How good's your travel insurance if your airline goes bust?

Sam Jackson

June 22, 2009

November 13, 2018

How good's your travel insurance if your airline goes bust?

Over the last 10 years or so we've seen an enormous explosion in the number people making their own holiday arrangements by buying their flight, accommodation, and even transfers, separately. Despite the greater number of people who'll be having a "staycation" or buying a packaged holiday this year, making your own holiday package remains a popular way of saving money.

But how financially risky is it?

As little as two years ago British Airways made a record profit of £922m; today the near unthinkable is that there are serious questions as to whether BA has a future. With that in mind, and the holiday season fast approaching, it's the right time to see what happens if your chosen airline gets into trouble.

As a bare minimum it's worthwhile ensuring that you pay for any flights by credit card. However doing that won't mean that you'll get a quick refund - XL customers are being told that they can only get a refund after the date of their flight, even although there's no chance of the plane flying. But although you'll get your money back - eventually - this won't have covered you for any extra costs which you've incurred to make alternative travel arrangements - you may have to go through a different route, or at a different time, and late booking may well be much more expensive.

If you're flying as part of a package holiday the position's a bit different. Book with a UK company and then by law they have to belong to ATOL (which is "Airline Travel Organiser's Licence). This means that in the event of the company going bust you'll not, at the very worst, be left stranded at your holiday destination. However this is where things get the most complicated. To take an example, BA Holidays Ltd are ATOL members, but BA, because they only operate an airline, aren't. Neither are most of the well known air lines. Even if you can book the separate components of your holiday from entering one site, you'll probably find that strictly speaking you're dealing with at least two companies; one's the airline, the other the provider of accommodation.

Having the protection of ATOL helps a lot, but even it won't provide insurance against extra costs you might incur if the holiday you've booked isn't available and the alternative to the same destination is more expensive.

Given that you'll need to have travel insurance anyway - don't even think about going without it, the medical cover alone is well worth it - your best bet is to find travel insurance that covers you for the extra costs of a cancelled flight.

Some providers, even when buying their "Gold" policy, don't cover this. Others of course do, amongst these are Marks and Spencer - Annual Travel Insurance cover.

Once you've got that sorted, you can relax - you've just got that new holiday wardrobe to sort out now.

Sam Jackson

Money Dashboard

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