What happens if your airline goes bust?

Over recent weeks two airlines have spectacularly gone bust, leaving many passengers stranded and many others wondering whether they will ever see the money that they forked out for their holiday again. The global credit crunch and the soaring cost of fuel has left many budget airlines really struggling, and over recent weeks both airline Zoom and holiday firm XL have had to call it a day.

Whilst nobody wants to be left in the lurch if their holiday firm or airline ceases to operate after they have paid for a holiday or flight but before they have actually taken the holiday or flight it is best to know the ins and outs of what might happen so that you know where you stand in the event that his does happen to you.

For many the Consumer Credit Act 1974 will provide relief. This entitled you to a refund in this event providing the purchases was between £100 and £30,000. So, if you bought the holiday or flight using a credit card you will be covered for a refund. Likewise, if you used your debit card but the purchase was made using your overdraft facility you will still be covered under this act because you still would have made the purchase using credit.

If, however, you used your debit card to make the purchase of the flight and were not in the red then you may not be covered, and it is best to check with your bank. If you paid by cash or cheque you will not be covered. However, bear in mind that your travel insurance policy may cover you depending on which policy you took out, although most will not cover for budget airlines purely due to the higher risk of them going bust. The most comprehensive policies may provide some level of cover for this type of eventuality however.

If you booked a package holiday through an ATOL member travel agency then you are also safe, as you should be entitled to get a full refund. However, do bear in mind that refunds can take a long time to come through in some cases, so if you still want to head off on holiday on your planned date you may have to pay from your pocket and wait for the refund to come through. If you are not covered for any reason, such as if you paid by cash, you will simply have to chalk this down to experience and put up with the losses.

If you have not yet booked a holiday or flight but plan to do so you should bear in mind the problems that can arise if a firm goes bust. If you are booking a flight only try and book by credit card so that you know you are covered. If you are booking a package deal make sure that the website or travel agent is ATOL registered. It is important to do all that you can to protect yourself - it is bad enough losing your holiday without then finding out that you have also lost your money.