Airline Bankruptcies: What Are Your Rights in the USA?

When an airline goes bankrupt and ceases operating, it makes headlines around the world — but the real impact falls on ordinary passengers, suddenly stranded abroad or left holding worthless tickets for long-planned vacations.

If you're dealing with this situation right now, this guide explains your flight rights as a US air passenger and the steps you can take to try to recover your costs. We'll also share how to protect yourself from airline bankruptcies in the future.

On this page:

• Spirit Airlines: what's happening and what to do

• What to do if your airline goes bust

• How to protect yourself from airline bankruptcies

• Major airline bankruptcies – and what happened

• Airline bankruptcy vs airline failure: what's the difference?

• What does bankruptcy mean for compensation claims?

Just a note: this advice is for US air passengers.
If you purchased your ticket in another country your rights may differ. Find our advice for different countries:

UK | Ireland

Spirit Airlines: What's happening and what to do

Spirit Airlines has had a turbulent few years. After struggling post-pandemic with rising costs, a Pratt & Whitney engine recall that grounded dozens of its aircraft, and a blocked merger attempt with JetBlue, the ultra-low-cost carrier filed for Chapter 11 bankruptcy protection in November 2024.

Spirit briefly emerged from that first bankruptcy in March 2025, but filed for Chapter 11 again just months later in August 2025. Its restructuring plan assumed fuel prices would normalize — but a sharp spike in jet fuel costs following the outbreak of the Iran conflict in early 2026 has thrown those plans into serious doubt. As of April 2026, jet fuel costs are nearly double Spirit's projected figures for the year, and the airline has reportedly reached out to the Trump administration seeking emergency financial assistance.

The airline is currently still flying. Flights are operating as normal as of the date of this update, and no shutdown has been confirmed. However, the situation is highly uncertain.

What Spirit Airlines passengers should do right now

• Don't cancel your booking. If you cancel voluntarily before Spirit officially ceases operations, you lose your right to a refund through your credit card company or travel insurer. Wait for official cancellation notices.

• Check your credit card coverage. If you paid for your Spirit flight with a credit card, contact your card provider now to understand your chargeback options in the event of service failure.

• Review your travel insurance policy. Some policies cover airline failure or scheduled airline failure (SAFI). Check what yours says — and look at the exclusions carefully.

• Make a backup plan. Identify alternative routes and airlines in case your Spirit flight is canceled at short notice. Competitors including Frontier, JetBlue, and the major US carriers serve many Spirit routes.

• Keep your booking confirmation. Download your boarding pass and save all confirmation numbers and receipts.

• Watch for official updates. Follow Spirit's website and credible news sources. Only act on confirmed information.

What to do if your airline goes bust

When an airline shuts down, the confusion can be overwhelming. Here's how to navigate it.

Start with the airline's website

Before operations fully cease, most airlines will post a statement on their website. If any passenger assistance is available, it will be mentioned there. This should be your first port of call.

There’s probably not going to be a lot to go on though, so it’s good to read up on your rights, and know how you can get a refund or a ticket home.

US passenger rights when an airline goes bankrupt

Here's the difficult reality: the US has no federal protection scheme for passengers when an airline goes out of business. Unlike the EU, where some protections apply, US passengers' rights are largely determined by the airline's own terms and conditions — and those terms become unenforceable once the airline ceases operations.

This means your tickets are effectively worthless if the airline shuts down, and there is no government-mandated compensation or repatriation program. Your best options come from your credit card company, travel insurer, or travel agent.

Getting a ticket home if you're stranded abroad

In some past bankruptcies, airlines or governments have stepped in to help stranded passengers. This is not guaranteed, and when it does happen, it's more likely to be a discounted "rescue fare" than a free ticket.

If no assistance is offered, you will likely need to purchase a new ticket at your own expense and pursue a refund of your original ticket through other channels.

Sadly this will leave many travelers out of pocket, but this is often the only way to recoup any of the ticket value. And the good news is there are several ways you may be able to claim a refund:

Refunds via credit card

Paying for travel by credit card is one of the most effective protections available to US passengers. If your airline fails, contact your credit card company immediately and request a chargeback. The Fair Credit Billing Act provides some protections here, though not all situations are covered. Your chances are strongest if:

• You made the booking recently

• You file the dispute promptly

• Your card provider has a strong track record on travel disputes

Refunds via travel agent or tour operator

If you booked through a travel agent or tour operator, contact them as soon as possible. They may have additional protections or trip cancellation guarantees for their customers. Be sure to ask whether their policy specifically covers airline bankruptcies, as some cancellation protections only apply to weather-related or evacuation cancellations.

Travel agents will likely have other customers in the same situation, so they’ll also be able to advise you and help you book new flights, if that’s what you want.

Refunds via travel insurance

Check your travel insurance policy for coverage related to airline failure. Look specifically for SAFI (Scheduled Airline Failure Insurance). Many standard policies cover flight cancellations but exclude airline bankruptcies — so read the fine print carefully.

Refunds for accommodation and other travel costs

If your flight is canceled and you decide to cancel the rest of your trip, contact your hotel and anything else you've pre-booked promptly. In some cases, you have the right to cancel in advance for any reason, other times they will offer a refund out of goodwill. If not, your credit card company and travel insurer may be able to cover some of those costs.

How to protect yourself from airline bankruptcies

There's no foolproof way to predict which airline will go under — some carriers teeter for years without failing, while others collapse suddenly. But taking these steps will significantly reduce your financial exposure.

1. Always pay with a credit card Your credit card is often your strongest safety net. In the event of airline failure, you can file a chargeback for services not received. Ask your card provider about their specific policies before booking, especially with smaller or struggling carriers.

2. Get travel insurance that covers airline failure Not all travel insurance policies cover airline bankruptcies. When shopping for a policy, specifically ask whether it includes SAFI (Scheduled Airline Failure Insurance) and what the policy excess is. Don't assume standard cancellation coverage is enough.

3. Stay informed You'll likely hear about a major US airline's problems in the news before they become critical. For smaller or foreign carriers, check local and aviation-specific news sources in advance of your trip.

4. Have a backup plan ready

If you're monitoring a financially troubled airline and have concerns, research alternative routes and airlines in advance. Don't book alternatives speculatively — if your original flight is not canceled, you won't be able to get a refund for it — but be ready to move quickly if needed.

5. Don't cancel preemptively

If you suspect your airline may shut down, do not cancel your booking before an official cancellation or shutdown is announced. Doing so typically forfeits your right to a refund through your credit card provider or insurer.

Major airline bankruptcies – and what happened

Spirit Airlines (USA) – First filed: November 2024

Spirit Airlines filed for Chapter 11 bankruptcy protection in November 2024, citing financial difficulties stemming from the pandemic, an engine recall that grounded dozens of aircraft, and a failed merger with JetBlue. The airline continued operating throughout its first bankruptcy and emerged in March 2025, assuring passengers that flights and ticketing operations remained normal throughout. However, it filed for Chapter 11 a second time in August 2025. As of April 2026, Spirit is still flying but is said to face a significant risk of liquidation due to surging fuel costs.

Ravn Alaska (USA) – April 5, 2020

Alaska's largest regional airline, Ravn Air Group, abruptly ceased all operations and filed for Chapter 11 bankruptcy on April 5, 2020 — one of the first major US airline casualties of the COVID-19 pandemic. A new investor group, FLOAT Alaska, relaunched service under the Ravn Alaska name in late 2020. However, the revived carrier never fully recovered, progressively cutting routes before ultimately ceasing operations for good in August 2025.

For passengers who had booked with the original Ravn Alaska when it folded in 2020, credit card chargebacks were the primary route to a refund, as no government repatriation or compensation scheme was in place for US domestic passengers.

Silver Airways (USA) – December 2024 / June 2025

Silver Airways, a Florida-based regional carrier that operated flights across Florida, the Gulf Coast, and the Bahamas, filed for Chapter 11 bankruptcy protection in December 2024. The airline initially hoped to restructure and emerge from bankruptcy by early 2025, but was unable to secure new investment or a buyer. On June 11, 2025, Silver Airways announced it was ceasing all operations immediately.

The shutdown left passengers across Florida and the Southeast scrambling to find alternative connections, with some smaller communities losing their only non-stop air service. As with other US airline failures, no federal compensation scheme exists for affected passengers.

Thomas Cook (UK) – 23rd September 2019

The UK's oldest travel company ceased all operations in early autumn 2019, leaving an estimated 600,000 travelers stranded abroad. The UK government launched its largest-ever peacetime repatriation to bring them home.

WOW air (Iceland) – March 28 2019

When Icelandic budget airline WOW air ceased operations all flights were canceled and the airline encouraged passengers to rebook with other airlines offering lower rates referred to as “rescue fares”. It followed months of financial uncertainty for the airline which had already sold or returned many of its aircraft, and began canceling flights in October 2018.

Primera Air (Denmark) – October 2, 2018

This Latvian-owned low-cost airline left passengers stranded on both sides of the Atlantic when it ceased operating in 2018. The BBC reported the failure was likely a result of unsustainable growth and a failure to secure funding.

Island Air (Hawaii) – November 10, 2017

Independent airline Hawaii Island Air had operated scheduled inter-island passenger services in Hawaii for 37 years before it stopped operating in 2017. According to Forbes the airline had some rocky years and was facing steep competition. Hawaiian Airlines stepped in and offered to honor outstanding tickets, providing unusual relief for affected passengers.

Air Berlin (Germany) – October 27, 2017

German’s second-largest carrier, Air Berlin, filed for insolvency in August 2017. However, as the BBC reported, the German government stepped in with a loan so that the airline could continue to operate while it looked for a buyer. The final Air Berlin flight flew in October after it was confirmed Lufthansa would purchase about half of Air Berlin’s assets. UK-airline easyJet later purchased a substantial portion of the remainder.

Airline bankruptcy vs. airline failure: What's the difference?

These terms are often used interchangeably, but they mean different things — and the distinction matters enormously for passengers.

Bankruptcy (specifically Chapter 11 in the US) means a company is seeking court protection to restructure its debts and finances while continuing to operate. Delta, United, and American Airlines have all filed for Chapter 11 bankruptcy at various points in their history. In these cases, passengers could continue to fly as normal. If your airline is in Chapter 11 bankruptcy but still operating, your ticket is still valid.

Liquidation (or "airline failure") is different. This is when a bankrupt airline cannot find a path to survival and completely ceases operations. All flights are canceled, the airline's assets are sold to pay creditors, and passengers are left without recourse through the airline itself.

What does bankruptcy mean for flight compensation claims?

If you submitted a flight delay or cancellation compensation claim before your airline went bankrupt, the outlook is not good. When a company enters bankruptcy proceedings, all creditors — including passengers with unresolved compensation claims — join a long queue. Investors, employees, and secured lenders are typically paid first. Passenger compensation claims are treated as general unsecured debts and are rarely recovered in full, if at all.

There is one possible exception: if your flight was operated by a different airline who had partnered with the airline which went bust. In that case, we’ll continue pursuing that partner airline for compensation passengers are owed.

Flight delays happen, but that doesn’t mean you have to accept them. You may be entitled to a much as $650 in compensation if your flight was delayed, canceled, or overbooked within the last three years.