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Airline Startup Failures - The Deadbeat Goes On

(December 1999)

They've got great rates, but sometimes, they don't stay around long enough for you to take advantage of them! What can you do to protect yourself from startup airlines going under?

First, a little background. New airlines have always had trouble getting off the ground. According to the Department of Transportation (DOT), 61 upstarts have failed since 1978.

Are customers not responding to new startups? Are startups facing pressure from the majors? Are they just poorly managed? Whatever the cause, the list of casualties this year is staggering:

KIWI Airlines
This Newark-based startup, named after a flightless bird, flew high for three years before being grounded by the FAA on March 25.

SunJet
This Newark-based charter carrier stopped flying June 25.

Winair
This Long Beach startup stopped flying August 17.

Eastwind Airlines
The Greensboro, N.C-based carrier suspended service September 7.

Tahoe Air
The Lake Tahoe-based airline stopped flying November 23

AccessAir
The Des Moines-based carrier stopped flying November 30.

Yet another startup filed for bankruptcy this Tuesday. AccessAir, the Des Moines-based carrier, abruptly stopped service, stating that customers "didn't respond as expected." The airline stated its hope to resume service in a month with new routes, however, the shut down comes at the busiest time of year, will affect thousands of consumers.

Aside from Eastwind, most of these airlines, stopped flying without advanced notice - stranding hundreds of passengers. So, how can you protect yourself if you decide to fly an upstart carrier?

1. Do a little research on the carrier. Does their management have previous successful airline experience? Are they currently hiring or laying-off? Are they expanding routes or suspending service on existing routes? These are clues to the financial viability of a carrier. KIWI and Eastwind were laying-off many employees and suspending service on many routes before they shut down.

2. Read your local paper. Have there been incidents surrounding the carrier? For example, in the months preceding the KIWI and Eastwind shutdowns there were numerous incidents of "air rage" and passenger protests due to poor service. In addition, find out if the carrier has lost gate space at any airport due to missing lease payments. This was the case for both KIWI and Eastwind. KIWI failed to pay lease payments at Boston, and was forced to end service there. Eastwind had the same scenario in Philadelphia.

3. How are the Department of Transportation's Air Consumer Report statistics on this carrier? Are they on time? Are their complaint levels low? Check the DOT's website at http://www.dot.gov/airconsumer/index1.htm for the latest statistics.

4. Read Smarter Living's Travel Forums. See if any customers have posted kudos or complaints about the carrier at http://www.SmarterLiving.com/forums.

5. Has a dissatisfied customer created a website? This happened in the case of Eastwind Airlines. A businessman in Boston created the website Eastwindsucks.com, complete with news and a bulletin board for complaints.

6. Always pay by credit card. The protection that a credit card offers can give you peace of mind. In the unfortunate circumstance of an airline shutdown you will probably get your money back sooner than if you paid via other methods.

7. If you are flying on a charter airline, make sure you deal with reputable and highly recommended tour operators. A good travel agent will advise you on your options. Charter airlines operate under different rules than do scheduled airlines.
Companies can cancel charter flights up to 10 days before departure.
Charters are allowed to change their schedule last-minute.
Charters are allowed to delay flights for up to 48 hours with no compensation mandated. Many charters do not have reciprocal agreements with scheduled airlines, so you won't be put on an alternate airline.
Most charter tickets have no refund value.
A good travel agent will advise you on the options.

8. Get trip insurance. If you're investing in an expensive vacation, don't leave home without it.

The majority of startup carriers operate few aircraft, which means limited service. As you might expect, most face an uphill battle with the majors, and can compete only on price. Startup airlines may offer service with very low prices to attract customers. This may be great for consumers in the beginning. However, be aware that as more and more startup airlines appear on the horizon, the frequency of bankruptcies and shut downs will unfortunately be more common.

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