This is how to get a refund from a bankrupt airline

What happens if an airline goes bankrupt in the middle of your vacation and leaves you stranded abroad? Is there anything you can do to get a refund?

For Kesleigh Eysie, that wasn’t a hypothetical question. Back in October 2018, she found herself stuck in Paris after Primera Air suddenly filed for bankruptcy and canceled her flight home. Although the bankrupt airline promised a refund and even an additional stipend, it didn’t follow through. Instead, the carrier shut down completely. 

Shortly after she made her way back home after her French fiasco, her request for help landed in my inbox. Eysie hoped to find out if and how to get a refund from the bankrupt airline. 

Eysie’s experience should serve as a stark warning for travelers considering buying a low-cost ticket on a financially unstable airline. While the allure of a bargain-priced flight may be strong, it’s crucial to understand the potential financial risks involved. Without proper research, you could end up like Eysie, with a worthless ticket on a bankrupt airline and a significant financial burden. 

Editor’s note: With the October 3, 2024, predictions that low-cost Spirit Airlines may soon be filing bankruptcy, Eysie’s terrible tale, which I first published in 2019, is more cautionary than ever. This article has been updated to include warning signs of impending bankruptcy and what to do if an airline closes up shop, leaving you with a worthless ticket.

Mistake: Booking a flight on a nearly bankrupt airline

Eysie and her friend were on a tight budget as they planned their end-of-summer getaway to Europe. So when they found a fabulous deal on Primera Air for round-trip airfare to France, they quickly booked the tickets. Neither had ever flown Primera Air before, but, they thought, what could go wrong?

As it turns out — everything.

That great deal on the flights eventually morphed into an expensive misadventure.

“On the morning we were scheduled to fly home, I received a cancellation text,” Eysie recalled. “Primera canceled our flight and could not provide any future alternative to get home. The instructions told us that we should book a flight on a different airline for up to 1,500 euros.”

In a panic, the young ladies started looking for flights home. Eysie says the cheapest one-way, last-minute fare they could find cost $1,103 per person. It was an Aer Lingus flight connecting through Dublin. As college students, the cost was way beyond their budgets. But having no other choice, the friends booked and paid for their new transportation home using their credit cards.

Primera had not indicated any ominous reason for the sudden cessation of the route from Paris to Boston. So when Eysie arrived home, she had no idea the promised $1,103 refund was likely a meaningless gesture from an airline on the brink of bankruptcy.

A delayed refund and suddenly a bankrupt airline

By September, when Primera Air had not provided the promised reimbursement, Eysie began to worry. In fact, the airline had not even responded to her request. But she was still hopeful. She sent a follow-up email that also received no response.

And then came Oct. 1.

On that day, Primera Air abruptly announced that it was ceasing all operations. The airline was officially bankrupt, and its website quickly went dark. Primera had left thousands of passengers unexpectedly stranded around the world.

With the announcement, Eysie’s heart sank. She knew that the bankrupt airline would likely never refund her original ticket or the additional $1,103.

“I’m a graduate student, so this additional expense is financially crippling,” Eysie lamented. “We were advised that Bank of America might help — but it turned me down.”

In December, she had given up on both the bankrupt airline and Bank of America for help. That’s when she contacted our advocacy team for assistance.

What should your credit card company do for you when your airline goes bankrupt?

A year before Primera Air’s bankruptcy announcement, Air Berlin had similarly abruptly gone belly up. It suddenly ceased operations and declared bankruptcy, stranding thousands of passengers around the globe. It also left many would-be passengers who had not begun their journeys with worthless tickets.

At that time, I contacted the Federal Trade Commission (FTC) for guidance. A senior attorney at the FTC explained to me that credit card companies should protect their customers when a merchant goes bankrupt.

The Fair Credit Billing Act (FCBA) is designed to protect consumers against billing problems and fraud. When a merchant can’t provide the goods or services it sold, a consumer can file a credit card dispute. 

A bankrupt airline obviously can’t provide the flights it sold to its customers. The FCBA should protect those passengers from the financial impact of the bankruptcy.  

So why do some consumers hit resistance when they ask their credit card company to reverse a charge from a bankrupt airline or other merchant?

Time limits for credit card disputes

The Fair Credit Billing Act indicates a 60-day time limit for a consumer to claim a billing problem. It was on that basis that Bank of America initially rejected Eysie’s credit card chargeback dispute. But it’s important to note that the 60-day time limit is not set in stone. Your credit card company can always defend you against a billing problem. It is 100 percent at the company’s discretion.

And in the case of a bankrupt airline, tour operator, or third-party booking agent, our team knows that credit card chargebacks have often saved the day for the consumers who contact us. In 2023, the struggling tour operator Vantage Deluxe World Travel went out to business owing its customers $108 million. The travelers who had wisely paid for their trips with credit cards were in luck and most received a refund (with a little intervention from Consumer Rescue).

Many of those successful chargebacks have occurred up to a year or more after the initial charge. 

So when I read Eysie’s request for help, I was hopeful that she could be another success story.

Will Bank of America help retrieve a refund from the bankrupt airline?

By the time Eysie had contacted our team, she had resigned herself to the fact that the original ticket was the only flight for which she could be reimbursed.

That $487 refund would be better than no refund at all. I advised Eysie to file a formal credit card dispute over the charge from Primera. About a month later, she returned with bad news.

Eysie had received not one but three rejections from Bank of America for her request for a credit card dispute. These all cited the time-lapse from the original charge in April until Eysie contacted Bank of America in December.

It was clear from reading Eysie’s paper trail that Bank of America was playing by the book. The investigators were strictly following the 60-day guideline listed in the Fair Credit Billing Act.

I thought a more personalized review of this case was in order. So I contacted Bank of America on Eysie’s behalf.

Asking the credit card company to reverse the charge

I wrote the following request for review to the executive team at Bank of America:

Kesleigh Eysie requested a chargeback dispute with BOA but received a less than helpful response that time had run out for her dispute. I believe this response is in error as previously when Air Berlin went out of business I received guidance from the FTC that consumers could file chargebacks on the worthless tickets as per the terms of the Fair Credit Billing Act. [The attorney for the FTC] told me that in these unique circumstances (a bankrupt airline or other merchant) that credit card companies have ways to retrieve the money for their customers. In fact, all of the consumers who contacted us about Air Berlin won their disputes which were, in some cases, up to a year from the original date of purchase.

I went on to point out that a credit card company can always defend its customer.

Could you ask your team if they could review Ms. Eysie’s complaint and reconsider her request for a chargeback of the money paid to Primera Air? The response from BOA says they are “required” to work within a certain timeframe — this is not our understanding of how the FCBA can be applied in terms of a bankrupt airline or other merchant.

A friendly face at Bank of America

Soon after sending my email, I received a friendly phone call from an executive at Bank of America. Her resolution team had thoroughly reviewed Eysie’s case. And, although the lower-level team members had responded appropriately, the executive team recognized this as a unique situation.

Hi Michelle. Thanks again for forwarding the information on this to us. Here’s a quick recap of what we discussed. In line with the Fair Credit Billing Act, our cardholder agreement contains “Your Billing Rights,” which outlines a customer’s responsibility to file a claim within 60 days following the statement containing the disputed transaction.

As additional background, the general time frame allowed for chargebacks under the Visa/MasterCard chargeback guide is 120 days from the transaction date. When the merchant is bankrupt, that time frame is generally extended to 120 days from the expected date of service.

However, our Bank of America contact explained, Eysie did not file a dispute claim until December — several months past BOA’s deadline.

The good news: Here’s your refund from the bankrupt airline

But there was a clear explanation for that delay — Eysie had never heard of a credit card chargeback before. When she initially contacted our team, I encouraged her to file a dispute. Later, when the bank rejected the chargeback, I contacted Bank of America directly.

The team at Bank of America considered the fact that Eysie was unaware of her right to file a credit card dispute. Their team ultimately decided to refund Eysie’s ticket. Our contact explained:

In this case, we made the business decision to resolve this [in Eysie’s favor].

For general advice to your readers, you might point out that when cardholders have a problem with a charge, they should contact the merchant immediately. If they want to file a claim with their card issuer, they should reach out promptly – within 60 days of the expected date of service.

Eysie is relieved. She has learned a vital travel lesson about using low-cost budget and obscure airlines. Additionally, following BOA’s advice, in the future, she will alert her bank immediately when there is a problem with a charge.

Signs that an airline could be in danger of bankruptcy

Of course, no one would knowingly book a flight on an airline in immediate danger of ceasing operations and bankruptcy. However, there are always signs that a company is about to go belly-up long before it actually does. Savvy travelers should keep their eyes open for indicators that an airline is in danger of going bankrupt. 

1. Deeply discounted airfares

When an airline, cruise line, or tour operator begins to slash its rates so as to leave no possibility of any profit margin, travelers should take note. Sure, getting an unbelievable bargain on a flight or cruise is fun. However, these types of deals are often a sign of a desperate company attempting to create a cash surge. If you book one of these fares, you may end up going nowhere at all if the airline suddenly declares bankruptcy.  

2. Flight cancellations, dropped routes, inability to maintain a regular schedule

An insolvent airline will invariably exhibit a pattern of frequent flight cancellations, dropped routes, and a general inability to maintain a regular schedule. 

3. A search for a merger 

Most airlines don’t suddenly close up shop without first looking for alternatives to bankruptcy. Travelers should keep in mind that solvent airlines don’t typically go looking to merge with another carrier. When reports begin to surface that an airline is looking for a buyer or a merger, travelers should take note. 

How to protect yourself from losing your money to a bankrupt airline

For travelers who find a bargain too difficult to resist, there are still ways to guard against the consequences of a potential bankruptcy. These tactics can protect air passengers whether they know the airline’s financial status or not.  

Buy travel insurance that covers insolvency with or without bankruptcy

This lesson is one that many victims of the bankrupt tour operator Vantage Travel learned last year. Travelers can protect themselves from the financial impact of an airline, cruise line, or tour operator’s bankruptcy by purchasing a travel insurance policy that covers insolvency – with or without bankruptcy. 

That insolvency clause is crucial because, without it, a traveler may not be covered. Insolvent means the airline has lost its ability to pay operation costs. For the consumer, that is what’s most important. The policy must protect the passenger if the airline ceases to operate, whether or not there is a bankruptcy filing.

A comprehensive travel insurance policy will be invaluable if you’re mid-trip and your airline suddenly shuts down. With an insolvency clause, you can find a replacement flight home and file a claim for reimbursement, minimizing the impact on you.

File a credit card dispute (Sample letter)

Remember, the Fair Credit Billing Act protects consumers from bearing the financial brunt of a company’s bankruptcy. If you purchase an airline ticket and the carrier cancels your flight, no matter the reason, it owes you a prompt refund. If that doesn’t happen, you should swiftly file a credit card dispute with your bank. 

Keep your complaint short and stick only to the important details, preferably in bullet point form. 

Here’s an example of what to include in your credit card dispute:

• On [Date], I purchased a ticket on  [Airline] for a flight on [Date].  
• [Airline] canceled this flight on [Date].
• I’ve asked [Airline] via phone and in writing to process my refund without success.
• The Fair Credit Billing Act should protect me as the airline sold me a flight it did not provide. 

Tip: Do not add extraneous information or impassioned explanations of how the cancellation impacted you, nor should you add commentary about what you think is going on with the airline. These messy narratives often reduce the impact of your complaint and may even lead to delays in your case being reviewed. 

The credit card disputes that receive the most favorable attention are emotionless, concise and factual. 

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Ask Consumer Rescue for help

If you hit a wall of resistance with your credit card company or a merchant fibs to win the chargeback, send your request for help to the Consumer Rescue advocacy team. We have a proven track record of successfully resolving even the most difficult disputes. Our mediation assistance is always fast, friendly and, of course, the best part: free.    (Michelle Couch-Friedman, Consumer Rescue)