Increased competitiveness, cost pressures and high fuel prices are the most common causes of airline bankruptcy.
And the past 12 months have been a record-breaker in terms of bankruptcies, as nearly 20 carriers have ceased operation so far. But this number may increase before the end of the year, according to flight compensation company GIVT.
Locally South African Airways is on the slippery business rescue slope. So how is this different from outright bankruptcy? Business rescue will either rescue SAA through restructuring or develop a plan that would deliver a better return for creditors or shareholders than would result from immediate liquidation.
The impact of Thomas Cook’s bankruptcy earlier in August 2019, gives insight into why this controlled route for SAA is necessary. In addition to the thousands of passengers forced to cut their holidays short and the cost of their repatriation, the knock on effect in other tourism sectors such as hoteliers has been considerable.
The end of 2018 into 2019 has also seen a lengthy battle for local carrier CemAir - but they have since had their operating license renewed.
READ: CemAir set to resume flights with 7 of its planes after receiving renewed operating certificates
Other bankruptcies this year were Brazilian airline Avianca Brasil and Indian Jet Airways.
Adria - Slovenia ‘s national carrier, Germania, Icelandic WOW Air, as well as France’s Aigle Azur also disappeared from the market. Kenya's regional carrier Silverstone Air had its license suspended, while Cypriot Cobalt Air and Icelandic Primera Air aircraft have also been grounded.
Airlines gone but not forgotten
There are a number of airlines that have “come and gone” in the last decade - local low-cost carriers that disappeared in the past 10 years include Velvet Sky (2012), 1time (2012) and Skywise (2015).
OAG recently detailed the 10 most notable. The largest are airlines such as Air Berlin, Germanwings, Indian Airlines, Spanair, Batavia Air, Mexicana, Transaero, Niki and Tranasia Airways.
READ: Hello 2020! The biggest changes to the way we travel in the last decade
Know your rights when it comes to flight cancellations
Airline bankruptcy may or may not mean trouble when seeking flight compensation. Passengers are due compensation in the event of a delayed or cancelled flights, as detailed in the airline's conditions of carriage.
READ: What to do when your flight gets cancelled
In light of South African Airways' precarious future - some insurers and companies pulled back from booking travel with the embattled airline or offering travel insurance against bankruptcy.
To avoid compensation payment problems related to airline bankruptcy, the following steps can be taken beforehand, according to GIVT:
- Purchase your tickets by credit card - in the event of a bankruptcy a claim can be made directly with your bank. Once submitted and verified the bank can process a chargeback procedure for a refund.
- Use a travel agency to buy your ticket. Your flight will then form part of a travel contract and will be covered by their insurance. Your ticket costs can then be recovered from the travel agency or insurer.
- Take out your own personal travel insurance at your bank or insurance company that covers airline bankruptcy
READ: 'I look forward to not hearing from you again' - SA airline's response to customer
In order to make a claim, a complaint should be submitted to the carrier containing the flight number, date and route.
“The airline is required to respond to a complaint, as per Regulation EC 261/2004. The airline should list any such claims on its list of claims”, says Elzbieta Tyszka, Head of Law at GIVT, dealing specifically with flight compensation claims for delayed or cancelled flights, and denied boarding.
“If the failing carrier’s assets allow for these claims to be satisfied, then the passenger's situation is much better and they can expect compensation, and reimbursement of costs incurred in connection with the cancelled flight”, she adds.
Unfortunately, although the deadline for filing claims is the same for all creditors, the order in which claims are settled depends on priority. Consumers are only second out of four categories, consumer claims can only be addressed once all the first category claims are satisfied. There is an exception if the flight was operated by another partner airline. In this case the partner airline is liable for passenger flight compensation.
“This procedure may differ slightly in other countries however the general rule should be to protect debtors in the event of a creditor's insolvency. In many countries work is underway to create a fund from which money will be paid to cover passengers' claims in the event of airline, or travel agency bankruptcy”, says Tyszka.
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