That’s ridiculous! What’s with this $150 fee to redeposit my frequent flier miles?

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By Christopher Elliott

If you’re a card-carrying frequent flier, you probably already know that several airlines – including American Airlines, Delta Air Lines and US Airways – charge $150 to redeposit frequent flier miles into your account.

But Anne Isaacson thought she might be able to talk herself out of the fee when she phoned United Airlines to book a first-class airline ticket. After all, she paid $4,300 for it, and figured that as a courtesy, the airline would let the surcharge slide for some unused miles she wanted to put back into her account for a different flight.

She thought wrong.

“The agent said she couldn’t waive the fee,” says Isaacson. “She said she understood my outrage.”

Airline profit from mileage redeposit fees

Airlines would sooner irritate a good customer than give up a mileage redeposit fee. That’s because most of the industry’s record profits are extracted from so-called “ancillary” fees such as redeposit surcharges. United made $243 million in fees like these for the first three quarters of last year – and that was before its merger with Continental, which earned $181 million from them.

Put together, United is the number-two airline for these extras, behind Delta Air Lines, which raked in an impressive $530 million in the first three quarters of 2010.

United didn’t respond to repeated requests to explain the $150 fee.

“The $150 redeposit fee in no way reflects the airline’s cost to reinstate a program member’s mileage,” says Tim Winship, editor of the site FrequentFlier.com. “While the process does require a call to the airline, the agent can complete the transaction in five minutes at most.”

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Embracing unjustified fees

Compare the cost of a mileage redeposit to a phone booking, which can take 15 minutes or more and costs $20, and you get the idea that airlines are charging the redeposit fee simply because they can.

“I don’t expect this fee — or others — to be discontinued in the foreseeable future. The airlines’ business model now depends on these ancillary revenues to attain profitability,” adds Winship.

But back to Isaacson. Can’t United see the forest for the trees and cut her some slack? More to the point, why would any airline force its best customers to pay the equivalent of a restocking fee?

The airline industry is headed in the wrong direction. The most forward-looking companies are eliminating restocking fees, including Apple and Best Buy. The fees are not only an annoyance, but there’s probably no purer example of unrestrained corporate greed. (Apple charged a 10 percent restocking fee and Best Buy’s was an eye-popping 15 percent.)

Customers hated the fees. And they still do. (Related: Really steamed about the quilt he can’t return.)

The entire point of frequent flier miles

Ridiculous? No question about it. You don’t punish your best customers with fees. You reward them. If they can’t use the miles, you deposit them back into their account with your apologies.

United should have waived Isaacson’s fee, since she was buying a first-class ticket, and the entire point of frequent flier miles is to reward people like her for their patronage. (Here’s what you need to know about travel loyalty programs.)

Maybe airlines should look somewhere else to make an easy buck. Or maybe passengers like Isaacson should reward another airline with their loyalty.

“That’s ridiculous!” is a new weekly column that highlights the most absurd, customer-unfriendly and downright illogical practices of the travel industry. Got a story to share? Please email me and don’t forget to include your full name, city and contact information.

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Christopher Elliott

Christopher Elliott is the founder of Elliott Advocacy, a 501(c)(3) nonprofit organization that empowers consumers to solve their problems and helps those who can't. He's the author of numerous books on consumer advocacy and writes three nationally syndicated columns. He also publishes the Elliott Report, a news site for consumers, and Elliott Confidential, a critically acclaimed newsletter about customer service. If you have a consumer problem you can't solve, contact him directly through his advocacy website. You can also follow him on X, Facebook, and LinkedIn, or sign up for his daily newsletter. He is based in Panamá City.

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