oneworld airline air berlin was a basket case — which is how Etihad bought into it in the first place. When Etihad withdrew its support, tired of the losses at the German carrier as well as at Italy’s Alitalia, it collapsed.
The bankruptcy administrator is seeking up to $2 billion in damages from Etihad, arguing that the Abu Dhabi-based airline had pledged to provide support which it then improperly withdrew.
However it appears that the administrator isn’t just going after Etihad. There’s a report that they’re even going after passengers. (HT: @airlineflyer via Zack A)
A customer reports that they had purchased 2 tickets on the airline. The carrier went bankrupt and cancelled its flights. So they disputed the ticket purchase with their credit card company, Chase, and got their money back.
Now, they say, they have received an email with a “bill for the flight and a court order for payment and a deadline.”
This is certainly unusual and I do not have any expertise in German bankruptcy law, though I am confident that this passenger needn’t worry. Though they don’t share the actual text of the demand or copy of the order of the court, I think we can reasonably surmise that:
- The bankruptcy administrator’s position is that the passenger is an unsecured creditor of the airline. Once air berlin entered insolvency proceedings they stopped refunding refundable tickets.
- That passengers are relatively low on the list for repayment, and essentially jumped the queue with the credit card dispute.
- So they want to claw back the money from the customer in order to pay higher priority creditors.
I do not know whether the customer themselves or the credit card company is the proper target of such a motion in a German insolvency proceeding. And I suspect that any such judgment would find difficulty being enforced through a U.S. court, since under U.S. law the passenger would be a priority creditor. Though I’d love to hear from subject matter experts among readers here.
Most consumers assume that successfully disputing a credit card charge nullifies a debt. That’s not true – the company you paid can still ask for payment and sue you for the debt.
However in this case air berlin doesn’t have a claim that the customer failed to pay for something they received — air berlin cancelled the flight. The claim is that even though they didn’t provide the service, the limited funds the airline had should have gone to repay someone else.
That may or may not be the case under German law but as a US resident I simply wouldn’t worry too much over it. Ultiamtely the chargeback was done in compliance with the airline’s credit card processing agreements covering events including bankruptcy.
This particular message to this passenger notwithstanding, the best approach in the event of an airline bankruptcy is to seek a refund through your credit card company.
However be aware that the U.S. Court of Appeals for the 10th Circuit ruled this year that a credit card company does not have to honor a chargeback if you have already paid off your card’s bill that included the charge. That’s one reason not to buy tickets too far in advance of travel, though not a practice card companies are likely to try to enforce except with very large transactions.
Interesting Case
Good reason not to buy from WOW until the day before.
No court of law would hold the consumer responsible for this. They agreed to accept money in exchange for a flight, then cancelled that flight. They cannot reasonably try and collect invalid debt from the consumers. That said, their strategy of trying to collect directly from consumers instead of CC companies that authorized the chargebacks is likely their best way to go. Chase’s high powered legal team would get this thrown out in a minute.
There are cases in the US where lawyers in US state courts have gone after foreign parties with little to no on-going physical presence/operations in the US and seek judgment in US state courts so as to use that to go after money/assets of/in the foreign parties, whether it be presently accessible or only accessible t in the US in the future.
If the plaintiff is desperate enough and can find enough of a foreign target, they may attempt to go after the foreign target by retaining foreign lawyers to go after the foreign targets in the jurisdiction of relevance to the foreign lawyers retained in a matter.
But in this matter of having paid for an Air Berlin ticket for services not provided by Air Berlin and having the money clawed back from Air Berlin by card-issuers, I have to wonder why the bankruptcy administrator isn’t going after the banks that did the charge-backs. Is it because fighting a bank like Chase is more expensive and less likely to be as lucrative than just shooting at easier targets and hoping to hit some easier money from less powerful parties such as the retail customer who paid for a service not delivered and is entitled to dispute charges for goods and services not delivered?
I have often wondered if a customer could get a full cash refund if their flight is cancelled. Delay may be difficult to argue, but cancelled or large delay, I wonder. If so, then clearly the card issuer could reverse the charge.
As for paying the statement in full, that clause, which is suppose to negate the customers ability to dispute a charge, is probably obsolete due to the volume of mail order purchases and advance purchases. The 60 day after statement date close clause, to dispute a charge, is probably the real deadline because by that time, the merchant has been paid by the card issuer.
There are two quick arguments against the 60 say limitation. 1: the card processing fees are so high that the card issuer is effectively providing insurance to the customer that the service will be rendered. 2: if it is a cobranded card, such as AA visa, Delta amex, Expedia MC, etc, used to purchase their product, the implied guarantee is that the bank is acting in partnership with the business, and while not liable for operational problems such as a crash or lost luggage, is liable financially such as for a fraudulent sale or cancelled flight especially due to bankruptcy.
The theory simply is that when Visa, MC, Amex, discover let a merchant use their logo in exchange for a cut, the customer that pays the bill gets the most protection, not the bank or merchant, despite any contract terms that may effectively bind the customer. Otherwise the bank/merchant have incentives and legal protections to defraud unsuspecting and relatively powerless customers. I am dragging this out, but Visa and MC could also be liable if they incentivized a cobrand relationship that the customer used. But I am not an atty, so call #law or whoever before you sue because the AirBNB you paid for cheated you out of a decent night’s sleep or something.
I’m no attorney, and I doubt they need to worry. But I feel that instead of disputing the charge causing this issue in the first place, they could’ve probably just filed a claim under the card’s trip delay/cancellation insurance.
Credit cards have been known to slow pay airlines teetering on the edge of insolvency. I bought a ticket on People Express airlines towards the end and much to my relief, I had no trouble getting it refunded…turned out Amex had not paid them yet.
As far as I know, bankruptcy law is a matter of the jurisdiction in which the company goes bankrupt. Whether they can enforce that law in the USbis a good question but I don’t think US bankruptcy law is relevant to this case one way or the other.
A duty probably exists to TRY to collect. The letter probably satisfies that duty.
The German bankruptcy administrator can spark a case in US courts about a contractual debt being owed it (for the chargeback amount) for the purchased ticket, whether it was used in part or not. Otherwise the German claim is likely to go nowhere unless and until the claimed debtor has attachable assets in localities accessible — directly or otherwise via bilateral/multilateral agreement — to German authorities after a German order of there being a recognized debt due from the “debtor”.
Unless the sum claimed from a party is large and/or relatively cheaply subject to collection action, the bankruptcy administrator is unlikely to find it worthwhile financially to spark a case and hire the necessary lawyer(s) to pursue the matter.
Under European law EU261 applies when a flight is cancelled a full refund plus compensation is due. Therefore they have no claim
This exact thing happened to me. I just received an email that was a reminder “Mahnung” for collection of the cost of the ticket for a flight to Germany last October that never took place. It was an incredibly stressful event and having to book another ticket on such short notice cost me a lot of extra money. They are now trying to come after me for cost of a single airline ticket, which I was fortunate enough to get reimbursed by the credit card company. I don’t think so!!!