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The Sensible Traveler

Who covers Air Bankrupt?

No guarantees for tickets from a carrier since grounded

Email|Print| Text size + By Bruce Mohl
Globe Staff / November 7, 2004

With the number of airlines in bankruptcy protection growing larger every day, Pam Hess Gibson of Natick raised some questions that are probably on the minds of many travelers.

Concerned about the future of US Airways, Gibson said she had decided to cancel her US Airways affinity credit card and asked whether the Capital One Go Miles credit card was any good.

She also decided to use her remaining US Airways frequent flier miles as soon as possible, so she bought five tickets for her family to go to St. Thomas during April vacation. Now she's concerned the airline may not last that long.

"What will happen to my tickets, and vacation, if they go belly-up?" she asked. "I called two travel insurance companies to insure the tickets, but neither company will insure US Airways tickets now."

I'm afraid there's not much more Gibson can do except hope for the best. Her credit card company cannot bail her out if US Airways goes under because she bought the tickets using frequent flier miles. I'm not aware of any travel insurer willing to cover the financial default of US Airways or any of the other three airlines in bankruptcy protection, United, ATA, and Hawaiian Air.

The one hopeful sign for Gibson and others is that Congress is working on a bill that would extend the life of a law that provides some protection for passengers with tickets on an airline that ceases operations because of insolvency or bankruptcy.

The law, passed after 9/11, requires other airlines flying the same routes to carry these passengers "to the extent practicable" for no more than $25 each way.

The law is scheduled to expire Nov. 18, but an amendment extending it for another year was attached to the US Senate intelligence bill. The amendment is being pushed primarily by credit card companies, who are concerned they could be stuck with a giant tab for air service that has been purchased but not provided.

As for the Capital One Go Miles card, it has some nice features. It has a $19 annual fee and allows the owner to accumulate miles that can be used to buy tickets on any airline, purchase merchandise, or make charitable gifts.

Buying an airline ticket is particularly easy. The cardholder buys the ticket any way he wants -- directly from an airline, from an online travel agent, or from a regular travel agent -- and then has the miles-equivalent cost deducted from his miles account.

There are no blackout dates or seat restrictions. The only requirement is that the ticket be purchased with the Capital One card.

The number of miles needed to buy a ticket is calculated by multiplying 90 times the price of the ticket. Thus, a $200 ticket would cost 18,000 miles. More expensive tickets take far more Capital One miles. A $400 domestic ticket on American Airlines, for example, would cost 36,000 Capital One miles, but that same ticket would cost only 25,000 American frequent flier miles.

The other chief drawback to the Capital One Go Miles card is that a cardholder cannot pool his Capital One miles with his airline miles to buy a ticket. The Capital One miles, however, can be used to buy an airline ticket that will generate frequent flier miles.

Bruce Mohl can be reached at mohl@globe.com.

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