Tuesday, 5 October 2004

Disparate treatment for airline lenders

In the wake of recent coverage of the lack of consumer protection for ticket holders if airline go bankrupt, the Business Travel Coalition (BTC) and the Association of Retail Travel Agents (ARTA) yesterday issued a joint appeal to USA-based airlines voluntarily to agree to honor tickets of bankrupt airlines -- for a fee, if they have empty seats on the same route -- even after the law requiring that expires next month.

A close reading of the BTC/ARTA statement suggests that, at least for ARTA, its purpose is as much to reassure travellers, so as to boost demand for air travel and travel agency business, as actually to protect consumers, which it wouldn't really do since there wouldn't be enough seats available for days or weeks to acocmmodate ticket holders were a major airline in the USA to be liquidated.

Former Consumer Reports Travel Letter editor Ed Perkins points out other problems with the current law in his syndicated column last week.

My comments on this yesterday on Marketplace on public radio were edited down to a couple of sound bites (Real Audio), but my point was this: under laws enacted by Congress, the government (i.e the taxpayers) have guaranteed billions of dollars in (profitable, interest-bearing) bank loans to airlines. But when travllers make (interest-free, unsecured) loads to airlines by buying tickets now for future travel -- a significant component of airlines' financing, on which they depend -- there is no similar guarantee.

Why are banks more deserving of Federal protection than consumers? And why should commerical banking corporations receive more security for their loans, at taxpayer expense, than individual travellers?

Link | Posted by Edward on Tuesday, 5 October 2004, 09:38 ( 9:38 AM) | TrackBack (0)
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All advice and recommendations are the personal opinions of Edward Hasbrouck, and do not necessarily represent the views of my publishers, employers, or clients.