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Airline Bankruptcy, Mexico Airfares & Frequent-Flier Changes

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Between airline mergers, the bankruptcy (and recent purchase) of Mexicana Airlines, and rising airfares, it’s been a weird summer for air travel.

Peter spoke with AirfareWatchdog’s George Hobica to uncover what travelers need to know, and how you can protect yourself in the long run.

Peter Greenberg: There’s a story in the news that came to me as quite a surprise. It is the oldest airline in America, and it has one of the best safety records of any airline:  Mexicana. You want to hear about the fallout from swine flu, border violence, and plain fear? You’ve seen it when Mexicana stops flying.

George Hobica: Yeah, it was quite a shocker. We’ve had old airlines in the United States that have stopped running like Pan Am, TWA, and Eastern Air Lines. Airlines don’t last forever.

PG: They don’t, except in Mexico where, up until recently, it was a relatively robust economy because it’s an oil-producing country. They’ve got Pemex, the petroleum company, tourism was big, and all of a sudden … whoops.

GH: For a lot of people, Mexico is not on their must-visit list. Although that’s not true for everyone—after all, we have Californians who just love Mexico. Virgin America, as you know, has filed to fly from California to Mexico. So all is not hopeless.

Ancient Clay Mask - Mexico TravelPG: No, all is not hopeless. I should tell people: I’ve done my radio show four times in the last 12 months from Mexico for two reasons. One, because it is a great destination, and two, to let people know the worst four-letter word that starts with F is “fear.” People need to get out their maps. You can fly down to Cancun and the Riviera Maya, or the Riviera Nayarit, or you go a little farther west to Puerto Vallarta, and guess what? There’s no problem. There’s nothing going on, other than you having a good time. It’s a little sad that when we flew down there, there were maybe five people on one plane. The hotel was maybe at 11 percent occupancy, and all the other ones had closed. This is sad.

GH: Another interesting thing is that for a while, especially during the H1N1 scare, fares to Mexico were really, really cheap. I mean they were $200 round-trip, including tax. Then they went way up again, which is kind of odd. I would have thought with all the fear factor that there would have been more deals. But it’s quite expensive, and unfortunately taxes on Mexican airports are rather expensive. 

PG: You know in the old days if an airline failed there was a gentleman’s agreement, even if they had a strike, with other airlines to honor the tickets. That’s not the case here, is it?

GH: Unfortunately not. There is one thing that can protect you whenever you buy an airline ticket and you don’t get it. That is the Fair Credit Billing Act. Basically if you buy something, even a toaster, and it doesn’t perform, or it doesn’t arrive, you contest the charge within 60 days. Then the credit card company has to eat the charge. If anyone has a bought a Mexicana ticket and the airline doesn’t refund the fare, ask the credit-card company to take it off the charge card. [For more information on the Fair Credit Billing Act, click here]

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PG: Let’s move on and talk about what else is going on this summer, because I can’t seem to find a plane that isn’t completely full. Last year, I could have gotten a fare round-trip from Los Angeles to New York on Virgin America for $218. Last week, that same fare on any of the other airlines, America, United, Delta, started at $757.

Cash in Hand - Prepare to Pay for Plane TicketsGH: Fares are up. The airlines are earning money and some people think that’s a good thing because we won’t have another Mexicana. When fares are too low we have bankruptcies. We need to have a healthy airline industry. I’m not an apologist for the industry, and I don’t like high fares, but they have to start earning money sometime.

There were a couple of incidences where they filed new fares, and they forgot to put the fuel charges in. Lufthansa did it, and Delta. So the fares were $300 less than they should have been, and they did honor the ticket. So we saw a couple of fares at $400 with tax to European cities like Copenhagen, Stockholm and Vienna.

But the fares to Europe are generally very high. The airlines have taken capacity off the domestic routes and put those planes on international routes because they know that there is no choice. Domestically, people can drive, take the bus, or the train. But if you’re going to Europe you cannot drive. The only other option is sailing on the Cunard line. So they have you over a barrel. You either stay home, or if you have to go, you have to fly.

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OneWorld Alliance LogoPG: And what is going to happen now that they’ve been granted anti-trust immunity with the OneWorld Alliance, so that British America and American can do more code-sharing and more flight consolidation. You’re going to see the capacity on the North Atlantic, especially going between London and New York, Los Angeles and Chicago, start to decrease as British Airways and American combine flights. That will then allow American to pull a lot of their 777s off those routes and put them into Asia. What it will do to the North Atlantic, of course, is every flight will be full, and the fares will go up again.

GH: Absolutely. The fares are high and it’s hard to use frequent-flier miles on these. I was thinking of going to London, and I wanted to use some miles. There were no dates for the summer—first class, business class, premium economy, economy—there were just no seats.

PG: Listen I actually went a little further than that to try to get a friend of mine over to Cape Town using miles. I went through United Airlines where I have a lot of miles. There are no available flights until June 2011, at the very least. Then I figured, United is part of the Star Alliance, so maybe Lufthansa has flights. Or maybe I can go a different route, via Air New Zealand and go back that way. Nothing. The reason is, that none of the airlines were releasing any of these seats into the frequent-flier pool, because they just wanted their flights to fly full with revenue passengers. And quite frankly, if I were running an airline, I’d want to do the same thing!

GH: And if they keep on doing this, people will stop using credit cards that earn frequent-flier miles, and turn to cards that give them cash back.  They’re going to kill the golden goose.

By Peter Greenberg for Peter Greenberg Worldwide Radio.

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