Are Your Frequent Flier Miles Safe?

September 9th, 2008 at 09:21am Tom Ptacin

 Thomas J. Ptacin, MBA, CFP® 

Times are certainly tough in the airlines industry. United, US Airways, Delta, and Northwest have all filed for Chapter 11 bankruptcy protection. Fuel prices continue to hover at high levels with no signs of dropping and competition from discount carriers is cutthroat. The cynics are saying that air travel will revert to that of the 1960s where the ordinary person will not be able to afford recreational air travel. Others suggest that the industry is about to undertake change of revolutionary proportions in order to adapt to today’s environment.  What does all of this turmoil mean to the millions of people who have miles banked in carrier mileage programs or bank-based cards with travel award options? 

The good news is that no carrier, who recently filed for bankruptcy protection has not honored their frequent flier mileage.  In fact, one of the few dependable sources of revenue an airline has today is these mileage programs. In most cases, airlines are not giving these miles away. Credit cards, hotels and rental car agencies, to name a few, are purchasing these miles from the airlines as a way to attract their own business. The fact that airlines allow the miles to be redeemed only on available seats simply makes for good business. Furthermore, the loyalty these programs generate is extremely valuable.  The traditional carriers don’t want to drive anymore customers to the discount carriers than they already have.  

While this news may seem comforting, it’s not necessarily so if you have hundreds of thousands of miles banked with a troubled airline.  Despite, the recent trends, there is no guarantee that airlines will honor the miles going forward. Should discount carriers continue to take market share, these millions of miles on the traditional airline’s books could turn into large liabilities and airlines will look to lose them faster than your luggage. Another more subtle option is that they could continue increasing fees, blackout dates, and add more restrictions. Capital One, the card where miles can be redeemed on any airline, recently changed the redemption rules on their card carriers requiring more miles to book tickets than in the past.  

If you find yourself holding a lot of miles and worry you won’t be able to use them all as you hoped, here are a few alternatives. Points.com allows you to spend frequent flier miles on a variety of retail products.  AirAwards.com allows you to enter your mileage balance and they respond with an offer to purchase them from you. In addition most airlines have charitable programs where you can donate miles to help sick patients fly for treatment or other worthy causes. These options can be particularly useful if miles are set to expire and you don’t have enough to earn a ticket. The best option is probably to go ahead and book a trip. If you have been accumulating miles for that big, once in a lifetime trip that may never happen, it may make sense to go ahead and use the miles for smaller trips. At least you know you will get use out of them.

Entry Filed under: Travel, Finances