It was May 1 and the phone rang seven times before it was answered. A recording gave the news in somber, friend-of-the-family tones: "Auto-Train Corporation regrets having to discontinue service effective April 30, 1981. Inquiries should be directed to Auto Train Corporation, 1810 K St. NW, Washington, D.C. 20006, or you may call us next week (202) 822-8664."
Well, "have a nice day" doesn't work out too well when you may be announcing to ticket-holders that you've just gone bust and won't be carrying them on the Lorton, Va.-Samford, Fla., trip they've planned and paid for.
At the same time in Baltimore, American Eagle Airlines was wrapping up, too. The company had announced a new scheduled service between Detroit-Cleveland-Baltimore and Frankfurt, Germany, to begin May 9. Instead, it declared insolvency April 21. No passengers were left in the lurch, though, since German landing rights hadn't been granted and therefore no tickets had been sold.
President Reagan, in his recent address to Congress, put a figure to the problem. In the last six months, he noted, more than 6,000 businesses have failed. He wasn't, of course, saying, "the end is at hand," nor has anything seismic happened in the travel field. But since travel often requires sizable advance payments, it's probably prudent for consumers to fasten their seat belts and extinguish illusions.
AIRLINES. "In light of present economic conditions," the American Society of Travel Agents (ASTA) is worried. The nation's largest travel agent association believes the traveling public has little recourse itself should an airline go under, and is therefore asking for legislation to require either airline bonding or self-insurance.
The Civil Aeronautics Board is studying the request. It has authority to demand financial guarantees of air carriers, but it's reluctant to move. The bottom line, if summarized, is short and snappy: Any airline that can afford a bond doesn't need it, and any that can't will likely go broke if forced to buy one.
In the past, the CAB has helped steer shaky airlines into mergers, but that isn't as attractive a proposition as it once was, and bankruptcy looms as a more likely alternative.
However, a large, publicly owned airline, Chapter XI (bankruptcy and reorganization) and first try to pull itself back together. By the same token, an advance cutback in schedules or other measures could be in the cards.
If financial-page news about your airlines makes you nervous, then the thing to do is reserve early but pay as late as you can, and possibly with a credit card or through a travel agency, since agents can hang onto the money for seven days more.
If you have to interline -- i.e., travel on more than one airline -- you might also consider buying separate tickets if the first line you have to fly is acknowledged to be shaky. (The first is the one whose "stock" the ticket is written on. It's repsonsbile for paying the others after your flight. If the others have no faith, however, they can rescind interline agreements on short notice. If so, your already-paid-for-tickets would not get you a seat.)
In sum: Commuter airlines have gone broke with some frequency, but reportedly few people have lost money since it is common to buy your ticket on the day of departure. Some customers also have had their losses absorbed by travel agents. With charters, most require bonding or escrow arrangements, but ask.
CRUISE SHIPS. U.S. law requires financial protection of cruise passsengers only on cruises that embark from U.S. ports. Therefore, even though passengers last year bought and paid for their tickets in this country, China trips about the ship Aquamarine were not covered. And when the shipine failed, U.S. consumers reportedly lost more than $1 million. Extension of U.S.-style protection is in the works, but does not yet exist.
RAIL AND BUS TRAVEL. Interstate passenger bus lines file periodic financial reports with the Interstate Commerce Commission, so even though there's no backup for tickets, there is good reason to expect early warnings of problems. Again, buying tickets at the last minute is the usual practice, and thus protection can be built in.
Most operators of bus tours are members of the National Tour Brokers Association. As such, they are bonded. They also point to their record: All "deaths" have been natural. In 30 years, no NTBA member has ever defaulted on a performer bond, nor, says NTBA, have any of its customers lost their money.
Amtrak, the nation's passenger train operator, would seem super-safe in that its books are public, all debts are known and it's hard to imagine that Congress, which has historically covered the company's deficits, would welsh on voters. (Auto-Train was, uniquely, a privately run company.)
TRAVEL AGENTS AND TOUR OPERATORS. It's ironic in the eyes of some airline people that ASTA is alarmed about possible airline failures, when airlines have long had to deal with losses from travel agent failures. How, then, does ASTA recommend that you check out a travel agency or tour operator? Officals concede that ASTA membership is no guarantee against insolvency, nor is membership in any other organization. But they point out that all agents with certificates of appointment from the Air Traffic Corference (you can ask to see the certificate) must be bonded. That $10,000-$50,000 bond would go to cover airline losses, though; it's not consumer protection.
However, in Ohio, Rhode Island and California, there are some state laws providing for limited consumer protection; and in Hawaii a new customer protection fund is getting started.
You can ask for bank references and check them, but you may do about as well using your eyes and ears. An unbusinesslike office, no airline tickets being written on the premises, ineptitude and lack of familarity with what they're selling, or a suspiciously hardsell approach should set off your alarms. You can also ask ASTA's consumer office (212) 486-0700, if the agent is or has ever been in default.
In buying a tour, ask immediately if it is warranted or guaranteed, and if so, who stands behind the promises, how adequate the guarantees are and iow they would be backed up. Apropos, a new "Tour Payment Protection Plan" is being worked on now by ASTA, which hopes to have it in place by September. In Canada, there is a guarantee plan for Canadian tours, but it doesn't cover U.S. citizens who buy through U.S. agents -- as a yet-unknown number of Americans reportedly have just discovered with the newly announced failure of two large Canadian companies.