What Happens When An Airline Goes Bankrupt And How Does It Affect Travelers With Tickets?

When it comes to stressful situations while traveling, having your flight canceled is certainly one of the top things you don't want to happen. While planning every single detail of your trip is actually a bad idea, one thing that most travelers book well in advance are flights. Knowing how long of a trip to take, or what airline to book are things people wish they knew when booking a vacation, but sometimes there are events outside your control, like what happens when an airline goes bankrupt, and how will that affect travelers with booked flights?

Whether it's from lack of investor funding, the high cost of maintenance fees, salaries, or fuel prices, airlines, like any other business, are sometimes subject to financial downfall, resulting in filing for bankruptcy. Airlines such as Germania, WOW air, and Thomas Cook Airlines all started with high hopes, only to have their bottom line plummet to the point of no return. When Thomas Cook Group eventually went under, it stranded over 600,000 travelers in 2019, which resulted in British CAA picking up the tab for hotels, flights, and refunds.

At the end of August 2025, budget carrier Spirit Airlines filed for bankruptcy in what would be its second time in nine months after attempting to restructure. Not long after, budget Icelandic carrier Play Airlines canceled all flights and essentially told travelers to find other ways to and from their destinations. The airline industry doesn't seem to be entirely healed from previous bankruptcies, leaving passengers wondering what happens to their booked tickets and most importantly, their money, when airlines fail.

The word bankruptcy comes with all sorts of stressful thoughts, especially when you have a flight booked on an airline that's in financial trouble. Although thought of in a negative light, bankruptcy doesn't always mean the end of your flight, or that cancellations will occur, but it's better to be safe than sorry, especially when it involves your hard-earned dollars.

Before you think that 2025 might be the year travelers finally get compensated for flight delays, or cancellations, it gets a little complicated. In the U.S., regrettably there are no passenger protections like in the EU and the UK when an airline goes belly-up. and if the airline goes completely dark? Good luck. Re-booking and refunds get pretty messy, and aren't guaranteed to be given.

If this happens, passengers will need to contact their credit card companies as soon as possible to do a chargeback, since they paid for a service that wasn't provided. This is why you should avoid buying airline tickets with a debit card, and always book travel or cancellation insurance as soon as you book your flights.

Other than avoiding purchasing your flight tickets with a debit card and making sure you purchase travel insurance, you might be asking yourself if there are other preventative precautions you can take before an airline financially tanks. The short answer is, yes, there are, and here's how.

If you don't follow financial markets, or news headlines, it may be time to start before you book that flight. Typically, insolvencies, bankruptcies, or financial issues with shareholders and stock markets don't happen overnight. Following the news, or doing research into the airline's financial status, might help give you peace of mind before booking that flight to Singapore.

If you find yourself affected by an airline's collapse, keep your eyes open for something referred to as "rescue flights," which are usually discounted flights offered by other airlines to help travelers in a jam when an airline ceases operation. Norwegian Air, Icelandair, and Virgin Atlantic offered to help passengers left stranded when WOW Air stopped flying, and back when Thomas Cook went bankrupt, the British CAA and Virgin Atlantic stepped up to get travelers home. Keep in mind that these "rescue fares" have a bunch of conditions that may require you to prove you had a flight booked for the dates affected, so make sure you keep those receipts!