Lessons From An Airline Collapse

As yet another budget airline goes belly up, Malcolm Wheatley looks at the lessons for travellers from Zoom's collapse.

Exactly one month ago today, I made a decision that has saved me a lot of heartache: I didn't book a family holiday to Canada with now-defunct Zoom Airlines.  For those who don't know, Zoom crashed and burned last night, leaving passengers stranded and holding worthless tickets to nowhere.

Yes, I came close to parting with my hard-earned dosh -- but lessons learned here on The Fool thankfully stood me in good stead.

First, the background.  As anyone with school-age kids knows, the summer holidays are an expensive time to go abroad.  And sky-high fuel prices and airport taxes don't help, either.  But summer 2009 offers our particular family a partial reprieve: with a daughter taking GCSEs, we can escape slightly earlier, before the main school holidays start.  And thereby save money.

We're very fond of Canada as a holiday destination, but wanted to go to a part of it we've never visited -- Nova Scotia.  But Halifax, Nova Scotia's capital, isn't well-served by transatlantic airlines.  Flights to Toronto tend to be cheaper, but adding on the domestic flight from Toronto to Halifax eliminates any saving.  So Halifax it had to be.

Kids Fly Free

Consequently, when an e-mail newsletter arrived from a well-known money-saving website, drawing my attention to a `kids fly free' offer from Zoom, I didn't waste much time checking it out.  And in truth, it didn't appear that there was much to check out.  

The rules were very simple: under the offer, kids under 18 could fly free next summer, paying only airport taxes and fuel surcharges, provided that at least two adults accompanied them.  Just enter the discount code `Children2009' and -- lo! -- save hundreds of pounds.

Promptly zooming onto Zoom's website, I found that this was indeed so: flying with the airline would save us a considerable sum of money.  The dates we wanted were available, the price was attractive -- and was much, much, cheaper than anything else on offer with any other airline -- so what was stopping us?

Two things, fortunately.

First, I checked out online reviews of Zoom's service.  Usefully, a number of websites offer fellow travellers' reviews of airlines, hotels and holiday destinations, and my wife and I have found the insights that they offer to be invaluable when planning holidays.  (For reviews on destinations and hotels, for example, check out www.tripadvisor.co.uk; for airline and airport reviews, try www.airlinequality.com .)

The reviews for Zoom were for the most part awful.  Delays, last-minute timetable changes, cancellations, poor in-flight service -- Zoom had it all, including profuse apologies from senior airline executives.  Ten minutes' online research, at no cost, had done a lot to dissuade me from making the booking.  I'll never meet the people who posted those reviews, but -- just like here on The Fool's discussion boards -- the opinions and experiences of anonymous strangers proved invaluable.  Whoever you were, thank you.

Second, I thought long and hard about the business logic underpinning the `kids go free' offer.  It's no secret that airlines are bleeding red ink, with half a dozen or so airlines operating in and out of the UK having gone bust in the past year.  

And in April, we'd witnessed at first hand the misery caused by the collapse of Hong Kong-based low-cost airline Oasis.  So how could Zoom afford to -- literally -- give away seats, when other airlines were scrabbling to boost revenues with check-in fees, luggage fees and other such cash-raising wheezes?

Too good to be true

The answer, I suspected, was that it probably couldn't.  As you often read here on The Fool: if an offer seems too good to be true, it likely is too good to be true.  Time and again, from `investment' firm Barlow Clowes back in the 1980s to the boiler room and timeshare scams of today, deals that offer returns that are significantly better than those available elsewhere in the market usually turn out to have a nasty sting in the tail.

So my wife and I discussed the Zoom offer, and decided not to take it up -- despite knowing that paying by credit card, as opposed to debit card, held out some prospect of getting our money back if the airline folded.  And we still haven't booked any seats, in fact.  So if anyone has any bright ideas, please use the comment box below!

More seriously, what are the lessons to emerge from Zoom's collapse, and indeed the current spate of airline failures?

* Check the reviews.  The shoddiest airlines are generally the first to fail.

* Airline failure is a serious possibility, and worth factoring into your plans.  Insurance is available, although the issuers (not very helpfully) exclude airlines that look dodgy.  Zoom had already been excluded, for instance.

* Pay with a credit card, not a debit card or cash.  Under the Consumer Credit Act, credit card firms must refund you. 

* Don't get suckered in by offers that are too good to be true.  There's always an element of judgement and luck in this, but try and stack the odds in your favour. 

* Make sure your flexible friend can bend enough to pay for a flight home if you're stranded.  As always when airlines go bust, today there are sad tales of people stranded in Canada and the U.S. without the funds to buy a new ticket home.

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