Destinations Where they went Travel gear Student travelA bankruptcy and student trips
By Bruce Mohl, Globe Staff, 02/24/02
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Destinations Where they went Travel gear Student travel |
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The recent filing for bankruptcy protection by Council Travel Service, the nation's largest student travel agency, has raised concerns that some of the tickets it issues may not be honored by the airlines.
I want to stress that that hasn't happened yet and Council Travel and the airlines say it won't happen. But passengers have been stranded in Europe when similar travel agencies there went into receivership. And the behind-the-scenes legal maneuvering of some airlines involved in the Council bankruptcy case suggests it's not beyond the realm of possibility here.
At the very least, Council's bankruptcy filing is shedding light on how it and other student travel agencies operate and how some of the tickets they issue bear a close resemblance to more risky travel vouchers.
Espen Odegard, chief executive officer of Student Universe, an online student travel agency based in Watertown, is raising many of these questions, for obvious competitive reasons. But he says students need to be aware of what they are buying, especially in uncertain economic times.
Council and STA Travel, which is negotiating to buy Council's assets, are two major brick-and-mortar student travel agencies. Council is the biggest US agency and STA is the biggest worldwide. Both companies tend to place their retail outlets near colleges. They both have several locations in Boston and Cambridge.
Council and STA have negotiated student discounts with all the major airlines and have agreements that allow the travel agencies to issue their own air tickets and reimburse the airlines for them only after the customer's travel is completed.
This voucher-like ticketing arrangement wasn't a problem in good economic times. But when Council began hemorrhaging red ink, suddenly airlines were carrying student passengers but not getting paid for doing so.
The airlines cut off Council's access to their booking systems for future flights, and Continental Airlines, Council's largest creditor at $5.8 million, tried to cancel earlier Council reservations and put those students on standby status.
Council has temporarily blocked Continental's move in bankruptcy court and continues writing tickets for new customers by having STA issue the tickets. But the bankruptcy court byplay would seem to indicate that the airlines' patience will extend only so far.
"Initially, there's a PR nightmare for an airline to reject passengers, but at some point, when the debts get big enough, something has to give," Odegard said.
"Not at all," said Schuyler Carroll, the bankruptcy attorney for Council. "The tickets that we will issue are 100 percent secure, just as if they were issued by the airlines." The airlines say the same thing on the record, although privately they aren't so sanguine.
Odegard predicts that financial turmoil for brick-and-mortar student travel agencies will only increase. Northwest Airlines, for example, has stopped accepting the voucher-like tickets, reducing the travel agenies' cash flow.
Odegard says his online business model also allows him to undercut the prices of his brick-and-mortar competitors, who face the high fixed costs of retail outlets and employees to staff them. I checked the price of a trip from Boston to Paris in May and found Student Universe charging $477, well below STA's fare of $578.
Odegard advises students, no matter which travel agency they book with, to get tickets issued directly by the airlines (all electronic tickets or paper tickets marked with the insignia ARC, for Airline Reporting Corp.). That way, Odegard said, no matter what happens to the agency they still have a valid ticket.
Michael Burns, vice president of marketing at Council, said consumer concerns undoubtedly increase during a period of financial turmoil, but he saw no reason for students to be alarmed.
"Student Universe has their business model and we have ours," he said. "The bottom line is the airlines aren't turning away ticketholders."
hdbriefCar insurance
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Bruce Mohl can be reached by e-mail at mohl@globe.com.