Mark Pestronk
Mark Pestronk

Q: After the Thomas Cook collapse, the U.K. government undertook Operation Matterhorn, which entailed chartering 700 flights to get 150,000 stranded passengers back home. The government also has a program called ATOL (Air Travel Organisers' Licensing) that will provide full refunds to most of the 360,000 U.K. customers whose trips were canceled. What equivalent government programs are there in the U.S. that would protect stranded passengers and provide refunds for canceled trips? What about private industry programs?

A: There are no such government programs. The federal government has no obligation to repatriate stranded vacationers or make refunds, and I doubt that it would undertake to do so voluntarily.

The closest government program is the Civil Reserve Air Fleet, which is a voluntary program involving the DOT, the Department of Defense and U.S. airlines that augments aircraft capability during a national defense-related crisis, such as getting troops to a war zone quickly. Absent such a crisis, the U.S. carriers have no obligation to cooperate.

For refunds, the federal government has no role whatsoever. The five states with seller of travel laws (California, Florida, Hawaii, Iowa and Washington) have bonding or trust account requirements for sellers, and there is a restitution fund in California, but once a seller forwards funds to an unregistered tour operator, there is no more protection.

The USTOA requires a $1 million bond, letter of credit or cash deposit from each active member, but a tour operator's cessation of business would be covered only by its own $1 million, which would obviously run out quickly if a major company went bankrupt.

When a tour operator files for bankruptcy, stranded passengers are not automatically entitled to anything. Those who paid for future trips are out of luck, too, as consumers are just seventh-priority creditors in bankruptcy, which means that they get any money left after secured creditors and six other kinds of priority creditors are paid.

In short, unlike citizens of the U.K. and other European countries, Americans must rely on self-help. The only alternatives available are purchasing travel insurance that will cover tour operator insolvency and, of course, paying by credit card.

The trouble with travel insurance is that not all polices cover insolvency, and those that do usually limit coverage to a list of well-heeled suppliers. For example, Allianz coverage is limited to those on this list.

Credit card companies will provide refunds for services that the cardholder contracted for but did not obtain, so paying by credit card is the only sure way to get a refund. Debit card issuers may do the same voluntarily.

For a travel advisor, the best way to protect one's self is to take four steps: First, have the client agree to a disclaimer such as the ones here; second, offer travel insurance that has supplier insolvency protection; third, strongly encourage (or indeed require) use of a credit card; and fourth, read the trade press for signs of supplier weakness, so you don't inadvertently recommend risky suppliers.

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