In the last fifteen years, holidaymakers have enjoyed a newly found freedom and unprecedented choice in holidays thanks to the low cost airlines and the internet. Searching the net for the best deals on flights and accommodation became popular, unsurprisingly so, as this is a highly flexible and convenient way of arranging a holiday. So far so good. But what happens when things go wrong?

In the last two years alone, 27 airlines have failed, including three business class only airlines: EOS, Maxjet, Silverjet, as well as Oasis Hong Kong and the Canadian low-cost airline Zoom. Then there was XL Leisure Group, with their charter airline, which has gone bust. The latest casualty is SkyEurope and more recently Flyglobespan. All blame fuel charges and the credit crunch

Whatever their reason, for holiday makers this means chaos and misery. This is especially true for the thousands of holidaymakers who travelled with XL last year and booked Flyglobespan without any ATOL protection (Air Travel Organisers Licensing) and may well be stranded abroad.

So what are your rights when an airline goes bust?

I booked through a Travel Agent/Tour Operator

All tour operators and travel firms selling air holiday packages in the UK are legally bound to hold an ATOL. This means that if a travel company, airline or hotel goes bust, help is at hand to get you home or if you can't travel you will get a refund.

So, travellers that booked their flight and accommodation as a package through an ATOL/ABTA or AITO bonded agent or operator will find that they are covered for the worst and that the CAA (Civil Aviation Authority) will be responsible for getting you home. 

Passengers will either get a full refund, or if they are already abroad, they can continue enjoying their holiday with the peace of mind that ATOL will be sorting out their homeward bound travel plans.

But consumers should be aware if they are booking only flights from a travel agent even if they ARE ATOL-protected. If you purchase a scheduled flight and are given either an e-ticket or paper ticket immediately or within 24 hours of the airline going bust, you will not be covered and the travel company is not legally bound to refund or repatriate you.

I booked through a travel agent or third party website

Protection depends on whether or not the agent has ATOL (Air Travel Organisers License ) bonding. If they are, you are entitled to a full refund but its not clear-cut. Some agents will only refund the cost of the flight if it was booked in conjunction with a hotel (in effect it became a package). Request for refunds for flight-only bookings may fall on deaf ears.

I booked my flight online via the airline's own website with a credit card

If you paid using a credit card, you are probably protected under the Consumer Credit Act, as long as the transactions is over £100, but it depends on the card issuer. Contact your card provider or bank and they will send you a claim form. You will need to provide evidence that your flight was cancelled.

So if you are not due to fly yet you must wait and see whether the administrators can get the planes flying once more.

However, there is no provision to cover the costs of getting home.

I booked my flights online via the airline's own website with a debit card

If you paid using a Visa or Maestro Debit card you may be protected on transactions over £100. You will have to check that your individual bank has signed up to the 'chargeback' procedure. However non-visa debit card payments will have no such protection.

Travel Insurance - Does it assist in getting a refund?

Unlikely. If you have stipulated this as a condition of your insurance you will be okay. Standard travel insurance policies, generally, won't have this provision.

Does Travel Insurance cover a package holiday?

Travel Insurance policies tend to favour package holidays over stand alone flight bookings when the firm goes bust. But it is worth checking. Your travel insurer will tell you to go to ATOL first.

Does Travel Insurance cover scheduled flight only travel?

It is not safe to assume that your travel insurance will cover airline insolvency. If the policy contains SAFI, then you are covered, but this is hardly ever the case.

Should I go ahead and book another flight, stay at my hotel and chase down the cost of the original flight later? Or should I wait for my refund to come through first?

If you are travelling quite soon, then go for it. Consumer Credit Act refunds can take several weeks and the same applies to travel insurance claims. So buy now and chase claims later.

Have you got a question not answered above? Leave a comment below.

27 December 2009