What happens to discounted tickets after an airline goes bankrupt? And
what about frequent flier miles and award tickets?
If a business is bankrupt then the deals made some time before
bankruptcy are void as preferences. For example, if a business borrows
£200 to be repaid on 1st of January next year, then borrows from
another creditor £1000 to be repaid on 2nd of January. If the business
meanwhile suffers a business failure so that on 31st of December they
have £600, what next? If they pay £200 to the first creditor as the
debt falls due, so they have £400 left over to pay a £1000 debt next
day, it is said to a preference. The first creditor has to repay the
whole £200 up front, and if he is lucky not to be prosecuted for fraud
then after the whole of assets and debts have been counted - £600 and
£1200 in this example - each creditor gets a percentage, in this case
50%, of the debt, so the first creditor gets £100 back and the second
creditor gets £500 rather than £400.
I understand that the period before bankruptcy when deals are void
varies with jurisdiction - sometimes it is 7 days, sometimes 10,
sometimes 14, sometimes 90...
Are services received from someone who then goes bankrupt also
preferences?
Especially the sundry discount and bargain offers. Much of the tickets
are paid with discounts of some sort. Are these valid? Or can the
bankruptcy trustees just go after passengers who have travelled on
discounted tickets and make then pay the balance to the full nominal
ticket fare?
Likewise the award tickets to frequent fliers. Are these just a gift
from an airline to a loyal customer? And therefore, if the airline
could not have afforded to make gifts to loyal customers, as evidenced
by bankruptcy, does it mean that every award ticket and upgrade
received for frequent flyer miles is stolen property? And people who
have travelled on award tickets and upgrades must pay the full fares
once the airline has gone bankrupt?
Or is it the case that frequent flier miles and points represent money
charged from fare-paying customers withheld by the airline (not used
for the service received first time) and kept for later use? In that
case, can it be said that customers holding frequent flyer miles are as
much creditors of the bankrupt airline as the employees entitled to
pensions afterwards over and above the salaries upfront, and therefore
part of the proceeds of the bankruptcy has to be given to the holders
of unredeemed frequent flier benefits, even though other creditors,
like employees losing their pensions, passengers losing fully-paid
tickets, fuel suppliers, aircraft manufacturers, air crash victims etc.
etc. thereby get somewhat less?
And how much is a flyable airplane worth? Some aircraft owners are said to worry that if they cannot find a customer to lease or buy their used aircraft, the airplane will cost money to park somewhere...
Many airports are said to charge fees per passenger.
Are the airport fees owed by passengers or not?
For example, suppose that you land in an airport and as the plane
taxies to the gate, the airline goes bankrupt.
What happens to the airport?
The plane cannot fly away because the airline cannot pay the wages or
pensions of the pilots, and also because the plane cannot tank unless
someone pays for fuel.
The airport must pay upfront to move the plane to where it costs the
least to keep and thereafter lose the value of a valuable parking spot.
They have no guarantee of being able to recoup their airport fees by
selling the aircraft, as warned above.
Can the airport state that since the passengers have not paid their
landing fees - they entrusted them to the airline as included in the
ticket price, but it has not reached the airport - the passengers must
pay the airport fees themselves over and above tickets paid already?
The passengers are locked up in a tube enclosed in a fenced-in field.
They would have rather limited choices. Except to claim that they had
not expected to need that amount of cash.
But then, can the airport enforce their claim against passengers the
way a restaurant could enforce their bills? An airport is in the better
situation, because the passengers are supposed to carry documents, and
be in passenger lists, so an airport can go after passengers who walk
out of the airport and fail to pay. And the airport could use the same
passenger lists to pursue passengers if the airline goes bankrupt after
the passengers have dispersed, but fails to pay the airport fees.
Or is a passenger who is let in a plane guaranteed a right to leave an
airport without ever paying extra, so that an airport that admits a
plane which will not pay landing fees is just a creditor for all the
fees?
Posts: 1,101
By: chornedsnorkack - 1st September 2005 at 17:12
What happens to discounted tickets after an airline goes bankrupt? And
what about frequent flier miles and award tickets?
If a business is bankrupt then the deals made some time before
bankruptcy are void as preferences. For example, if a business borrows
£200 to be repaid on 1st of January next year, then borrows from
another creditor £1000 to be repaid on 2nd of January. If the business
meanwhile suffers a business failure so that on 31st of December they
have £600, what next? If they pay £200 to the first creditor as the
debt falls due, so they have £400 left over to pay a £1000 debt next
day, it is said to a preference. The first creditor has to repay the
whole £200 up front, and if he is lucky not to be prosecuted for fraud
then after the whole of assets and debts have been counted - £600 and
£1200 in this example - each creditor gets a percentage, in this case
50%, of the debt, so the first creditor gets £100 back and the second
creditor gets £500 rather than £400.
I understand that the period before bankruptcy when deals are void
varies with jurisdiction - sometimes it is 7 days, sometimes 10,
sometimes 14, sometimes 90...
Are services received from someone who then goes bankrupt also
preferences?
Especially the sundry discount and bargain offers. Much of the tickets
are paid with discounts of some sort. Are these valid? Or can the
bankruptcy trustees just go after passengers who have travelled on
discounted tickets and make then pay the balance to the full nominal
ticket fare?
Likewise the award tickets to frequent fliers. Are these just a gift
from an airline to a loyal customer? And therefore, if the airline
could not have afforded to make gifts to loyal customers, as evidenced
by bankruptcy, does it mean that every award ticket and upgrade
received for frequent flyer miles is stolen property? And people who
have travelled on award tickets and upgrades must pay the full fares
once the airline has gone bankrupt?
Or is it the case that frequent flier miles and points represent money
charged from fare-paying customers withheld by the airline (not used
for the service received first time) and kept for later use? In that
case, can it be said that customers holding frequent flyer miles are as
much creditors of the bankrupt airline as the employees entitled to
pensions afterwards over and above the salaries upfront, and therefore
part of the proceeds of the bankruptcy has to be given to the holders
of unredeemed frequent flier benefits, even though other creditors,
like employees losing their pensions, passengers losing fully-paid
tickets, fuel suppliers, aircraft manufacturers, air crash victims etc.
etc. thereby get somewhat less?
And how much is a flyable airplane worth? Some aircraft owners are said to worry that if they cannot find a customer to lease or buy their used aircraft, the airplane will cost money to park somewhere...
Many airports are said to charge fees per passenger.
Are the airport fees owed by passengers or not?
For example, suppose that you land in an airport and as the plane
taxies to the gate, the airline goes bankrupt.
What happens to the airport?
The plane cannot fly away because the airline cannot pay the wages or
pensions of the pilots, and also because the plane cannot tank unless
someone pays for fuel.
The airport must pay upfront to move the plane to where it costs the
least to keep and thereafter lose the value of a valuable parking spot.
They have no guarantee of being able to recoup their airport fees by
selling the aircraft, as warned above.
Can the airport state that since the passengers have not paid their
landing fees - they entrusted them to the airline as included in the
ticket price, but it has not reached the airport - the passengers must
pay the airport fees themselves over and above tickets paid already?
The passengers are locked up in a tube enclosed in a fenced-in field.
They would have rather limited choices. Except to claim that they had
not expected to need that amount of cash.
But then, can the airport enforce their claim against passengers the
way a restaurant could enforce their bills? An airport is in the better
situation, because the passengers are supposed to carry documents, and
be in passenger lists, so an airport can go after passengers who walk
out of the airport and fail to pay. And the airport could use the same
passenger lists to pursue passengers if the airline goes bankrupt after
the passengers have dispersed, but fails to pay the airport fees.
Or is a passenger who is let in a plane guaranteed a right to leave an
airport without ever paying extra, so that an airport that admits a
plane which will not pay landing fees is just a creditor for all the
fees?