Los Angeles Times
Oct. 3, 2008 07:18 PM
These are perilous times for customers of airlines, cruise lines and tour companies that may be financially wobbly.
When Aloha Airlines, ATA and GrandLuxe Rail Journeys stopped operations this year, thousands of travelers were stranded and collectively lost millions of dollars.
Although still rare, industry bankruptcies are growing in a tough economy. How do you protect yourself?
The best step is to pay with a credit card. Never use cash, a check or a debit card to buy or make deposits on a flight, tour, hotel, cruise or vacation package.
Other strategies, such as buying trip insurance, booking with a group and researching the travel provider, may help, but each has pitfalls. Here's a look at your options.
• Credit cards: If you buy a product or service with a credit card and fail to receive it, you are entitled to have the charge removed from your bill. It's that simple - almost.
Details about the law, called the Fair Credit Billing Act, are on the Federal Trade Commission Web site at www.ftc.gov/bcp/edu/pubs/consumer/credit/cre28.shtm.
Debit cards fall under the Electronic Fund Transfer Act and have limited protection. As a result, the FTC Web site says, "you may not be able to dispute a debit and get a refund for non-delivery or late delivery."
• Trip insurance: Policies that cover financial default of a travel supplier can be smart purchases, even though they may require that you first try to collect from your credit-card issuer.
But if you want this coverage, don't buy the policy from the tour operator, cruise company or airline you're using. Such policies generally exclude default of the travel supplier that sold you the policy. Instead, buy directly from the insurer.
Bill and Katie Miller of Plandome, N.Y., are among many travelers who learned this lesson the hard way.
They deposited more than $14,000, including $1,240 in trip-insurance premiums, with GrandLuxe Rail Journeys for a nine-night train trip. Eight days before the Sept. 3 departure, they learned the Colorado-based company, citing financial reasons, had stopped operating.
Judy Sutton, spokeswoman for Travel Insured International, the East Hartford, Conn., company that administered the GrandLuxe policy, confirmed that the Millers' insurance didn't cover default. Although premiums are non-refundable, she said, Travel Insured was allowing hundreds of customers who bought certain policies through GrandLuxe to apply their premiums to future trips.
But not the Millers. The offer applies only to policies bought after January, Sutton said.
• Group bookings: If you work with a reputable organization, you may be protected from default.
When GrandLuxe stopped running, Smithsonian Journeys, a division of Smithsonian Institution, had not yet forwarded trip deposits for its Oct. 22 train trip, Journeys director Amy Kotkin said. Fewer than 15 Smithsonian clients had booked the trip, and they will get their money back, she said.
• Research: Even industry insiders can't always tell if a travel supplier is about to fail. Foundering companies often shut down without warning after guarding appearances to the last day.
If travel insurers refuse to cover a company for financial default, that should raise a red flag, but it's not the last word. Airlines may remain in bankruptcy protection for years and still fly.
Here's where a travel agent can be your best friend. Savvy agents watch for signs of financial trouble, such as slow payment of sales commissions, and they often will take steps to protect their clients.
When Aloha Airlines, ATA and GrandLuxe Rail Journeys stopped operations this year, thousands of travelers were stranded and collectively lost millions of dollars.
Although still rare, industry bankruptcies are growing in a tough economy. How do you protect yourself?
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The best step is to pay with a credit card. Never use cash, a check or a debit card to buy or make deposits on a flight, tour, hotel, cruise or vacation package.
Other strategies, such as buying trip insurance, booking with a group and researching the travel provider, may help, but each has pitfalls. Here's a look at your options.
• Credit cards: If you buy a product or service with a credit card and fail to receive it, you are entitled to have the charge removed from your bill. It's that simple - almost.
Details about the law, called the Fair Credit Billing Act, are on the Federal Trade Commission Web site at www.ftc.gov/bcp/edu/pubs/consumer/credit/cre28.shtm.
Debit cards fall under the Electronic Fund Transfer Act and have limited protection. As a result, the FTC Web site says, "you may not be able to dispute a debit and get a refund for non-delivery or late delivery."
• Trip insurance: Policies that cover financial default of a travel supplier can be smart purchases, even though they may require that you first try to collect from your credit-card issuer.
But if you want this coverage, don't buy the policy from the tour operator, cruise company or airline you're using. Such policies generally exclude default of the travel supplier that sold you the policy. Instead, buy directly from the insurer.
Bill and Katie Miller of Plandome, N.Y., are among many travelers who learned this lesson the hard way.
They deposited more than $14,000, including $1,240 in trip-insurance premiums, with GrandLuxe Rail Journeys for a nine-night train trip. Eight days before the Sept. 3 departure, they learned the Colorado-based company, citing financial reasons, had stopped operating.
Judy Sutton, spokeswoman for Travel Insured International, the East Hartford, Conn., company that administered the GrandLuxe policy, confirmed that the Millers' insurance didn't cover default. Although premiums are non-refundable, she said, Travel Insured was allowing hundreds of customers who bought certain policies through GrandLuxe to apply their premiums to future trips.
But not the Millers. The offer applies only to policies bought after January, Sutton said.
• Group bookings: If you work with a reputable organization, you may be protected from default.
When GrandLuxe stopped running, Smithsonian Journeys, a division of Smithsonian Institution, had not yet forwarded trip deposits for its Oct. 22 train trip, Journeys director Amy Kotkin said. Fewer than 15 Smithsonian clients had booked the trip, and they will get their money back, she said.
• Research: Even industry insiders can't always tell if a travel supplier is about to fail. Foundering companies often shut down without warning after guarding appearances to the last day.
If travel insurers refuse to cover a company for financial default, that should raise a red flag, but it's not the last word. Airlines may remain in bankruptcy protection for years and still fly.
Here's where a travel agent can be your best friend. Savvy agents watch for signs of financial trouble, such as slow payment of sales commissions, and they often will take steps to protect their clients.
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