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Mileage Programs Here to Stay
Power Trip · January 24, 2003

Peter Dowling is a Premier Executive 1K member, the most elite United Airlines frequent flier. Make that, was a Premier Executive 1K member.

"I have just cashed in all my miles," says the Los Angeles foreign affairs consultant.

He booked two trips: one to Tonga on United partner Air New Zealand, the other to Portugal on Lufthansa. "I believe, unfortunately, that United will go the same way as Braniff and Eastern."

With United and US Airways in bankruptcy reorganization and other carriers changing the rules of their programs, some travelers are quietly redeeming their frequent-flier miles. Based on the recent actions of both airlines and anecdotal reports of passengers rushing to redeem their points, it's possible that more travelers are trying to unload their miles than at any time in recent memory — perhaps even since the creation of these loyalty programs.

"It isn't so much a run on miles as it is a trot on miles," says Tim Winship, a mileage expert who edits the Web site FrequentFlier.com. "People are worried about the safety of their miles. A lot of them are cashing in their points earlier than they would have."

The ailing airlines insist there's nothing to worry about, that the points are perfectly safe. When a major airline stops operating, frequent-flier miles and benefits normally transfer to another carrier.

In announcing its Chapter 11 filing late last year, United assured its customers they will be able to continue earning and redeeming mileage. At the time of US Airways' bankruptcy filing, CEO David Siegel promised travelers that his airline's mileage program "will continue to offer millions of fliers significant award benefits throughout the restructuring process and beyond."

Dowling says he isn't buying it. He lost both his miles and his elite status when Ansett Australia went under last spring. "I'm not willing to lose my miles again," he says.

Neither United nor US Airways will say what's happened to their mileage redemption levels since they filed for bankruptcy reorganization. Airlines typically disclose such information in annual reports filed with the Securities and Exchange Commission, but the 2002 reports aren't out yet.

Hal Brierley, one of the architects of American Airlines' frequent-flier program and a loyalty program consultant, says passengers are "prudently accelerating their use of miles." Among travelers with a preference for United, he says, 34% of respondents to a recent survey say they've stepped up their mileage use.

That doesn't necessarily mean road warriors think these programs have reached a dead end. Brierley says only about 3% of the frequent travelers he's polled believe their program would be terminated. About two-thirds think future mileage programs would be "less rich," and slightly less than a third of them are convinced that their program would be "significantly less rich."

"It's virtually inconceivable that the industry would walk away from a program that identifies its best customers and provides a meaningful reward," he says. "But I think mileage programs are going to evolve."

At the same time, the airlines are trying to entice travelers — particularly business travelers — with generous mileage deals. US Airways, for example, offered triple miles for United frequent fliers who booked shuttle flights last month. United is giving Mileage Plus members double miles on all flights, but the offer is limited to existing frequent travelers within certain geographic areas, according to Winship. He says the carriers hope the deals will restore public confidence in the mileage programs.

Travelers like David Smith, an advertising executive from San Francisco, are skeptical. "I've been aggressively using my miles," he says. "To me, it's like money in the bank that doesn't earn interest and could be eliminated if an airline went belly up."

Although most experts believe the odds of any airline — even one under bankruptcy protection — eliminating its frequent-flier program is remote, it's hardly unanimous. Charles Leocha, author of the book Travel Rights, says he thinks the mileage programs could face serious cutbacks, if they aren't eliminated entirely. He points to changes by the likes of Delta Air Lines, which recently announced that on deeply discounted coach tickets, passengers would only earn half the miles they used to that can be counted toward elite status.

"Believe me, when push comes to shove, loyalty programs will be curtailed in order to contain potential costs and future liabilities."

His advice: cash in your points while you still can.

That's exactly what Jacquelyn Peterson is doing. She redeemed 360,000 miles on Delta (which isn't in bankruptcy court) for three business-class seats to South Africa.

And, while she's not quite ready to give up her United Airlines mileage account, she says, "I'm keeping a close eye on it."

Christopher Elliott is a travel commentator based in Key Largo, Fla. All e-mailed questions may be edited, condensed or republished at the site's discretion.