A federal bankruptcy court judge will decide as early as Jan. 9 whether about 1,900 people will get partial refunds for tickets they purchased on Direct Air flights that were canceled after the Myrtle Beach-based air carrier was grounded in March 2012 due to financial problems.
Joseph Baldiga, the trustee in Direct Air’s bankruptcy liquidation, on Wednesday filed a revised list of people who could share in a $250,000 pool set aside to pay those who purchased tickets with cash or by some means other than a credit card. Most of the 93,000 people who bought tickets for Direct Air flights that did not occur already have been reimbursed through credit card chargebacks.
The plight of those who have yet to get their money back has caught the attention of at least one Congressman. Brian Higgins – who represents the 26th district in New York, which includes former Direct Air destination Niagara Falls – sent a letter to the judge overseeing the carrier’s bankruptcy urging a quick resolution to the refunds.
“Understandably, these customers have been frustrated by Direct Air’s cynical business practices and by their circuitous and difficult path towards securing refunds,” Higgins wrote in the letter to Judge Melvin Hoffman.
“In order for our nation’s air travel system to work, consumers need to be assured that they will not be subject to arbitrary cancellations, and if they are, that they will receive fair and timely compensation,” Higgins wrote. “Without these assurances, consumer confidence in the air travel system will continue to erode.”
Hoffman is expected to approve the payouts during next month’s meeting in Worcester, Mass., where Direct Air was incorporated as Southern Sky Air & Tours LLC.
Baldiga’s plan would pay each person 26.5 percent of the money they are owed for the unused tickets. The payments would range from a low of $2.65 for one individual to a high of $2,297.64 for a high school group’s canceled trip. If Hoffman approves the payouts, consumers could expect their checks to arrive within a few weeks.
Direct Air, which was formed to help bring tourists to the Myrtle Beach area, announced in 2006 that it would start offering air charter services with its first flight on March 7, 2007. The charter service abruptly stopped flying five years later after running up $80 million in unpaid bills, according to bankruptcy documents.
Those who bought tickets on canceled Direct Air flights should have been reimbursed from the charter’s escrow account, where passengers’ money was supposed to be held in safe-keeping until after their flights occurred. When Direct Air stopped flying, about $28.5 million was missing from its escrow account, forcing passengers to file for credit card chargebacks or petition the bankruptcy court for repayment. Baldiga is investigating how the charter’s escrow account was spent.
Direct Air’s failure prompted the U.S. Department of Transportation, which oversees such carriers, to tweak its rules for charter operators, including not allowing the sale of vouchers for future travel not tied to specific flights because they are not protected under charter escrow requirements. Direct Air regularly sold vouchers through its “Friends and Family” promotion.
DOT also fined several of the carriers for Direct Air flights for their roles in the abrupt shutdown of flights that left thousands of travelers stranded or scrambling to line up alternate means of travel.
Contact DAVID WREN at 626-0281.