When you buy a plane ticket for an upcoming trip, you may be worried about having to wait in long TSA security lines or face flight delays, but you usually don’t have to worry about your airline shutting down.
It’s unlikely, but as recently as this month, budget Spirit Airlines made headlines for its imminent liquidation, following ongoing financial problems. With the summer travel season approaching, many passengers may be wondering: What really happens to their ticket if the airline goes bankrupt?
Here’s a closer look at what Spirit travelers should know and how anyone can protect their travel expenses this summer.
Spirit Airlines, which faces continued financial difficulties, was reported to have been on the verge of liquidation this month. In recent years, the airline filed for bankruptcy twice and was blocked by a federal judge from a $3.8 billion merger with JetBlue.
Spirit announced earlier this year that it planned to emerge from Chapter 11 bankruptcy in “early summer.” But that was before its financial pressures increased due to rising global fuel prices stemming from the war in the Middle East.
Following news of Spirit’s possible liquidation, the Trump administration stepped in with a potential deal aimed at saving the airline. If the deal goes through, the federal government would lend Spirit up to $500 million in exchange for guarantees that could allow the government to have significant ownership in the airline.
The goal of the deal would be to give Spirit Airlines additional runway as it continues to work toward emerging from bankruptcy and becoming a durable, well-funded airline, a person familiar with the matter told Yahoo Finance.
A Spirit spokesperson declined to comment, but specified that business at Spirit continues to operate as normal: “Guests can continue to book, travel and use tickets, credits and loyalty points as usual.”
There’s a lot of speculation about what the bailout would mean more broadly for the airline industry, but it’s good news for Spirit travelers who have already booked and paid for future flights.
That kind of sudden liquidation can significantly alter your travel plans. As recently as 2019, low-cost airline Wow Air suddenly ceased operations and canceled all flights, leaving passengers stranded and struggling to find new travel arrangements.
Any dissolution as abrupt as Wow Air’s is unlikely today, but Spirit’s situation is a reminder of the importance of protecting yourself when you spend significant amounts of money booking travel.
That’s especially true now. Even if your airline isn’t at risk of bankruptcy, this summer could cause more travel disruptions than usual, thanks to the continuing effects of the war in the Middle East. Rising fuel prices are already driving up airfares, and fuel shortages are causing flight cancellations for some airlines.
Here are some ways to protect your trip:
When you book a flight with a card with travel insurance, you’ll get some automatic protections in case of delays and cancellations. You’re more likely to find solid travel insurance benefits with travel credit cards, and typically, the higher premium the card, the better coverage you’ll get.
Below are some common coverage examples:
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Trip cancellation and interruption insurance: Get a refund if your trip is canceled due to certain covered situations, such as illness, injury, or even bad weather.
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Travel delay insurance: Recover unreimbursed expenses for delays lasting more than a set number of hours. This coverage can help you get reimbursed for necessary costs caused by the delay, such as meals and lodging.
Typically, you’ll only get coverage if you pay for your trip with the insurance credit card. The refund may also only be applied to non-refundable tickets or reservations. In most cases, if the airline cancels your flight, you should expect a refund directly, without having to take out insurance. If you do not notify the airline (or other travel provider) directly about a refund, you may not be eligible to receive a refund through travel insurance.
Be sure to read your card’s specific benefits guide to understand exactly what is and isn’t covered.
For example, coverage often differs for cancellations caused by the bankruptcy of an airline (or other travel company). While “financial insolvency” is specifically excluded from coverage by some insurers, it is a covered write-off under other policies.
Read more: How credit card travel insurance works
You may also want to consider third-party travel insurance, especially when booking a major trip or if you don’t have travel insurance benefits through your credit card.
The cost is usually a percentage of the total trip price, although it can also vary depending on additional factors. Just like credit card travel benefits, different policies cover different things. While trip cancellation and interruption insurance is common, coverage may vary for specific reasons, such as the financial insolvency of your airline.
Be sure to read your specific policy or contact your insurer directly to find out what is covered.
Read more: Air travel insurance: what it covers and when it is worth it
If an airline cancels your flight because it closes and you don’t have travel insurance, another option is to dispute the charge with your credit card company. You may qualify for a chargeback since you never received the services you paid for.
Guidance from the U.S. Department of Transportation suggests: “If an airline or ticket agent that has filed for bankruptcy refuses to refund you for a canceled flight and you used a credit card to purchase your ticket, you may be entitled to a credit from your credit card company under the Fair Credit Billing Act.”
Your credit card issuer may even tell you to do this if your card’s travel insurance doesn’t offer coverage for your travel company liquidation.
For example, the Chase Sapphire Reserve® trip cancellation and interruption benefit does not cover financial insolvency. But the card’s benefits guide specifies that you should “contact Chase Disputes or the number on the back of your Chase credit card if your trip has been canceled due to financial insolvency.”
You must make your claim as quickly as possible. The Department of Transportation says you must notify your issuer no later than 60 days after your first monthly statement showing the airfare charge. However, that deadline may not apply to trips you have booked in advance.
You’re not as likely to be able to successfully dispute the charge if you used a debit card to make the purchase, the department says, another reason to use your credit card instead of your debit card for travel purchases, even if you’re not eligible for travel insurance. Still, always contact your bank to ask about your options.