Refundable Tickets are No Longer Refundable as Customers In air berlin Insolvency

air berlin has been a financial disaster for years, and the subsidies from Etihad have stopped so the airline had no choice but to file for bankruptcy.

The German transport ministry stepped in with a government subsidy to keep the airline running for 3 months, guaranteeing a €150 million loan.

They lost nearly a billion dollars last year. Etihad’s total amount in the airline is estimated at about $2 billion. Last month’s traffic was down about 25% year-over-year. They’re smaller than German rival Lufthansa. They face significant short haul ultra low cost carrier competition. They’ve been hurt by interminable delays in opening the new Berlin airport.

It seems unlikely that the airline will survive, and the government’s money is being used to keep the carrier afloat while bidders carve up the assets, travelers fly on their existing tickets, and the government hopes some jobs are saved. Most tickets are purchased within three months of travel.

@FlyingDutchBlog points out that since the carrier has entered insolvency proceedings, customers are like suppliers as unsecured creditors — amounts the airline may owe are frozen. That means refundable tickets purchased before the airline filed are no longer refundable!

This doesn’t likely disadvantage very many readers. I don’t imagine there are many of you who purchased refundable tickets on air berlin. But it’s interesting nonetheless because anyone who spent more for a refundable ticket as a hedge against the financial problems at the airline not only is holding a ticket in a time of instabiltiy but paid more for the privilege of doing so while not keeping the option of a refund as-promised by the carrier.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Is this normal for airline bankruptcies? is that how US airline bankruptcies have worked in the past? Does this mean that buying a refundable ticket as a hedge against insolvency is the wrong strategy in general, or is this a fluke?

  2. @AM yes, buying a refundable ticket as a hedge against insolvency is the wrong strategy in general. Once bankruptcy has been filed, any prepayments are automatically unsecured claims. If the flight is ultimately cancelled and you are not accommodated on another flight, you would have to do a charge-back (your credit card issuer would take over your right as an unsecured creditor). In the US, most airline bankruptcies have been restructurings, which are a bit different in that the company is expected to emerge from the process as a going concern — courts generally allow the company to honor prepayments under the original contract to facilitate normal operations in such cases.

  3. Not happy 🙁
    2 business class seats to Curacao (return) booked using TopBonus points plus about £400 taxes for November.
    The airline is not expected to be flying after mid October (3month from the €150m contingency fund).

    Don’t know what to do 🙁

    Will Amex travel insurance cover a cancellation ? If so I’m guessing only the cash portion (which is taxes mostly), not the points value 🙁

    Not happy at all.
    Wish I were flying sooner.

  4. Hello Alitalia, can you hear us now?

    In other news, I recently got a refundable ticket on Qatar refunded. Seems the dollar lost a good chunk of value against the Euro since I bought it, so there was the unusual delight of an extra $40 in that refund. How often does that happen in one’s lifetime?

  5. Gary – could you update the 1st comment to hide the email from the public view? Seems I mistyped that initial comment. Sorry/thanks

  6. @Boobaholic Your flight may be OK given that the 3 month contingency fund would allow AirBerlin to operate until mid November.
    By the way, I’m in a similar situation although I paid with cash.

  7. @Jules It will be close !
    mid Aug to mid Nov is that 3 month period and my flights back are 16th.
    I am also sceptical that €150m will last three full months. I guess I’ll just have to wait and see.

    If cancelled I’m wondering if TopBonus will reinstate my points. I don’t expect so but it depends how TopBonus actually pays AirBerlin; in terms of how and at what time / date. TopBonus may actually still have my points, not AirBerlin.

    Thanks for your reply 🙂
    Fingers crossed.

    I hope your flights are flown too. You might be in a slightly better position if they are cancelled as whilst AB won’t give you a penny you might find credit card or travel insurance will compensate you.
    The issue with using points which complicates my booking is that it’s nothing to do with a credit card and I expect most (if not all) travel insurance co.panies won’t cover loss of points.
    Therefore if I do manage to get Credit Card to refund me or Travel Insurance it would only be for the taxes & fees paid (about £400) and not the true value of two business class flights to Curacao 🙁
    There goes my gift to my Mum for her 70th Birthday of 2weeks in Curacao.

  8. Gary, et al.,
    I booked American award ticket on Air Berlin one way PRG-TXL-JFK connecting to SEA on AA.

    If Air Berlin doesn’t fly on October 14 — can I file EU 261 for compensation?

    AA has advised if I miss AA flight at JFK due to AirBerlin being late then I can only request compensation from Air Berlin even though ticketing was on AA web site.

  9. The day before this was announced I got around to booking my positioning flights from LHR-DUS rtn to match up to my Nov 2 – 16 DUS-CUR rtn.
    Gutted as its more money down the drain.
    Booked a night in DUS on the way out too !!

    I am just bloody hopeful that they do fly the route on the 2nd & 16th.

    I wonder what the travel insurance position is if they fly us out there on the 2nd but cancel the return on the 16th while we’re there ?

    Or even before we go, what if they keep the flight on the 2nd but say they will have ceased flying back by the 16th – if we still hop on the plane on the 2nd would we be able to get the insurance company to get us home ?

    All bloody up in the air !

    Looks like I was potentially ‘lucky’ to have used my TopBonus points up a week before this got announced, unlucky that the flights aren’t much sooner (like next week), and potentially luicky / unlucky depending upon what date they actually cease flying the route DUS-CUR.
    Then IF Etihad do announce a favourable transfer rate from TopBonus into Etihad Guest I’ll be very, very annoyed – nay furious – if my flights don’t go , thus losing the TopBonus points, not getting a flight and not getting (more useful) Etihad Guest points 🙁

    Gggggrrrrr………. Just tell me that my flights will fly for sure OR that I’ll be given my TopBonus points back with the ability to book Etihad flights into the future OR that they’ll transfer (favourably) into actual Etihad Guest miles.

    I think its really rather unfair for Etihad to throw TopBonus to the wolves too 🙁

  10. Flew August 31st on AirBerlin to Barcelona with layover in Dusseldorf. Not 1 person on my flight got their checked luggage, their baggage service agent in Barcelona says ” can’t locate any bags due to ABerlin labor shortages. I asked about filing a claim and another agent in Barcelona said its a bankrupt airlines and there is noone to make a claim to. If you try to call the customer service lPhone lines they don’t answer at all. At SFO they claimed no way to track any AB luggage on any computer systems so go to the website to make claims. I filed a claim and was sent an email to “please discontinue any follow-up on this claim”

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