The recent troubles at Italian carrier Alitalia clearly demonstrate the extreme volatility of the airline industry. When faced with imminent travel on a troubled carrier, it's best to be prepared with a plan "B" or even "C". But how can you even guess the coming of an airline's demise?

We occasionally hear rumblings of trouble at an airline or other business but it's not until a situation becomes critical enough to be noted by media outlets that the gravity of the situation becomes apparent to the general public. To best protect yourself, you should take the same precautions as you would for your health. Look for warning signs, buy from healthy carriers, and make sure you can do something about it before it's too late.

There are a few basic outcomes when an airline goes into bankruptcy or administration. The airline can use the status to rework labour agreements, renegotiate debt repayment terms with creditors and develop a new, leaner business model that permits the airline to emerge financially stronger. The other options include being purchased, debt and all, or liquidation. The latter typically is a lengthy undertaking as creditors line up to receive what often amounts to a fraction of what they are owed, based on what assets the airline can sell off. Passengers left holding tickets on a defunct airline wind up at the very end of a long list of unsecured creditors – those who are owed money but cannot reclaim an asset from the airline. Bankruptcy protects airlines from its creditors, including customers who have purchased tickets, but it does not protect the customer.

So what can you do when you are contemplating travel on an airline that has declared (or is about to declare) bankruptcy? Buying a ticket from an airline in bankruptcy or administration can be risky. If it's a larger, established airline, chances are the carrier will continue operations with no imminent threat of a shutdown. The opposite may be true of a new-entrant or smaller carrier with fewer assets and less available cash to continue operating. Most often, an airline will insist that all operations will remain normal and all tickets honored. The problem is that the airline cedes control over these decisions to a court or commissioner and cannot guarantee their claims of "business as usual." If you already hold tickets on a bankrupt airline, be prepared for schedule and route changes that may have you sitting at an airport for quite some time. Though it's no longer required to reconfirm your flights with an airline, you might want to do it anyway in this particular case. This way you can find out about any last-minute changes to your itinerary. Be sure to study alternate routes to get to your destination. Find out which other airlines go where you need to go and start your journey as early in the day as possible so that you have more options. If you absolutely must travel by a certain day or time, consider purchasing a refundable or less restrictive ticket on another carrier. Yes, it will cost a great deal more but this might be the price you pay to secure a confirmed seat before others gobble them up. If your original airline happens to find you a seat on a flight that won't cost you anything more, at least you can refund that new unrestricted ticket you just purchased.

If an airline completely shuts down, are you protected? Yes and no. It depends on how you paid for your ticket and what laws govern your airline's situation. For example, in the United States, a law that required airlines to accept stranded passengers on a space-available basis for a nominal fee was allowed to expire in 2006, after heavy lobbying from the airlines. In the UK, tour operators now contribute a £1 levy per passenger as part of the ATOL protection scheme against company collapse. As of yet, no such protection exists for passengers against the failure of scheduled airlines.

In the United States, if you purchase your tickets with a credit card, you can request a credit in writing. If you tend to book your flights very far in advance, be aware that most credit card companies limit your claim eligibility period to no more than 60 days from the date the charge was posted to the credit card. Elsewhere in the world, refund or credit policies can differ and may require a minimum purchase amount before a claim can be filed. Contact your credit card company and ask for details of your agreement regarding any travel purchase protection as this can differ among credit providers. If you purchased a form of trip insurance, become familiar with the terms of your coverage as it differs based on country of origin and level of protection purchased. Save all receipts of your expenses and keep detailed notes of the names and statements of airline personnel you speak with in case you need to escalate an issue with an airline or agency. The old mantra "know before you go" holds true in the airline world. Just as you would check the weather before leaving your home, you should keep tabs on the industry forecast and look for warning signs of trouble ahead.

Here's an interesting piece of information you might not have known. Did you know that claims for refunds of the taxes in your ticket have a higher priority than claims for refund of the fare? Airlines are supposed to hold collected taxes in escrow until you travel which in turn allows the government to be paid. Since you can sure bet that the government would be ahead of you in any line for reimbursement, it might be worth filing a request for a refund of the taxes on your unused ticket, even if an airline goes out of business.