US Airways Dividend Miles (Pre-FlightFund Merger) - Legal background on bankruptcy and tickets

NOTE: Much of this information is now out of date. I will try to post an updated primer. I'll probably just start a new thread, so as not to lose any of this discussion.

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In response to a suggestion by CPRich, I put my insomnia to semi-good use and spent an hour or two crusing the web and flyertalk archives to try to get a sense of what would happen if.

I would like to start by saying (1) I don't believe the collapse is imminent. It may happen, but I personally don't think it will happen soon. (2) In my experience, things usually work out pretty well. Another airline is likely to buy the frequent flier program, honor the miles and the status of current US Air account holders. For instance, see USA Today (http://www.usatoday.com/travel/news/2002/2002-08-20-frequent-flyer.htm) (3) I'm not a lawyer, and not even a very smart guy about these topics, so I'm thinking I am more of a moderator. If people correct or update this, I'll edit. I'd rather not start a discussion about any of these three points here. If you want to talk the liklihood of US folding or someone else buying the miles, feel free to do that on any of the 100 other threads that discuss that. Please try to keep this thread to the topic of what is the worst-case scenario and what would happen if it did come to pass.

1. Purchased tickets on an insolvent airline.

There is no question about this. No matter if it is an e-ticket or a paper ticket, all airlines travelling this route are obligated to honor tickets by the defunct airline. They can charge a nominal fee of up to $25 a segment to cover costs of processing tickets, but that is it. This comes from Section 145 of the Aviation and Transportation Security Act. You can read the full act on thomas.loc.gov (http://thomas.loc.gov/cgi-bin/query/z?c107:S.1447:). You can read the relevant section and some other interesting discussion in this old thread (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum51/HTML/004036.html). You can download a very informative memo from the good folks at the Department of Transportation in PDF format (http://airconsumer.ost.dot.gov/rules/20021114.pdf). It is also available in a variety of slightly different forms from several different bankruptcies.

You can also obtain a refund of your ticket price from the credit card company.

2. Award tickets issued on the insolvent airline.

Several people have posted that they will be honored under the rules cited above. At least one person has claimed that DoT has formally ruled that FF tickets are the same as any other. I can not find anything I find convincing on this subject. You are welcome to provide anything you think is conclusive. Randy Petersen (http://www.insideflyer.com/articles/article.php?key=1156) doesn't think there is a conclusive answer either, and he's a pretty smart guy.

Several people have pointed out that if you have ticket in hand for an award ticket, it pretty much looks any other ticket and you could probably get another airline to honor it. I would agree with the probably, but you could get stuck in Bora Bora when they didn't like taking it on the return leg, so I'd prefer something more definate.

When there is no rule or law, there is opinion and past experience. All of the rest of this section should be taken with a grain of salt, but here is what fellow FTers said on this topic earlier this year:

A very credible source on the United forum claimed that Star Alliance carriers wouldn't honor United tickets (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum50/HTML/018555.html) if they went bankrupt. The same conclusion (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum50/HTML/018452.html) was reached in another thread. Another person was told by a UAL employee their partners wouldn't honor reward tickets (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum50/HTML/018627.html).

On the other hand, long-term poster gleff reports that his uncle eventually got a reward ticket from Ansett honored by UAL (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum50/HTML/016896.html)

3. Award travel issued on a partner airline (such as Quantas) by an insolvent airline's frequent flier program.

This seems to be the least secure method. The exchange between the partner airlines seems to take place at or near when you fly. There are a number of reports of partnerships breaking up and long-awaited reward travel had to be rescheduled. The partner would appear to the option not to accept you for travel and return your miles. That would leave you with miles on a defunct program, but no ticket. I'm too lazy to search for specific examples, but I know I've read them when partnerships break up, which is a similar situation, I think.

(edit to fix link, add direct thomas link to law and add a section on past discussions to the #2 section)

[This message has been edited by MikeLaw (edited Jan 12, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">* Will other airlines honor my award ticket?

Nervous about losing your miles, you book an award ticket on a troubled airline. Then it stops flying, stranding you. What now?

There's no guarantee another airline will take your ticket.

Under U.S. Department of Transportation rules that were recently extended to February 2004, airlines are required to take passengers stranded by a bankrupt airline as standbys, subject to space and a $25 fee.

But the DOT "has not addressed" the issue of whether award tickets are covered by these rules, says DOT spokesman Bill Mosley, adding, "Airlines are setting their own policies on accepting frequent-flier tickets."</font>

http://www.latimes.com/travel/news/insider/la-tr-insider30mar30, 0,1709984.column?coll=la-travel-travel_insider (http://www.latimes.com/travel/news/insider/la-tr-insider30mar30,0,1709984.column?coll=la-travel-travel_insider)

[This message has been edited by NJUPINTHEAIR (edited Jan 11, 2004).]

Personally, I believe that you are better off having a ticked issued by the partner not having a ticket for travel on the bankrupted and soon to be liquidate airline.

I believe that the spirit of the legislation that you cited above was to assist those air travelers who held tickets on a bankrupt airline whose has ceased flying STRANDING them at a destination far from home, and was not meant that any airline was required to fulfill the contract of carriage for that passenger if their journey had yet even to start!

As the article and others make clear, there is considerable resistance from the airlines to even honoring tickets from a bankrupt airline whose passenger are stranded, let alone an obligation for them to convey them on their long awaited trip when same has not even started.

On the other hand, I believe that once you are ticketed on another United States incorportated carrier having received such tickets as a result of your cashing in your FF miles from a bankrupt and now soon to be liquidated airline, the other carrier, whether they are bankrupt or not, could very well be obligated to convey you on your journey.

Regardless of when they are to receive consideration from Dividend Miles for your award travel -- whether at the instant you made the reservations, or at some close to your anticpated departure -- may prove immaterial to their obligation to convey you to your destination. After all, they have permitted a ticket on their airline to be issued to you, and you -- in good faith -- allowed fro your FF miles to be deducted from your account. Moreover, they or their agent -- US Air -- caused a ticket to be issued to you for a specific flight.

If the partner -- United in this scenario -- has not received actual cash payment from US Air until some time close to your travel date, and then US Air fails to pay United for that travel and then liquidates, then United becomes a creditor in US Air's liquidation, not you.

Just my 2 cents.

[This message has been edited by NJUPINTHEAIR (edited Jan 11, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NJUPINTHEAIR:
I believe that the spirit of the legislation that you cited above was to assist those air travelers who held tickets on a bankrupt airline whose has ceased flying STRANDING them at a destination far from home, and was not meant that any airline was required to fulfill the contract of carriage for that passenger if their journey had yet even to start!</font>

I am pretty sure you are mistaken about the intent. I can't speak for the Congressmen who voted for the law, but it is clear that DoT intended it to apply to people who haven't started their journey. Otherwise, the provision that you have 60 days to get a new ticket doesn't make much sense. Who would wait 60 days if they were stranded?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NJUPINTHEAIR:
On the other hand, I believe that once you are ticketed on another United States incorportated carrier having received such tickets as a result of your cashing in your FF miles from a bankrupt and now soon to be liquidated airline, the other carrier, whether they are bankrupt or not, could very well be obligated to convey you on your journey.</font>

This does not appear to be the case. I know of cases where partner awards were not honored even though they were already ticketed. When the partnership broke up, you got your miles back, but the ticket isn't honored. I know I've read threads on this, but I can't seem to find them now. I'll do some looking.

(edit to change quoted bold tags for beauty's sake)

[This message has been edited by MikeLaw (edited Jan 12, 2004).]

MikeLaw:


I understand your first point, but it was not I who read the rules to apply only to stranded passengers, but the LA Times reporter... However, that would not be the first time a reporter got something wrong. Nevertheless, it makes sense concerning a stranded passenger, but not with respect to one who has not started their journey..

After all, why else would a DOT official state, contrary to some of the reports made in this forum, that they have NOT ruled on whether award tix are so protected under the rules that you have indicated?

As for point # 2, if that did occur, I believe that such instances occurred with respect to non-US airlines, perhaps after the Sabena-Swissair debacle, or Ansett's bankruptcy filing and its Star Alliance carriers. If my assumption is correct, your belief that a United award tix would be worthless could be incorrect.

Of course, we are all flying by the seat of our pants here, but I believe that United would either be required to honor the tix or would do so because of good business sense/negative publicity, as it is clear that they will emerge from Chap 11 in one form or another, either with the present pension plan intact due to a waiver from the Fed Gov't or else having it dissolved by the Bankruptcy Court.

Of course it helps if your spouse is a bankruptcy attorney who often works on these and similar matters. http://www.flyertalk.com/forum/smile.gif

Well, I tend to prefer original source material, and I read the DoT notice as stating unambiguously that "confirmed tickets" must be honored by any carrier on the same route "on the scheduled date of travel." I don't place much faith in a reporter's interpretation. I'd rather have a frequent FT poster's interpretation than one from a reporter and I'm not too crazy about FT posts as fact.

In terms of the DOT quote, I believe that applies to my scenario 2 only. I think that scenario 1 ticket holders are golden on any airline, I think that scenario 2 has not been ruled on by anyone.

I do agree that the most valuable asset of US will be us collectively and I am certain that airlines will offer to comp status and pick up miles and otherwise kiss butt in an effort to win our business.

Interestingly enough, my spouse is an attorney whose practice includes bankruptcy. Alas, I don't thnk she really works on any "similar matters".

I have found some interesting old posts, but I have to go board a plane. I'll update my original post later.

I updated the original post with a direct link to the actual law and added some good discussions from the United forum to the section 2 piece.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MikeLaw:

I updated the original post with a direct link to the actual law and added some good discussions from the United forum to the section 2 piece.</font>


With respect to Point # 2, the sources that you have cited -- assuming for the moment that they are correct -- would have been FOREIGN airlines, some of which may have been owned in whole or part by that country's government. That is not an analagous situation to United's being obligated to fulfill its contractual agreement to USAir -- as both are US incorporated carriers. Moreover, Gleff's uncle I am sure did get a reward on United, as the following article from the IHT clearly indicates that the Star Alliance dealt with Ansett's bankruptcy by making the Business Decision to have all Star carrier honor those award tix.


See:

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">What to do in the face of a possible Chapter 11

Roger Collis
International Herald Tribune

Frequent fliers are not considered creditors under Chapter 11 terms, which means that they can continue to redeem their miles without restrictions.
.
Nevertheless, it might be good to start redeeming miles for flights or upgrades with United or its 14 partner carriers in the Star Alliance, such as Air Canada, SAS, Lufthansa and Singapore Airlines.
.
Outside the United States you have far less security if an airline goes bankrupt. You'll recall the woeful tales of stranded passengers when Swissair and Sabena went bankrupt last year. Both companies were subsequently bailed out and restructured by shocked governments.
.
When Ansett collapsed, the Star Alliance made a commercial decision to honor frequent-flier miles, and the government asked Qantas to assume financial liability by setting up a fund, which travelers are still paying for each time they buy a ticket in Australia.
.
Similarly, during merger talks between Air Canada and the bankrupt Canadian Airlines - when Air Canada at one point demurred at taking on the other carrier's frequent-flier miles - the government intervened, and Canadian members' mileage accounts were transferred to Air Canada.

Page 2 - 3.</font>

I have not researched Point number 1 -- and nor has my wife -- but there has been incredible resistance on the part of the other US carriers to agree to do this even when an individual is stranded. I really doubt that they would be forced to pony up with a free award seat -- let's ay NYC to London -- at some future date for $25 because someone held the same US Air reward tix. The $25 consideration for such a seat is laughable, and I doubt that such an interpretation will be enforceable, especially since all domestic US airlines are operating on such thin margins.

Fortunately, we don't have many US Air miles, and those that we did, we have dumped into United tix. Others may do as they see fit, but I would not count on holding US paper with expectation that a competitor that you did not patronize should see fit to award you with a reward seat on that airline, just because a law -- whose interpretation will certainly be subject to review -- is interpreted by some that they do.

In addition, such an interpretation can be termed clearly ludicrous in that the DOT has refrained from stating that an award tix on a defunct carrier's alliance partner may not have to be honored, but that very same award tix issued by the defunct carrier on its own metal prior to its liquidation must be accepted by that very same partner -- or any other air carrier -- under the very statute that you cite, even though to my knowledge there has never been such a judicial ruling as to the constitutionality of that provision (an unlawful "taking" of property without fair and just compensation comes to mind) and moreover, this must be done for an award tix that the person has not even yet commenced his or her journey, and thus has ample time to make other arrangements or plans.

I would not bet the farm on that.

Obviously, the best way to get use of one's miles is to use them sooner rather than later, but I would not bet the farm on a little employed -- if ever? -- provision that has not been judicially tested.



[This message has been edited by NJUPINTHEAIR (edited Jan 12, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MikeLaw:

I updated the original post with a direct link to the actual law and added some good discussions from the United forum to the section 2 piece.</font>

This is one of the applicable docuements concerning the provision that our readers should review:

http://dms.dot.gov/general/orders/aug02/183624_web.pdf

Now, I have taken a little time to review this document and its interpretation of that provision and I ask of you two questions:

1). Did Vanguard have a Frequent Flier program?


2). Has the term "to the extent practicable" ever been judicially reviewed?


If Vanguard had no FF program, then it had no FF tix that other carriers were required to redeem and therefore, the complaints that the DOT received from disgruntled Vanguard passengers did not include what could be loosely described as that "form of currency."

If my assmption is correct, then there is obvious reason for the DOT not as yet having opined on an alliance carrier's obligation to convey passengers of its liquidated partner even if they hold a ticket on the still flying partner's aircraft, as such a decision might impact the very question that you presented in the first place and which you argue is clearcut.

Although the language of the provision states "a ticketed passenger" and you certainly have an argument that it includes all ticeketed passengers, one might just as vocieferously argue that Congress intended such instances where people actually paid cold hard cash for those tickets, and a court might not buy the argument -- literally and figuratively -- that use of FF miles on an award tix constituted what Congress had intended.

Moreover, it seems clear to me that the term "to the extent practicable" is open to and subject to a very wide interpretation, and you can bet your bottom dollar, that the airlines still flying are not going to pony up even an award seat for a former competitor's customer for a mere $25.00.

Inasmuch as Randy cannot seem to get a clear answer on this matter from the DOT, I am even more convinced that reliance on this interpretation is foolish in the extreme.

Finally, even when the DOT was forced to issue such a directive -- link above -- that concerned individuals that were either stranded or clearly lost their $$ in such an airline bankruptcy, it is obvious by the need to release such a directive that the resistance of those airlines still flying was enormous.

Therefore, how can you realistically argue for the proposition that a reward tix on a defunct carrier must be honored by its competitors when the DOT studiously has refrained from making any statements concerning the viability under the provision that you cite, of reward tickets after an airline's bankruptcy? Such an event is even more removed from that of either a stranded passenger or one who has lost their money from an airliine's declaration of bankruptcy.

I still belive that this argument would not be accepted by either the airlines, the courts, the DOT or even the general public!

After all, juries and public opinion are made up of the man and woman on the street, and many will probably look askance at various individuals whining about their loss of their vacation reward tix, when in the context of the subject airline's demise, many people would have lost much more than their vacation plans; rather, the loss of countless jobs and livelihoods and the impact on those communities so affected I belive would be uppermost in their minds, and such argumetns would get short shrift indeed.

As I said, I would not bet the farm on this assertion, but after all, I am only one voice and I may be absolutley 100% wrong about this matter. Just my 2 USAir FF miles on this issue. http://www.flyertalk.com/forum/wink.gif

[This message has been edited by NJUPINTHEAIR (edited Jan 12, 2004).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NJUPINTHEAIR:
This is one of the applicable docuements concerning the provision that our readers should review</font>

The NOTICE you quote is one of several issued by the DoT on this subject. The one that I originally linked in my first post is from the National Airlines bankruptcy and refers to the notice that you link to.
It has two paragraphs or more discussing the $25 figure, mentions that several airlines objected to the figure. They say that they haven't seen any evidence that would justify a higher charge and gave the airlines 7 days to provide a justification for a higher figure and vaguely alludes to taking action against carriers who don't behave.

The DoT has very broad powers to regulate airlines which are given remedies of administrative appeal and the standard to receive judical review of their actions is very difficult to meet. I do not think very many DoT rulings have been contested in federal court, but I'm quite sure that few airlines would seek that remedy.

Remember that airlines are only required to transport these passengers on a standby basis, so the incremental cost for those passengers is quite low. The plane would cost essentially the same to operate with the empty seat as it would with the standbv passenger on it.

You will also find that there is some discussion from the DoT on the subject of "to the extent practicable" in the docutemnt I cited.

You also seem to refer to award travel in the context of my case #1. To clarify, I believe that the rules cited for case 1 only apply to paid ticketed passengers. I think there is no law, mptice or order directing airlines to carry people on free tickets. In fact, in the National memo I cited originally, they suggest that carriers could require passengers to provide receipts proving the purchase of e-tickets before they let them travel.

I understand the distinction you draw between international carriers and domestic ones. I merely intended to point to other discussions of similar situations. When there is no clear ruling or law, all we can do is speculate, so I just hoped to point to similar cases from the past.

MikeLaw:

I am in agreement with you that Point 1 does not apply to reward travel and that the DOT document that I had cited appears to only apply to situations described in Point 1.

I am not familiar with administrative law per se, and certainly not before the DOT, but I wonder what the DOT actually did with respect to those airlines that apparently did not comply with that rule in the Vanguard bankruptcy.

You state that you doubt that the airlines took the DOT to court over that matter, but it may well be that the DOT levied no or minimal fines for those violations and that an individual's recourse is against a specific airline. I do not know, do you?

Nevertheless, I mention that document to highlight the resistance that the airlines have demonstrated with respect to an individual having a paid ticket on a defunct airline and that DOT ruling. It certainly will be even more demonstrable if they are to accommodate passengers flying on a defunct airline's reward tix. Again, the documents that you have cited involved purchased tickets, so the definition "to the extent practicable" can and quite likely will take on another meaning in the context of non-paid award tix. Given that the DOT has failed to address whether award tix are covered by these rules, and appears content to permit the airlines to create their own policies in that regard, I would hesitate to cash in an award on US Air stock, as opposed to United stock, because United may -- either as a business decision or as a legal obligation -- honor the award tix for its planes, even if they were "purchased" with USAir FF miles.

You seemed to have indicated that cashing in one's US Air FF miles for a US Air ticket would be superior to that of an award on United. I don't believe so, but if I misconstrued the original thrust of your argument then there is no daylight between your views and mine.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NJUPINTHEAIR:
I wonder what the DOT actually did with respect to those airlines that apparently did not comply with that rule in the Vanguard bankruptcy.</font>

As best I can tell, they never fined anyone. The database of their administrative actions is voluminous and I do not profess to an expert, so I may have missed it or the sanctions may have been unpublished. I can't say.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NJUPINTHEAIR:
You seemed to have indicated that cashing in one's US Air FF miles for a US Air ticket would be superior to that of an award on United. I don't believe so, but if I misconstrued the original thrust of your argument then there is no daylight between your views and mine.</font>

I readily admit that it was nothing but speculation on my part and I have no confidence in the accuracy of that guess. As a practical matter, UAL is likely to honor the ticket despite the lack of any law requiring them to do so. Given that an award ticket on US is only possibly covered by law, one might prefer UAL tickets and I have no argument with that.

MikeLaw:

As I said, I believe that one may have the law on one's side if one must argue that UA owes your a reward flight.

It would go something like this:

1). You as seller of your FF miles gives them to intemdiary USAir in return for a UA ticket.

2). USAir issues you a UA ticket based upon their agreement with UA -- which although you are not a party to, has been contracted at least in part for your benefit, and of which your are aware of some terms, the main one being USAir's ability to issue tix on United flights.

Timeout -- I don't even fly USAir, so anyone chime in who knows who actually issues the UA tix, and on what stock -- USAir or UA. If it is UA, then they are obligated, pure and simple.

3). IF USAir issue a UA tix, at the very least, UA is aware that USAir has acted as its agent in issuing you the ticket, in return you have paid USAir your FF miles, which USAir is obligated to forward in some $$ amount to UA.

4). If USAir fails to provide the consideration that you in good faith "paid" to USAir for the United tix, and fails to pay UA in turn for those tix, then you as an innocent seller/purchaser will likely not have your implied contract with UA vitiated by the court. It would appear that this would boil down to a simple case of a contract dispute between a party and its agent and not you.

As such, I beleive that since UA was aware that USAir had issued you a UA ticket, but for one reason or another did not receive the consideration for that ticket from USAir until such time as your flight nears, and then USAir cannot meet that obligation to UA, then the dispute would be between USAir and UA, and not you as you have long fulfilled your part of the bargain, and most probably have made reservations etc., in reliance of that bargain. Equity would dicatate that as between you -- an innocent who properly provided consideration for the deal -- and two corporations who have a dispute just how much and who should pay for the ticket that had been issued to you, I think that it is likely that the ticket would be safe from being nullified.

As I said, I think that UA would become a creditor in any 2nd bankruptcy/liquidation of USAir with respect to any tickets that were issued by USAir on behalf of UA, but which UA had never received any consideration from USAir for same.

Having said this, just lets hope this does not occur!

The passenger is a third party beneficiary in the contract between UA and US.

Others have posted that the ticket would be issued on US stock. I have no experience in this area.

....1. Purchased tickets on an insolvent airline.

There is no question about this. No matter if it is an e-ticket or a paper ticket, all airlines travelling this route are obligated to honor tickets by the defunct airline. They can charge a nominal fee of up to $25 a segment to cover costs of processing tickets, but that is it. This comes from Section 145 of the Aviation and Transportation Security Act. You can read the full act on thomas.loc.gov (http://thomas.loc.gov/cgi-bin/query/z?c107:S.1447:). You can read the relevant section and some other interesting discussion in this old thread (http://www.flyertalk.com/pasttalk/ftpasttalk_forum/Forum51/HTML/004036.html). You can download a very informative memo from the good folks at the Department of Transportation in PDF format (http://airconsumer.ost.dot.gov/rules/20021114.pdf). It is also available in a variety of slightly different forms from several different bankruptcies.

You can also obtain a refund of your ticket price from the credit card company....

Just wanted to point out that Section 145 expires 18 months after passage. To the best of my knowledge, section 145 was extended once. But I believe that extension has also expired.

I suggest reading US Terms of Transportation available on the US website and the UA Contract of Carriage available on the UA website. From what I see, US terms indicate that when US acts as an agent of another carrier and issues a ticket for travel on that carrier, then that carrier's contract of carriage prevails. From UA's contract of carriage, I note two things:
1. B) ONCE A PASSENGER OBTAINS A TICKET REFLECTING CONFIRMED SPACE FOR A SPECIFIC UA FLIGHT AND DATE, EITHER FROM UA OR FROM ANY AGENT OF UA, THE RESERVATION IS CONFIRMED EVEN IF THERE IS NO RECORD IN UA'S RESERVATIONS SYSTEM.

2. G) CARRIER IN DEFAULT
NOTWITHSTANDING THE PROVISIONS OF THIS RULE, UA WILL NOT ACCEPT FOR ANY PURPOSES UNDER THIS RULE PASSENGER TICKETS OR RELATED TRANSPORTATION DOCUMENTS ISSUED BY ANY CARRIER WHICH IS IN SUBSTANTIAL DEFAULT OF ITS INTERLINE OBLIGATIONS OR WHICH VOLUNTARILY OR INVOLUNTARILY HAS BECOME THE SUBJECT OF BANKRUPTCY PROCEEDINGS (THE "DEFAULTING CARRIER").
EXCEPTION: NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH, TICKETS ISSUED BY THE DEFAULTING CARRIER OR ITS SALES AGENT PRIOR TO THE DEFAULT, WILL BE ACCEPTED SOLELY FOR TRANSPORTATION OVER THE LINES OF UA, PROVIDED SUCH TICKETS WERE ISSUED BY SUCH DEFAULTING CARRIER IN ITS CAPACITY AS AGENT FOR UA AND SPECIFIED TRANSPORTATION VIA UA. WHEN TICKETS ARE ACCEPTED, NO ADJUSTMENTS IN FARE WILL BE MADE WHICH WOULD REQUIRE UA TO REFUND MONEY TO THE PASSENGER.

The two items above were taken from different sections of the UA contract of carriage (the second item actually is part of the Rule 240 provisions) so I may be guilty of taking things out of context, but there are other sections in the contract that appear to link the two. I'm not an attorney, but it strongly seems to suggest that as long as you ticket on UA prior to US filing for bankruptcy, you will be OK. After US files for bankruptcy, even if it is chapter 11 and US continues to operate, UA is under no obligation to accept the tickets. Given this, I am more optimistic than I was earlier that UA will honor US award tickets issued right now. I believe that if US returns to chapter 11, UA will stop accepting award reservations from Dividend Miles.

Just wanted to point out that Section 145 expires 18 months after passage. To the best of my knowledge, section 145 was extended once. But I believe that extension has also expired.

That is true -- it has now expired. The entire initial post could use an edit, as much new information has come to light. If I get the time, I will do so. Many think that airlines would continue to honor tickets on a stand-by basis, but there is no current law that would require them to do so.

EDIT: I have read elsewhere it was extended with a new name. I'm still researching.

Given this, I am more optimistic than I was earlier that UA will honor US award tickets issued right now. I believe that if US returns to chapter 11, UA will stop accepting award reservations from Dividend Miles.

Randy has stated publicly twice that he thinks that award tickets on UA are safe no matter what. I'm inclined to believe that.

Good catch mileking! This seems to support the Randy's asserting that tickets issued on UA metal using a US ticket number would be valid.

I suggest reading US Terms of Transportation available on the US website and the UA Contract of Carriage available on the UA website. From what I see, US terms indicate that when US acts as an agent of another carrier and issues a ticket for travel on that carrier, then that carrier's contract of carriage prevails. From UA's contract of carriage, I note two things:
1. B) ONCE A PASSENGER OBTAINS A TICKET REFLECTING CONFIRMED SPACE FOR A SPECIFIC UA FLIGHT AND DATE, EITHER FROM UA OR FROM ANY AGENT OF UA, THE RESERVATION IS CONFIRMED EVEN IF THERE IS NO RECORD IN UA'S RESERVATIONS SYSTEM.

2. G) CARRIER IN DEFAULT
NOTWITHSTANDING THE PROVISIONS OF THIS RULE, UA WILL NOT ACCEPT FOR ANY PURPOSES UNDER THIS RULE PASSENGER TICKETS OR RELATED TRANSPORTATION DOCUMENTS ISSUED BY ANY CARRIER WHICH IS IN SUBSTANTIAL DEFAULT OF ITS INTERLINE OBLIGATIONS OR WHICH VOLUNTARILY OR INVOLUNTARILY HAS BECOME THE SUBJECT OF BANKRUPTCY PROCEEDINGS (THE "DEFAULTING CARRIER").
EXCEPTION: NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH, TICKETS ISSUED BY THE DEFAULTING CARRIER OR ITS SALES AGENT PRIOR TO THE DEFAULT, WILL BE ACCEPTED SOLELY FOR TRANSPORTATION OVER THE LINES OF UA, PROVIDED SUCH TICKETS WERE ISSUED BY SUCH DEFAULTING CARRIER IN ITS CAPACITY AS AGENT FOR UA AND SPECIFIED TRANSPORTATION VIA UA. WHEN TICKETS ARE ACCEPTED, NO ADJUSTMENTS IN FARE WILL BE MADE WHICH WOULD REQUIRE UA TO REFUND MONEY TO THE PASSENGER.

The two items above were taken from different sections of the UA contract of carriage (the second item actually is part of the Rule 240 provisions) so I may be guilty of taking things out of context, but there are other sections in the contract that appear to link the two. I'm not an attorney, but it strongly seems to suggest that as long as you ticket on UA prior to US filing for bankruptcy, you will be OK. After US files for bankruptcy, even if it is chapter 11 and US continues to operate, UA is under no obligation to accept the tickets. Given this, I am more optimistic than I was earlier that UA will honor US award tickets issued right now. I believe that if US returns to chapter 11, UA will stop accepting award reservations from Dividend Miles.

Perhaps an enterprising journalist could get some *A executives on the record saying they'll honor US-issued mileage tickets post-liquidation?

It would make sense for *A to announce up front that they'll honor US tickets no matter what, in order to bolster confidence in US and ensure that they won't HAVE TO make the choice whether to honor the tickets...

I mean, why can't we get a commitment or clarification now rather than speculating?

While generally a paid ticket on UA issued by US is done so as UA's agent, it is not clear that such is the case with an award ticket. Nevertheless, it would make sense for UA to honor such US award tickets issued on UA flights, from a goodwill, marketing, and business-generation perspective. UA would want to scoop up the best customers of US in the event of its demise, rather than letting them go elsewhere.

However, UA is also a current marketing partner of US. It is entirely unreasonable to expect UA to publicly state what it would do.

Indeed, it may be legally actionable if UA were to do so, since this could trigger a "run" and actually push US over the brink into a second bankruptcy.

So while it might be "nice" for customers and frequent flyers to have an "assurance" from UA as to what would happen, it is not going to happen. Live with it, and act accordingly.

UA WILL NOT ACCEPT FOR ANY PURPOSES UNDER THIS RULE PASSENGER TICKETS OR RELATED TRANSPORTATION DOCUMENTS ISSUED BY ANY CARRIER ... WHICH VOLUNTARILY OR INVOLUNTARILY HAS BECOME THE SUBJECT OF BANKRUPTCY PROCEEDINGS

Hmmm - does that mean they don't accept their own tickets? ;)

US partners will likely honor US tickets for a period after bankruptcy to settle any outstanding interline clearinghouse balances owed to the US estate. Of course, the balances will vary widely between the airlines, with UA probably having the largest balance, and carriers like NH, SQ, OZ owing very small amounts of money to US. In this regard, there is no guarantee that Star would have a unified policy on honoring US tickets, and indeed, there would be zero incentive for the likes to SQ to honor said tickets beyond a few weeks or so after a shutdown.

Randy has stated publicly twice that he thinks that award tickets on UA are safe no matter what. I'm inclined to believe that.

I'm getting really nervous reading this thread! I've already booked 2 award tickets to Cancun on US over Thanksgiving week. What do you experts think are my chances of actually making the trip? :confused:

And is there anything I can do at this point to increase my odds (other than booking on another airline?) The resort we're staying at (Club Med) has a 45-day cancellation policy for full refund.

Thanks for your advice!

I'm getting really nervous reading this thread! I've already booked 2 award tickets to Cancun on US over Thanksgiving week. What do you experts think are my chances of actually making the trip? :confused:

And is there anything I can do at this point to increase my odds (other than booking on another airline?) The resort we're staying at (Club Med) has a 45-day cancellation policy for full refund.

Thanks for your advice!

My opionion is that you should be OK, but I'm ever the optimist. Not much you can do about it. You can join me in hope/prayer with my 1M+ outstanding miles.

And is there anything I can do at this point to increase my odds (other than booking on another airline?) The resort we're staying at (Club Med) has a 45-day cancellation policy for full refund.

See if you can get some trip cancellation insurance that can be invoked in these circumstances. I dont tend to buy it so I cant point in any directions of who to talk to but I am sure that if you talked to Club Med that they would have some sort of recommendation. Doesnt solve your problem but if you do end up having to cancel then youre not out the whole amount.

Also, consider booking an award ticket on another airline if you can spare the miles and if there is availability. If you need it you have it and if you dont then you can usually pay to have them redeposited. I dont know the case now but AA used to charge $50 to redeposit miles. If its the same, that would basically be a $100 insurance policy for the two of you.

I dont know enough about USAir's position to make a terribly informed opinion, but I expect they will be around for Thanksgiving and Christmas. Airlines tend to make money hand over fist in this period and their creditors would crucify them for going out before either. But as I said, my opinion is worth the amount of research I have done....none. All I know is that I am reading this thread because my dad has a ticket in October and I said that I would keep an eye on things for him.

See if you can get some trip cancellation insurance that can be invoked in these circumstances...
Also, consider booking an award ticket on another airline if you can spare the miles and if there is availability.

Thanks for the advice. I will look into trip insurance. Unfortunately I don't have enough miles on another airline to try that suggestion, but it seems like a good one.

I may actually rebook on another airline with a refundable fair just to make sure we get there. Although that kinda defeats the purpose of a quick, cheap trip!

Thanks again.

That is true -- it has now expired. The entire initial post could use an edit, as much new information has come to light. If I get the time, I will do so. Many think that airlines would continue to honor tickets on a stand-by basis, but there is no current law that would require them to do so.

EDIT: I have read elsewhere it was extended with a new name. I'm still researching.

Another user pointed out that it expires in November 2004.

Section 428 of Public Law 108-176 extends it to 36 months from November 19, 2001.

Another user pointed out that it expires in November 2004.

Section 428 of Public Law 108-176 extends it to 36 months from November 19, 2001.


I know that I have posted this in other threads before, but I'm not sure if you're referring to me or not. But this information is correct. This regulation is set to expire this November. It's original intention was to provide some security for travellers in the immidiate wake of the 9/11 terrorism attacks.