Passengers and bankruptcies
Jan 8, 2007, 3:39 am
#1
Original Poster
Join Date: Dec 2006
Posts: 1,452
Passengers and bankruptcies
What happens to discounted tickets after an airline goes bankrupt? And what about frequent flier miles and award tickets?
If a business is bankrupt then the deals made some time before
bankruptcy are void as preferences. For example, imagine a business borrows £200 to be repaid on 1st of January next year, then borrows from another creditor £1000 to be repaid on 2nd of January. If the business meanwhile suffers a business failure so that on 31st of December they have £600, what next? If they pay £200 to the first creditor as the debt falls due, so they have £400 left over to pay a £1000 debt next day, it is said to be a preference. (First creditor gets 100% of debt, the second just 40%.) The first creditor has to repay the whole £200 up front, and if he is lucky not to be prosecuted for fraud then after the whole of assets and debts have been counted - £600 and
£1200 in this example - each creditor gets a percentage, in this case 50%, of the debt, so the first creditor gets £100 back and the second creditor gets £500 rather than £400.
I understand that the period before bankruptcy when deals are void varies with jurisdiction - sometimes it is 7 days, sometimes 10, sometimes 14, sometimes 90...
Are services received from someone who then goes bankrupt also
preferences?
Especially the sundry discount and bargain offers. Much of the tickets are paid with discounts of some sort. Are these valid? Or can the bankruptcy trustees just go after passengers who have travelled on discounted tickets and make then pay the balance to the full nominal ticket fare?
Likewise the award tickets to frequent fliers. Are these just a gift
from an airline to a loyal customer? And therefore, if the airline
could not have afforded to make gifts to loyal customers, as evidenced by bankruptcy, does it mean that every award ticket and upgrade received for frequent flyer miles is stolen property? And people who have travelled on award tickets and upgrades must pay the full fares once the airline has gone bankrupt?
Or is it the case that frequent flier miles and points represent money charged from fare-paying customers withheld by the airline (not used for the service received first time) and kept for later use? In that case, can it be said that customers holding frequent flyer miles are as much creditors of the bankrupt airline as the employees entitled to pensions afterwards over and above the salaries upfront, and therefore a part of the proceeds of the bankruptcy has to be given to the holders of unredeemed frequent flier benefits, even though other creditors, like employees losing their pensions, passengers losing fully-paid tickets, fuel suppliers, aircraft manufacturers, air crash victims etc.
etc. thereby get somewhat less?
And how much is a flyable airplane worth? Some aircraft owners are said to worry that if they cannot find a customer to lease or buy their used aircraft, the airplane will cost money to park somewhere...
Many airports are said to charge fees per passenger.
Are the airport fees owed by passengers or not?
For example, suppose that you land in an airport and as the plane taxies to the gate, the airline goes bankrupt.
What happens to the airport?
The plane cannot fly away because the airline cannot pay the wages or pensions of the pilots, and also because the plane cannot tank unless someone pays for fuel.
The airport must pay upfront to move the plane to where it costs the least to keep and thereafter lose the value of a valuable parking spot.
They have no guarantee of being able to recoup their airport fees by selling the aircraft, as warned above.
Can the airport state that since the passengers have not paid their landing fees - they entrusted them to the airline as included in the ticket price, but it has not reached the airport - the passengers must pay the airport fees themselves over and above tickets paid already?
The passengers are locked up in a tube enclosed in a fenced-in field.
They would have rather limited choices. Except to claim that they had not expected to need that amount of cash.
But then, can the airport enforce their claim against passengers the way a restaurant could enforce their bills? An airport is in the better situation, because the passengers are supposed to carry documents, and be in passenger lists, so an airport can go after passengers who walk out of the airport and fail to pay. And the airport could use the same passenger lists to pursue passengers if the airline goes bankrupt after the passengers have dispersed, but fails to pay the airport fees.
Or is a passenger who is let in a plane guaranteed a right to leave an airport without ever paying extra, so that an airport that admits a plane which will not pay landing fees is just a creditor for all the fees?
If a business is bankrupt then the deals made some time before
bankruptcy are void as preferences. For example, imagine a business borrows £200 to be repaid on 1st of January next year, then borrows from another creditor £1000 to be repaid on 2nd of January. If the business meanwhile suffers a business failure so that on 31st of December they have £600, what next? If they pay £200 to the first creditor as the debt falls due, so they have £400 left over to pay a £1000 debt next day, it is said to be a preference. (First creditor gets 100% of debt, the second just 40%.) The first creditor has to repay the whole £200 up front, and if he is lucky not to be prosecuted for fraud then after the whole of assets and debts have been counted - £600 and
£1200 in this example - each creditor gets a percentage, in this case 50%, of the debt, so the first creditor gets £100 back and the second creditor gets £500 rather than £400.
I understand that the period before bankruptcy when deals are void varies with jurisdiction - sometimes it is 7 days, sometimes 10, sometimes 14, sometimes 90...
Are services received from someone who then goes bankrupt also
preferences?
Especially the sundry discount and bargain offers. Much of the tickets are paid with discounts of some sort. Are these valid? Or can the bankruptcy trustees just go after passengers who have travelled on discounted tickets and make then pay the balance to the full nominal ticket fare?
Likewise the award tickets to frequent fliers. Are these just a gift
from an airline to a loyal customer? And therefore, if the airline
could not have afforded to make gifts to loyal customers, as evidenced by bankruptcy, does it mean that every award ticket and upgrade received for frequent flyer miles is stolen property? And people who have travelled on award tickets and upgrades must pay the full fares once the airline has gone bankrupt?
Or is it the case that frequent flier miles and points represent money charged from fare-paying customers withheld by the airline (not used for the service received first time) and kept for later use? In that case, can it be said that customers holding frequent flyer miles are as much creditors of the bankrupt airline as the employees entitled to pensions afterwards over and above the salaries upfront, and therefore a part of the proceeds of the bankruptcy has to be given to the holders of unredeemed frequent flier benefits, even though other creditors, like employees losing their pensions, passengers losing fully-paid tickets, fuel suppliers, aircraft manufacturers, air crash victims etc.
etc. thereby get somewhat less?
And how much is a flyable airplane worth? Some aircraft owners are said to worry that if they cannot find a customer to lease or buy their used aircraft, the airplane will cost money to park somewhere...
Many airports are said to charge fees per passenger.
Are the airport fees owed by passengers or not?
For example, suppose that you land in an airport and as the plane taxies to the gate, the airline goes bankrupt.
What happens to the airport?
The plane cannot fly away because the airline cannot pay the wages or pensions of the pilots, and also because the plane cannot tank unless someone pays for fuel.
The airport must pay upfront to move the plane to where it costs the least to keep and thereafter lose the value of a valuable parking spot.
They have no guarantee of being able to recoup their airport fees by selling the aircraft, as warned above.
Can the airport state that since the passengers have not paid their landing fees - they entrusted them to the airline as included in the ticket price, but it has not reached the airport - the passengers must pay the airport fees themselves over and above tickets paid already?
The passengers are locked up in a tube enclosed in a fenced-in field.
They would have rather limited choices. Except to claim that they had not expected to need that amount of cash.
But then, can the airport enforce their claim against passengers the way a restaurant could enforce their bills? An airport is in the better situation, because the passengers are supposed to carry documents, and be in passenger lists, so an airport can go after passengers who walk out of the airport and fail to pay. And the airport could use the same passenger lists to pursue passengers if the airline goes bankrupt after the passengers have dispersed, but fails to pay the airport fees.
Or is a passenger who is let in a plane guaranteed a right to leave an airport without ever paying extra, so that an airport that admits a plane which will not pay landing fees is just a creditor for all the fees?
Jan 8, 2007, 4:08 am
#2
Join Date: Mar 2006
Location: ICN / 평택
Programs: AA, DL Gold, UA Gold, HHonors Gold
Posts: 8,714
For example, suppose that you land in an airport and as the plane taxies to the gate, the airline goes bankrupt.
What happens to the airport?
The plane cannot fly away because the airline cannot pay the wages or pensions of the pilots, and also because the plane cannot tank unless someone pays for fuel.
The airport must pay upfront to move the plane to where it costs the least to keep and thereafter lose the value of a valuable parking spot.
They have no guarantee of being able to recoup their airport fees by selling the aircraft, as warned above.
The plane has value, regardless of the insolvency of the airline. The airport could probably slap a lien on the airplane to recoup their losses. Whether they collect or not is a different story.