of those are guaranteed.”
As for passengers that have yet to take off, they’re in less of a pickle, but it certainly is a nuisance. Unfortunately, they’ll have to find a new flight, and they may be able to get a refund if they booked through the airline itself. Look out for these signs you’re about to book a bad airline to avoid ending up in such a situation.
What happens to the planes?
When an airline shuts down, do its planes get sold for scrap metal? Fortunately, no. “What happens to the planes themselves depends on who the actual ‘owner’ is,” explained Scott Keyes, Founder and CEO of Scott’s Cheap Flights. “Oftentimes airlines are just leasing their planes, and so in a situation where an airline folds, their planes just revert back to whoever owns them.” But sometimes, the airline does own the planes, and when this is the case, “they’re typically sold or auctioned off as part of the bankruptcy and liquidation proceedings,” Keyes says, explaining that planes changing ownership is actually fairly common.
How can you avoid falling victim to an airline failure?
One of the best ways to make sure a failed airline doesn’t derail your travel plans is to book through a large, mainstream airline (though, of course, this doesn’t guarantee anything). And if you do chance it and book with a smaller airline, you’ll want to book directly through the airline, with a credit card, rather than through a third party. You’ll also want to look into travel insurance, which “can provide a measure of protection in the event an airline fails financially and ceases operation,” Sandberg says. “Many travel insurance plans offer trip cancellation and trip interruption coverage to protect against losses.” However, he advises that “travelers will want to look for policies that include coverage for a supplier financial insolvency or bankruptcy,” and “it’s important to note that basic or economy travel insurance plans typically won’t provide that coverage.” So you might have to spend a little more for peace of mind. No matter what type of airline you’re booking with, prepping for mishaps is one of the things all smart travelers do before a flight.