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Will I Get Stranded by WOW Air?

Nov. 29, 2018
Travel, Vacations & Trip Planning
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In the early hours of Nov. 29, 2018, more bad news came to ultra-low-cost carrier WOW Air.

After previously announcing it would be purchased by Icelandair, the deal was called off by both sides because all conditions could not be met to move forward. With the buyout gone, WOW Air admits that it is concerned about its near-term profitability and long-term stability.

If you have a ticket aboard the airline or are considering purchasing one, it’s now time to think over all your options in the event it ceases operations.

The building troubles for WOW Air

The financial turmoil at the low-cost carrier started well before its potential agreement with Icelandair. In September 2018, the airline secured just over $68 million in bond sales to continue flying. By the next month, it ended routes between three American cities — Cincinnati, Cleveland and St. Louis — and their hub in Reykjavik.

In November, the airline publicly acknowledged their concerns, warning that the fourth quarter results would be “materially worse” than originally anticipated. WOW Air cited the bankruptcy of Danish airline Primera Air, the cancellation of a “sale-leaseback” agreement and rising oil prices as contributing factors. Combined with their canceled merger with Icelandair and the downsizing of four aircraft from their fleet, the carrier is now focused on “securing its long-term funding” to maintain operations.

WOW Air is not the first European airline to face serious financial issues in the last 13 months. In 2017, Air Berlin and Monarch Airlines were permanently grounded after bankruptcy. While Air Berlin was sustained by the German government until Lufthansa Group could purchase their assets, Monarch terminated service immediately and left more than 100,000 passengers stranded away from home.

What happens when an airline goes bankrupt?

When airlines seek bankruptcy protection, the effects may not be immediate. After Pan Am went under at the beginning of 1991, they continued to operate until their assets were purchased by Delta Air Lines.

But more commonly, insolvency can leave customers stuck at their destinations or scrambling to get their money back. Two years after Eastern Airlines filed for bankruptcy, it abruptly shut down at midnight of Jan. 19, 1991. Passengers were forced to find refunds for already purchased tickets, while those traveling needed to find a new way home.

Although American Airlines helped Eastern flyers get home, passengers in modern times haven’t been so lucky. In 2008, both ATA Airlines and Skybus Airlines ended operations after declaring bankruptcy. Both offered little support to their customers, leaving them to contact their credit card companies for refunds and book emergency airfare or rental cars to get home.

Will my credit card travel insurance cover bankruptcy?

Because of the previous situations, travel insurance plans may list financial insolvency as a covered situation. With the Chase Sapphire Preferred® Card, financial insolvency of a travel agency, tour operator or travel supplier whose services you booked are a covered loss. To qualify for these benefits, you must purchase at least a portion of your airfare with your Chase Sapphire Preferred® Card card, or with the Chase Ultimate Rewards® points you earned from spending with it.

What is “financial insolvency?” Chase defines the term as: “The inability of an entity to provide travel services because it has ceased operations either following the filing of a petition for bankruptcy, whether voluntary or involuntary or because it has ceased operations as a result of a denial of credit or the inability to meet financial obligations.” If you purchased your tickets before the airline ceased operations, then you may be covered.

Not all travel credit cards offer bankruptcy coverage. Some Citi credit cards earning ThankYou® Points and the Citi® / AAdvantage® Platinum Select® World Elite Mastercard® do not offer trip cancellation or trip interruption benefits due to financial insolvency. Before you book any ticket, be sure to read the fine print on your credit card guide to benefits to see if bankruptcy is covered.

It’s also important to understand that credit card travel insurance is secondary to any benefits you may have from a traditional travel insurance plan and are subject to reimbursement. To receive your money back, you must file a written claim within 60 days of the incident.

Bottom line: Should I buy a WOW Air ticket to Europe?

As of the time this article is published, WOW Air continues to operate ultra-low-cost flights between the U.S. and Europe and does not anticipate ending service. The carrier operates flights daily to Europe, North America and Asia, and is continuing with plans to expand into India.

However, because of the uncertainty of its future vision, travelers should carefully consider if the low airfare is worth the risk. If WOW Air is forced to go into bankruptcy or abruptly shuts down service, your European vacation could immediately spike in price due to purchasing emergency airfare.

Before buying any ticket, be sure to understand what avenues of relief you may have. More importantly, make sure you can afford a last-minute plane ticket home while you wait for a travel insurance reimbursement, as claims can take three months or more to get paid.

How to maximize your rewards

You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2019, including those best for:

Planning a trip? Check out these articles for more inspiration and advice:
How to find the best travel insurance
5 tips to find a cheap flight
How to survive multiple-day airline delays

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