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Are the Airlines Financially Sound!

I've been working with the airlines for five years now and have gained a certain amount of insight that you may find useful... Since Sept 11 there have been a lot of changes in the Airline Travel Industry, some good, some not so good and some just plain bad!

For the purpose of keeping this short I will deal specifically with what you should know to help you protect your investment.

Last week I recieved an email from a client stating that she wished she had known that USAir is under Chapter 11 bankruptcy protection and she wishes that I had told her in advance. That was my fault because I assumed that everyone knows that the airline industry is in a dismal state right now. USAir and United are reorganizing under court supervision, Delta is teetering on the brink and just recently filed for Chapter 11 bankruptancy protection, American Airline is adding more seats to their planes, nullifying their campaign they started a couple of years where they removed seats to give us more leg room. The fact is that most of the major US carriers are struggling(A large reason is that the business class seats which at one time accounted for a large percentage of the airline revenue is now down as many businesses are no longer willing to pay those exhorbitant fares!). The new low-fare no frills upstarts are also adding to the woes of the major airlines...

You can add Delta to the list of airlines that have filed Chapter 11 and are reorganizing. Will they survive? Hard to say.. so you may want to protect yourself as outlined below..... the US Airlines are not doing so well...maybe I should fly a European Airline?. Well, that may not be much better. In 2002 Sabena went from a large international airline to a small european carrier(after Swissair bought them and promptly put both of them out of business. Swissair is now Swiss... Same planes, same staff. same logos, just a different name).

Olympic Airways, is now Olympic Airlines. Small unnoticable change, but necessary or else they would have had to disappear all together. They changed their name, sold off some of their other routes and presto... they can continute to operate(EXACT same planes-As they always said "Olympic" on them, not "Olympic Airways" they can change to "Olympic Transit" next and still wont have to change their planes' paint jobs!)...albeit on the edge...

As it stands, Olympic is once again on the verge. There are two companies that are interested in purchasing them which will be determined within a couple of months. Time will tell.

British Air is struggling...KLM and Air France merged and every airline is doing all the scrambling they can to make sure they can continue to exist.(keep in mind that their number one goal is to remain afloat, and as damaging as it is to our egos, we have to realize that getting you and I to Europe is not their number one priority and we will be sacrificed if necessary!).

In the US, the government has bailed out a number of airlines a number of times. Whether it will happen again, we don't know. On the other hand, in Europe, due to European Community Law, the government cannont bail out(or even own an airline-which was what got Olympic in trouble with the EEC in the first place. They were a government run airline losing hundreds of millions of dollars a year and being subsidized by the Greek Government. The EEC doesn't like that because the recognize that it would give an airline an unfair advantage which non-subsidized airlines cannot compete against. So... European airlines can go down just as quickly(if not quicker) than US airlines. what to do to protect yourself? I don't think the choice of airline makes a difference(As Bob Dylan said so prophetically sang 30 years ago "The first one now will later be last, for the times they are a-changin'". Any airline can disappear at any moment without any warning.

I would protect myself by paying by credit card(Congress has extended a law into 2006 that mandates other carriers to take the stranded passengers of a defunct airline on a standby basis for a fee of up to $25 each way. Of course, you'll ask...What if there are no standby seats? If that happens, then you may be stranded, but the chances of you being at the airport when the airline fails is pretty slim, you will most like hear about it before you even go to the airport.) As long as you purchase the ticket within two months of the airline going bankrupt you will be protected. Outside of the two months you will be fighting your credit card company, and probably won't win. So that is not much protection for someone who is diligent wants to plan in advance and purchase tickets to save money.(Do you ever get the feeling that the deck is stacked against us?)

I have never purchased travel insurance but it seems like it is becoming a better idea all the time. If I were traveling with my family and concerned about losing the money I spent on my vacation, I would consider it. In contrast, I flew to Greece 8 times last year and had I purchased insurance, it would have added up to more than the cost of my lost ticket. You'll have to weigh the costs vs. the benefits according to your own situation.

I've added a link to the Travel Guard Travel Insurance. All the information is there for you to read, apply to your own situation and determine whether it is worth the cost to you. I will not answer any questions on the insurance for the simple reason that I don't want to tell you something that is incorrect or has been changed and find myself in the middle of an unhappy insured passenger and an insurance company. That is about the last place in the world I would want to be....

I hope this has helped to outline the risks that you take purchasing airline tickets and help you to minimize your loses should your airline run into trouble.....

If you have questions about the airlines or tickets, please feel free to contact me.......




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