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Swissair problems - passengers were left stranded and out of pocket.

By haro in Op-Ed
Wed Oct 03, 2001 at 04:29:26 PM EST
Tags: News (all tags)

Swissair was unable to pay for fuel, and had to ground all flights. 18000 passengers were told that their tickets had no value. Reports can be found at The Times of London, The Washington Post and The New York Times (free registration required).

This can only increase the trouble the airline business is in already.

The fear felt by possible passengers for terrorism may be larger than it should be. The real risk of flying is probably lower at the moment than it was a month ago. Leave behind the terrorist attacks for a moment and look at what this event means.

Consequences for passengers

Many of us have travelled by air, and taken good care of our valuable air tickets. Stop thinking of the air tickets as having a value, and start thinking of it as a proof of an unsecured loan. A loan you have given to an airline company against a promise that they may possibly redeem the loan with a seat on a flight if they still are solvent and the fuel suppliers will let them fly.

The question passengers should ask themselves is - why should we be willing to pay in advance for something that may not be delivered. At least we should demand that they insure the tickets for the face value.

Consequences for airlines and IATA

This is another blow that will increase the fear of flying. We used to believe that IATA had some value as a guarantee against our loss. No more. The IATA membership should be seen almost as an advertisement gimmick designed to make us more likely to choose an airline that is a member than one that is not.

Consequences for Swissair and Switzerland

This company had a solid reputation. The reputation helped increase the view of Switzerland. The downfall means that this brand has lost its value, and that our view of Switzerland is less solid. The rest of us should also consider that letting an airline use the flag as a symbol lets the airline borrow some of our status as well as giving us status. That is fine in good times, but unless we are willing to back the airline up in bad times, we may loose status with it too.

The consequences I have given here may be lessened if the passengers are reimbursed fully, but will not be eliminated.


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Swissair problems - passengers were left stranded and out of pocket. | 21 comments (16 topical, 5 editorial, 0 hidden)
Stupid Analogy (3.50 / 2) (#3)
by farl on Wed Oct 03, 2001 at 01:23:07 PM EST

"The downfall means that this brand has lost its value, and that our view of Switzerland is less solid."

That would mean that every time a company in the USA goes bankrput, my view of the USA would diminish too.

Please try draw realistic conclusions from what you are commenting on.

It's a little bit different ... (4.00 / 1) (#5)
by aphrael on Wed Oct 03, 2001 at 01:29:19 PM EST

most of the rest of the world has airlines that are either run by the state or grew out of official state airlines and are considered the national carriers of the country --- in some sense, they are the commercial wing of the country's air force. (This is a thin analogy, but it's more or less accurate). Even Uzbekistan has a national airline; it's a point of pride, it's one of the things that makes them a real country.

Switzerland's national airline just went bankrupt. How can that not embarass Switzerland among the people who think this way?

[ Parent ]

Re: Stupid Analogy (none / 0) (#7)
by haro on Wed Oct 03, 2001 at 01:54:34 PM EST

This is a question about a small contry with a reputation as a superpower in its own way. Think Swiss banks, think drug industry, think Swissair. All these used to be part of our view of Switzerland as one of the most safe places we could do our business. It is not Swissair going bankrupt that changes our view, but that one day they may let you by a ticket, the next day they tell you it is not worth the paper it is printed on.

[ Parent ]
Slowdown (4.50 / 2) (#4)
by twodot72 on Wed Oct 03, 2001 at 01:23:39 PM EST

The fear felt by possible passengers for terrorism may be larger than it should be. The real risk of flying is probably lower at the moment than it was a month ago.
The airline industry was already in trouble before the attacks, due to the general economic slowdown resulting in a big decrease in business travel. So unfortunately, convincing people it is now safe to fly again might not be enough to save some of the carriers.

I think that, instead of just insuring the face value of the ticket, maybe carriers themselves should have to sign up for some kind of "service insurance" that would make it possible for the company to wind down operations gracefully in a situation like this, giving passengers a few days or weeks to reschedule their flights. This is not the first time people have been left stranded all of a sudden by a carrier going into bankrupcy, although it is probably the largest case.

There is (none / 0) (#10)
by wiredog on Wed Oct 03, 2001 at 02:33:57 PM EST

It's called "travel insurance". Talk to a travel agent about it, it usually covers rebooking, cancellations if someone breaks a leg or there's a war, and other stuff.

If there's a choice between performance and ease of use, Linux will go for performance every time. -- Jerry Pournelle
[ Parent ]
Travel insurance (none / 0) (#12)
by twodot72 on Wed Oct 03, 2001 at 03:11:05 PM EST

I know about travel insurance. But if a big airline suddenly disappears, there's going to be difficult to find alternative flights for everyone who are stranded (18000 people just today in this case). That's why I said it would be better if they could wind down operations gracefully, instead of just disappearing from one day to the other.

I remember a few years ago when an airline targeting "holiday islands" suddenly went bankrupt. Some people were standed for over a week; there were almost no other flights from those tourist destinations.

[ Parent ]

Good Travel Insurance (none / 0) (#13)
by wiredog on Wed Oct 03, 2001 at 03:17:17 PM EST

Covers that sort of thing. Stuck in Hawaii for a week? No Prob. It'll cover hotel, meals, lost pay. The cost of the insurance is a good guide to the health of the company you are travelling with. Admittedly, it doesn't make sense to spend more than the trip cost on the insurance, but if you're spending $6000 on the trip, $600 on the insurance might be a good bet.

I learned about this stuff the hard way. No insurance and the trip got cancelled at the last minute due to health problems. Cost the family a couple grand.

If there's a choice between performance and ease of use, Linux will go for performance every time. -- Jerry Pournelle
[ Parent ]

Update (4.00 / 1) (#8)
by twodot72 on Wed Oct 03, 2001 at 02:06:28 PM EST

The Swiss government is giving Swissair an emergency loan, so that they can resume operations at least until october 28.

Meanwhile Sabena, a Belgian airline, is seeking bankrupcy protection.

Good story (none / 0) (#9)
by M0dUluS on Wed Oct 03, 2001 at 02:16:38 PM EST

Interesting that Swiss air was allowed to use the national flag. What other countries do this? AirCanada uses the mapleleaf - a part of the flag. I guess it is because of the huge government investments that have gone into supporting these commercial behemoths.

Note that one of the few companies that is not projecting trouble is SouthWest who are not one of the large monopolies. They seem to be providing what consumers want - cheaper, stripped-down flights.


"[...]no American spin is involved at all. Is that such a stretch?" -On Lawn
WTF (4.00 / 1) (#14)
by dr k on Wed Oct 03, 2001 at 04:18:43 PM EST

There is something deeper here, and the Trade Center attack is just a timely excuse for "travel" companies to fold. This smells like greed.

In the US, we had that booming economy (so we were told). The airlines were able to scale up quit efficiently. But when the economy went south (so we were told) I don't remember reading that this would jeopardize the airline industry. Okay, so they lost one week worth of profits (well, actually, one week of expenditures - most of the profit from ticket sales was already on the books, and passengers will be stuck with "credit" instead of cash). Could you find a better opportunity to use that golden parachute?

Perhaps the problem is simply one of financial mismanagement. If I don't put some money into savings and I get sick and can't work for a month, I will end up bankrupt. It seems the same logic applies to large international corporations. So, does the airline industry really live hand to mouth? Shouldn't they be smarter than that? Or does the stock market have something to do with poor financial strategy?

Perhaps Nike could run a more efficient airline.
Destroy all trusted users!

Association between airlines and their countries (none / 0) (#16)
by Best Ace on Wed Oct 03, 2001 at 04:35:22 PM EST

I am not sure about your analysis concerning the association between airlines and the countries they represent. It is precisely the consideration of these airlines as 'flag carriers' with all the prestige and kudos this brings, that is preventing us from letting these airlines operate successfully. Certainly in Europe, anyway.

If governments are not prepared to stand up to the airline unions, or to refrain from prolonged subsidization, or to allow their 'flag carriers' to be bought by larger players in the market, then European airlines will forever be condemned to be loss-making over-manned behemoths that are constantly outshined by those airlines that are privatized and/or not worried about being symbolic of their countries.

It is crazy that there are six US majors, while in Europe, there are dozens of national airlines, all climbing over each other in the race to be the most inefficient.

European governments have to realize that having their own airline is not about prestige. The Belgian flag carrier, Sabena, has made a profit just twice in its entire history. Is this really a national symbol that Belgium considers worth promoting around the world?

US airlines shining examples? (none / 0) (#17)
by lordpixel on Wed Oct 03, 2001 at 04:47:34 PM EST

Hrm, typical US troll?

While I'd hardly say I believe all European airlines are stirling examples of efficiency, I think events and "revelations" after the attack have shown us what "outshining" really means.

As for "refraining from subsidization": are you kidding? Do you have any idea what advatages are handed out by the US government to its airlines?

Standing up to the unions: you think its a good thing when some US pilots qualify for food stamps and security inspectors can get better pay at McDonalds and thus have 400% annual turnover?
Over manned? Have you ever flown to Europe or the US? Ever looked how many people man each airport/desk/gangway in each region respectively?

I am the cat who walks through walls, all places and all times are alike to me.
[ Parent ]
Which revelations? (none / 0) (#18)
by roystgnr on Wed Oct 03, 2001 at 11:52:37 PM EST

I mean this as a serious question; I followed the news closely for the first few days after the attack, but not much recently.

I can't imagine anything short of a strip search that would prevent a determined terrorist from getting a razor-sharp blade onto a plane. Exactly what did American airlines do that made them more susceptable to this sort of attack, except being located in the same airspace as the desired targets?

[ Parent ]

You have no idea (none / 0) (#20)
by Best Ace on Thu Oct 04, 2001 at 12:11:59 PM EST

Do you have any idea what advatages are handed out by the US government to its airlines?

US subsidies are a pittance compared to all the subsidies European governments have poured into their airlines over the years, and their cost base is much higher than either US or Asian airlines.

You want to know why? Because there are only a few major airlines in the US, and they can take advantage of economies of scale. The European market only deregulated in 1997, some 20 years after the US market did, because European governments wanted their national flag carriers protected at any cost. They are still vastly more inefficient than their US counterparts.

And for your information, I'm European, not American.

[ Parent ]

Food stamps?!? (none / 0) (#21)
by EriKZ on Thu Oct 04, 2001 at 09:52:31 PM EST

Some US pilots qualify for food stamps?! Man, you've got to provide a link when you drop a statement like that!

[ Parent ]
Airline Failure Insurance (none / 0) (#19)
by jynx on Thu Oct 04, 2001 at 09:54:30 AM EST

Whenever I buy an ticket (I'm in the UK) I have to pay around GBP1 for "Airline Failure Insurance". A clerk in the travel shop once said that this is "in case the airline goes bust". I'd always assumed that this insurance would refund the ticket price in a situation like the SwissAir one.

So does anyone know if AFI for something other than the ticket value, or is it something which is compulsory in the UK and maybe not elsewhere?


Swissair problems - passengers were left stranded and out of pocket. | 21 comments (16 topical, 5 editorial, 0 hidden)
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