What to do When Your Airline Goes Bankrupt? • 13 Helpful Tips

The clock struck midnight. We were recovering from our day of aimless wandering around the Cypriot city of Larnaca. We hate days like that – where you must leave your Airbnb or hotel at checkout time, but have a late evening flight with no plans for the day.

This day our Airbnb host gave us a late checkout of 2 pm, so we walked, and ate, and walked, and ate, and drank a few coffees all day around Larnaca until heading to the airport late at night.

Our Cobalt Airlines flight to Abu Dhabi was due to depart at 2:10 am, getting us into the UAE city around 9 am before we would catch out flight onward to Sri Lanka. We arrived at the airport early so that we could change into our comfy red eye clothes, I could take out my contacts, and do all the things necessary before a long haul flight.

The airport was suspiciously quiet, and I immediately noticed no one manning the Cobalt airline check-in station, one of the largest Cypriot airline carriers.

We flew with them to Cyprus, and the airplane was seriously disrepair with little shits. So I wasn’t shocked at the lack of communication from Cobalt, but I was still annoyed I couldn’t check-in.

I knew it was late, but it was strange that we still couldn’t check in for our 2:10 am flight two hours ahead. I was irritated, I had questions, I wanted to check in and get into the damn lounge and eat some food before I got hangry.

Then I saw it…

A camera guy, an anchorwoman, and a news crew shooting photos of the Cobalt office. I knew something was going on that all passengers were unaware of. I walked over to Cameron and our luggage and we quickly typed “Cobalt Air” into Google.

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Cobalt Air Suspends Services: Bankrupt

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Excuse me? What does that mean? I’ve yet to hear anything from anybody!

I made my way up to the airport help desk with a group of other passengers demanding answers. The poor clueless staff gives none. They have no idea what’s going on.

A British guy turns to me, “that’s it,” he says. The Europeans had dealt with this before.

“Now what,” I ask. “What does this mean!?”

“It’s bankrupt. They’re done, they won’t help you — you’ll have to make other plans.”

Stunned I walk back to Cameron to tell him the news and I see the news crew charging toward him. Makeupless and in yoga pants, I run away – the last thing I want to be is on Cypriot television.

“So how do you feel knowing your airline is bankrupt?” They ask.

“Ugghhh what?” He says.

Yep, everyone knew this was going to happen. Except for Cobalt passengers.

Little did I know at the time that this was typically how it works when airlines go bankrupt. They let you carry on with your travel plans until the eleventh hour, suddenly vanishing into thin air. No explanations, no announcements, no emails, no nothing.

We sat at the airport until 4 am that night, frantically figuring out what to do. Researching different flight options, see if there was a way we could still connect with our Sri Lanka flight.

Pissed off, then laughing at being so pissed off, trying to find a hotel in the Cypriot high season. We finally made it work – but more on that at the end of this post.

If you found this article, chances are your airline may have gone bankrupt too. It’s predicted this will start happening more and more, especially with low-cost carriers. Want to know what to do? So did we.

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What To Do If Your Airline Goes Bankrupt?

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1. The Brutal Answer

There’s not a lot you can “do” when an airline goes bankrupt. You can’t demand a refund from the airline – they’re bankrupt. You’re probably not going to talk to an employee – their employer went bankrupt, and they are out of a job.

You can’t hire a lawyer or seek help from sites like Airhelp – there is no one for them to go after – the airline has collapsed.

It didn’t take long to grasp all this after Cobalt went bust. We quickly realized that we would be responsible for all financial charges incurred because of this fiasco, and it would be up to us to readjust our planning. The sooner you realize this – the better. Trust me.

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2. Contact Your Travel Agent

If you booked your trip through a travel agent, now would be the time to call them so they can start making other plans for you themselves. They are there to make sure you are relatively unaffected. If you didn’t book with a travel agent…

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3. Make Alternative Plans – Quickly

The next thing you should do when you find out your airline goes bankrupt is to make plans. If it’s late at night, you need to secure a place to sleep for the night. There will be many people affected by an airline bankruptcy, and you need to make sure you don’t get priced out of hotel rooms.

In our case, getting a hotel room was critical because it was so late at night. I didn’t want to sleep on the airport floor because of the drama. We quickly sought out hotel rooms but didn’t act fast enough.

Our flight was due out on October 18th at 2 am. Cobalt declared bankruptcy after the last of their aircraft was back in their home airport of Larnaca at 11:50 pm on October 17th. This is typical of airline closures, they declare bankruptcy when all company aircraft are at their home base.

That meant there were a lot of stranded people who all of a sudden needed a room in the middle of the night. Needless to say, there weren’t a lot of options, and because of the last-minute and late-night bookings, prices were much higher than usual. Once news officially broke of the collapse, hotels started raising prices. So don’t wait to book a place.

Now is also the time you’ll want to figure out how you will either get home or to your final destination. Do not wait to see if the collapsed airline carrier will reimburse you for this – they’re not.

It was a “pay now and figure out the reimbursement later situation”. Yes, you will be out of money, and it sucks, but it’s better than being stranded.

You’ll want to make your alternative travel plans quickly before seats get booked up by other stranded passengers or airlines start to raise their prices. In our case, this meant figuring out a new flight option before everyone else woke up the morning of October 18th and heard the news.

Although we found out the news at 12 am, I actually consider ourselves luckier than the holiday goers who found out at 8 am, and there was panic at the airport and a low supply of seats. More on that later.

Rescue Fares

I should also mention that sometimes, depending on where you are in the world, competitor airlines will offer “rescue fares” to stranded passengers.

Companies like Ryan Air and Icelandair have recently done this in the aftermath of competitor collapses. A rescue fare is a discounted fare only available to those impacted by the bankrupt airline.

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4. Contact your Hotel, Car Rental Company, Tour Provider, etc.

If you booked your trip with a tour agent, you need to call them and make them aware of the situation. A good one will work with you to rebook you on a flight and sort out the rest of your trip.

If you made your own hotel, car rental, and excursion bookings, it’s important to call them and cancel your reservation or make adjustments. Hopefully, they will cancel your bookings without charge if you explain your situation.

Our hotel, unfortunately, didn’t and still charged us for the nights we had booked even though our cancellation was out of our control. (They got a bad review from me) Bringing me to my next point…

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5. Contact Your Credit Card (Crucial Tip)

This is my top tip and the reason why this section is a highlight. Your main and only recourse for refunds when an airline goes bankrupt is with your credit card company.  But first, let me remind you that you need to book your flight with a credit card.

Do not. Ever. Ever. Ever book a flight with anything other than a credit card in case this happens to you. Debit cards are notoriously harder to get reimbursed than credit cards, if not impossible. If your flight goes bankrupt, the best thing to do is check if the credit card company offers a travel insurance policy that covers cancellations due to bankruptcies.

Fortunately, it is not uncommon. You can also dispute or cancel the payment that you made for the flights, as many credit card companies put that money into a holding for a few months until they actually pay the service provider.

Many American credit cards offer trip cancellation insurance, but the coverage and eligibility differ. But you should be able to get at least something back with the Chase Sapphire Cards. They offer coverage to the cardholder and immediate family members up to $10,000 per trip if a travel supplier goes under.

Unfortunately, and conveniently the Cobalt Air website wouldn’t take my Chase Sapphire Reserve Card (my preferred credit card) at the time of booking, so I put the charge on my Capital One® Venture® Rewards Credit Card, which did not provide trip cancellation insurance. 

My next course of action was to file a dispute on the entire Cobalt Air charge on my Capital One for failure to provide service. I won the dispute as Cobalt Air could not fight it and I got my money back for the cost of the flights, but I was on my own for the costs of the new hotel rooms, taxis, and surprise flights I had to book.

FYI I also filed a dispute with the hotel in Abu Dhabi that would not let me out of my booking and won that as well.

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6. Contact Your Travel Insurance

If you have purchased travel insurance for your trip, now would be the time to see if they cover trip interruption or cancellation due to airline insolvency. It’s most likely going to take a phone call and some persistence, but it’s definitely worth it if they cover all your expenses incurred.

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7. Don’t Count on Compensation Under the Passenger Rights Act

Many European low-cost carriers have been going under in the past few years. Unlike the US and other nations, the EU has very strong passenger rights. However, the rules don’t usually apply to airline collapses. When an airline cancels your flight but is still in business, you can claim back funds because the airline is still operational.

If your flight is canceled due to bankruptcy, the airline ceases all operations, is insolvent, cannot refund any claims, and will be rolled over into bankruptcy. After our flight went bankrupt, the Larnaca airport employees directed all affected passengers to the EU Air Passenger rights form. Which clearly states:

“In case of a bankruptcy, claims should be filed to the administrator/liquidator.”

Well…that’s not very helpful, is it?

Of course, the rules all depend on where your airline’s home country is. It’s best to do your research and see if you can claim back your ticket regardless. Sites like AirHelp will take cases on for you for a small percentage of the payout, but I wouldn’t count on this. I sent them my details for this particular flight of ours and received a response that they could not pursue the case.

However, AirHelp is great for ensuring you get canceled flight compensation from EU flights. So if your flight didn’t go bankrupt but was just canceled or delayed, seek help from them!

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8. Try to Make the Best Out of It

Understandably, you’ll be pissed off if your airline goes bankrupt, but try to make the best of it because if you don’t, you’ll be cranky and get wrinkles. If this happens at the end of your vacation, make plans to get home and consider yourself fortunate you got to enjoy your vacation first.

If this happens before your vacation, make other plans to go elsewhere. My favorite is to hop on Skyscanner, put in my departing city, and use the Everywhere function to find the cheapest flight to a new country.

We were mid “vacation” (or mid “life” because we were continuously traveling) and found that the cheapest flight out was to Jordan. We had yet to travel to Jordan, and we had to go somewhere, so we booked it and enjoyed our new travel destination.

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9. Know That You’re Not Alone

You’re probably cursing the Gods because your airline went bankrupt, but remember that you are not alone in this situation, and there is always someone worse off than you. We quickly realized this, and honestly, it made us less angry with the “it could always be worse” mindset. It’s estimated that over 10,000 people were affected by the Cobalt collapse alone.

When our flight went bankrupt, we met many people in far worse shoes. One man I talked to could barely speak English, had no money and had little comprehension of what was happening. And he didn’t have a visa into Cyprus, the country he was stranded in. Oy.

A group of girls I talked to flew from Athens to Abu Dhabi with a layover in Larnaca. Cobalt knew in advance that no flights would go out of Larnaca but still let passengers board the plane, knowing they would all be stranded in Larnaca.

They would have all rather found out in Athens so they could make arrangements in Greece’s capital, as Larnaca is not a well-connected airport. They told me they had to get home to Fiji, of all places. Oy.

Then I read a story of a couple having their whole wedding in Cyprus shattered because now none of their friends or family could make it there. It ended up costing them over $5,000 to rebook flights.

Cameron and I were fortunate as we had the flexibility and financial independence to make quick moves. I felt sympathy for how each passenger was treated in this case. Lastly, it’s important not to forget about all the employees who are suddenly out of a job.

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What Can You Do To Avoid This Situation?

There’s very little you can do, but there are steps you can take to hopefully avoid this happening.

1. Pay with Credit Card

You have more rights to claim your purchase with a credit card than a debit card.

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2. Make Sure your Travel Insurance Covers Bankruptcies

Always read the terms and conditions of your travel insurance and what kind of stipulations there are for trip cancellation.

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3. Don’t Book With Low-Cost Carriers

It’s incredibly hard to turn a profit in the airline industry, and low-cost air carriers will be hit hardest. Filing for bankruptcy is not uncommon, and it’s predicted that more and more will go bankrupt each year.

Airlines have to support low airfares while dealing with rising fuel costs. Monarch, Air Berlin, Primera, Cobalt, and more recently, WOW Air are all European carriers that went under. It’s not just Europe, though. The other day, the second largest air carrier in India, Jet Airways, went under, stranding thousands of people.

One thing is for sure. The airline bankruptcy trend is not one to die out soon.

If you want to be almost 100% sure your airline won’t bust, book with the big guys and avoid low-cost carriers.  Aviation analysts are showing growing concern over the future of FlyBe, Norwegian, WOW(another one bites the dust), and Wizzair.

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4. Keep Your Eyes on Aviation News

When I booked the Cobalt Flights, I didn’t know that the airline was in trouble, but many others in the aviation industry did. There were rumors that the airline could not secure funding from Chinese investors weeks before our flight, but I’m guessing most passengers were oblivious.

If I had Googled the airline or done more research, I probably could have found this information too. If you’re skeptical of an airline, try to dig into the details and news.

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Finally what did we end up doing after all this?

We received zero help or assistance from Cobalt. I received an automated email while sitting at the airport, stranded and looking for hotels, that our flight was canceled. Not bankrupt, just canceled. That was it.

A few hours later, there was a press release stating that Cobalt ceased operations (although you could still book a flight on their website, and the rest of the Cobalt air flights still showed as taking off on time on the leaderboard – HAH).

We overpaid for a late-night cab, went back to a hotel in Larnaca to get some rest, and did more research about our plans. Not wanting to sleep without assurance that we could leave Cyprus, we booked the last remaining seats on Jordanian Air to Jordan, one of the only direct flights we could find.

We both had always wanted to travel to Jordan and figured this was a great time to check it off the list. Sure, we missed out on our five days on the beaches of Sri Lanka, but we replaced it with five INCREDIBLE days in Jordan.

I got refunded on my credit card for the Cobalt Air charges and messaged our Airbnb host in Sri Lanka about the issue. Thankfully, he let us out of that booking. Between the extra hotel room in Cyprus, taxi fares, and new airfare to Jordan and then on to Sri Lanka for a travel conference, we had the whole fiasco cost us upwards of $1,500.

The Cypriot Government promised refunds and assistance to all passengers affected, but I have yet to hear back more than six months later and know that I never will. I emailed them and EU Air Passenger Rights as directed. I filled out all the necessary forms, but that was a big waste of time. Sometimes you just have to know when to give up and let go.

We are not immune to this type of thing happening again, given how much we travel, and neither are you. Hopefully, this post will help you a bit in the future or, at best, make you feel better. 🙂

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