Elise Grossman, a New York student, remembers all too well the inglorious demise of Eastern Airlines last month.

She found herself stranded in West Palm Beach, Fla., her Eastern ticket worthless. "I ended up spending an extra $350 to get home," she said. "I was furious."In the not-too-distant past, passengers chose an airline based on its schedule or its service.

Today, an airline's balance sheet factors into the reservation equation.

"You have to take into consideration not only flight schedules and amenities but whether the airline will be around three months from now," said David Perelman, president of DMS Travel Group in New York.

A combination of higher fuel costs, the recession and wartime jitters means empty seats and record losses for the industry.

Two airlines, Pan Am and Continental, recently filed for Chapter 11 bankruptcy protection. One other, Trans World Airlines, has failed to make a timely payment to its creditors.

And, of course, Eastern Airlines stopped flying altogether last month after 63 years in business, the last two spent under the cloud of a crippling strike.

Once an airline files for Chapter 11 protection, ticket holders become creditors, along with fuel suppliers and aircraft leasing companies.

Should the airline cancel all flights, your refund depends on how you paid for the ticket, what safeguards have been arranged by the bankruptcy court and what's left of the airline.

Granted, just because an airline files for bankruptcy protection doesn't necessarily mean it's about to stop flying. Continental, for one, has actually added flights since it filed.

But a wise traveler will take precautions before making a reservation on a financially precarious airline.

The surest way to protect yourself is to pay for a ticket with a credit card or charge card.

Although a refund is not guaranteed, most card companies will suspend the charges on your card while they go after the bankrupt airline themselves.

If you do pay cash for a ticket, you have to file for a refund with the bankruptcy court: a potentially time-consuming task.

Another form of protection is trip-cancellation insurance.

Such policies, available from a number of insurance companies, cover all kinds of reasons for a canceled trip, such as sudden illness.

If an airline or charter company should go out of business after you've purchased a ticket, the policies will make up the difference between the amount of your original ticket and a more expensive substitute one.

A typical policy costs $5.50 for each $100 of coverage.

But travel insurance has some major drawbacks.

Some policies must be purchased several weeks before the departure date and, of course, they won't compensate for the inconvenience of being stranded in Jakarta while you frantically search for another flight home.

And just as medical insurance rarely covers a "pre-existing condition," most travel policies aren't valid if an airline had already filed for bankruptcy protection when you bought the ticket.

In hopes of winning a loyal customer, other carriers may honor tickets of a recently defunct competitor.

After Eastern shut down last month, confusion was the rule at many airports. Some passengers simply handed their Eastern tickets to another airline's gate agent and boarded the plane, while others had to buy a higher priced ticket and then file for a refund from Eastern.

"It was pot luck," said Nathan Devore, vice president of Rich Worldwide Travel in New York.

While a traveler's money may be protected, his frequent-flier miles probably aren't. The airlines have gone to great lengths to insure that the miles are viewed in court as their property, not the passenger's.

"The miles go down with the airline," said Jeff Miller, a travel lawyer.

He recommends people with bonus miles on a shaky airline either use them or, if possible, transfer them to a participating foreign airline.

Some industry experts recommend that passengers avoid booking far in advance on financially shaky airlines.

For instance, America West, a struggling midsize carrier, recently announced a two-for-one special for travel as far in advance as next year. But other, stronger airlines have already matched America West's offer with similar promotions.

(Of course, such a strategy may ultimately prove counterproductive, since shunning a weak airline may help lead to its demise, leaving the bigger carriers even more freedom to charge whatever fare they like.)

In today's imploding airline business, the stronger carriers sometimes have a vested interest in prolonging the lives of their weaker competitors.

Sometimes, the consumer can benefit. For instance, when United Airlines bought Pan Am's routes to Heathrow Airport in London, it agreed to guarantee up to $100 million worth of Pan Am's tickets should the airline stop flying.

In addition, Pan Am frequent-flier miles could be redeemed on United.

But the entire deal hinges on British government approval, and negotiations between the two countries hit a snag that had not been resolved at press time.

Seeking the counsel of a reliable travel agent is always a good idea. But agents are caught in a bind between their desire to support a troubled airline - and thus promote healthy competition - and their obligation to steer consumers away from an airline that may evaporate at any moment.

With airline bankruptcies becoming as common as delayed flights and lost bags, the words "Chapter 11" don't have the stigma they once did.

Since Continental Airlines filed for bankruptcy protection (the second time in eight years), it has added three dozen flights from Newark International Airport, and the carrier recently revamped its service.

"It's business as usual," said Ned Walker, a Continental spokesman, adding that the airline has not seen a drop in passengers due to its bankruptcy filing.

Still, some on Capitol Hill aren't convinced that consumers are adequately protected. Bills by Rep. Sherwood L. Boehlert, R-N.Y., and Sen. Nancy Kassebaum, R-Kan., would force the airlines to devise a plan to protect the traveling public's money.

Details have yet to be worked out, but one proposal is that a surcharge of a few cents be added to each ticket, establishing a pool of money to be dispensed to passengers stranded by a bankrupt airline.

While the bills are supported by travel agents, they are strongly opposed by the leading airlines, who feel that such legislation is, in effect, asking them to subsidize their weaker competitors. So far, the bills have made little progress.