`
`Home > News & Advice > Columns > On Frequent Flyer Miles > Looming bankruptcies threaten airline miles
`
`On Frequent Flyer Miles
`by Tim Winship
`
`Tweet
`
`0
`
`0
`
`Editor's Note: This story was originally published on October 15, 2001. To see the most
`recent SmarterTrave| articles on related topics, please click on any of the following links:
`American, frequent flyer, Hilton, insurance, Midway, On Frequent Flyer Miles, Sabena,
`Swissair, Tim Winship, TWA.
`
`On September 11, the universe of airlines was, in one fell swoop, separated into three distinct groups:
`airlines not in bankruptcy, airlines in bankruptcy, and airlines soon to be in bankruptcy.
`
`As we go to press, the a|ready—in—bankruptcy list includes Ansett, Midway, Sabena, and Swissair. Some of
`these carriers continue to operate, temporarily propped up by government Iargesse or private financing.
`Others have grounded their planes completely, possibly forever.
`
`Advertisement
`
`There are as many bound—for—bankruptcy lists as there are industry
`prognosticators. But whichever version of the "endangered airlines“
`list you happen to see, it's likely to be a disturbingly long one,
`including carriers in every corner of the world.
`
`And while there may be disagreement as to which airlines will survive
`and which will cease to exist, there is broad agreement on the
`industry's current shape and future direction: The world of airlines is
`shrinking, and it will shrink further still. And as airlines disappear, so
`will frequent flyer miles.
`
`Where do miles go when programs die?
`
`Unlike dollars deposited in a checking account, which in most cases
`are insured by the FDIC, miles come and go with the airlines that
`operate the mileage programs.
`
`Often in the case of an airline declaring bankruptcy, the miles simply
`disappear because, when the carrier's assets are sold, miles are
`viewed as a liability (the eventual cost of transporting a passenger for
`free). When it ceased operations on September 12, Midway was a
`partner in the programs of Continental and Northwest, but did not
`operate its own program. So no miles were lost. However, when the
`original Midway went be||y—up in 1991, it did have a program and
`700,000 members lost their miles. Another current bankruptcy case is
`Ansett, Australia's second largest airline. While Ansett continues
`limited flights, the accounts of its 2.4 million Global Rewards
`members are frozen.
`
`On the other hand, if a faltering carrier is acquired by another
`airlineoas happened with American's acquisition of TWAOthe
`frequent flyer program members, including their miles, can be seen as
`a positive asset. To insure that TWA's customers would transfer their
`loyalty and business to American after the sale, American is merging
`all members of TWA's Aviators program, together with their miles,
`into American's program.
`
`What to do?
`
`Given the unprecedented uncertainty of this post—September 11 period, and the likelihood of airline
`bankruptcies and lost miles, many frequent flyers are fretting over their mile options.
`
`Redeem ASAP
`
`
`
`The natural tendency, when faced with the prospect of losing one's hard—earned miles, is to use them
`before they disappear. I recommend redeeming the miles for award travel on partner airlines, which
`presumably will still be flying after the airline operating the frequent flyer program has gone bankrupt.
`
`However, Joan Benham, former head of Pan Am's WorldPass program, cautions that it's a catch—22
`situation: Participating in a scramble for awards from an already—f|oundering carrier could contribute to
`that airline's demise.
`
`Exchange endangered miles
`
`Another option is to exchange the at—risk miles for miles in a program with better survival prospects.
`There are three exchange mechanisms to choose from:
`
`1. The Reward Exchange feature of Hilton's HHonors program. Conversion is a two-step process:
`Redeem miles from participating airline programs for HHonors points; then redeem the HHonors
`points for miles in one of the participating airline programs. The convenience comes at a price with
`more than half of your original miles getting lost in the conversion.
`. Diners Club Rewardséhas both Mi|es—to—Points and Points—to—Mi|es capabilities. As with HHonors’
`Rewards Exchange, you would convert from one airline's miles to another's, by way of Diners Club
`Rewards points. And as with the HHonors option, much of your original miles‘ value will be sacrificed
`in the conversion process.
`3. The dedicated mi|eage—exchange service, Points.com. While the process is highly efficient, only five
`airlines (not including Delta or United, two of the three largest) participate. And the exchange will
`leave you with only 10 to 20 percent of the miles you started with.
`
`The best insurance: Insurance?
`
`Proving the maxim that anything and everything can be insured, AwardGuard is insurance for frequent
`flyer program miles.
`
`The brainchild of Randy Petersen, editor and publisher of InsideF|yer, Awardcuard is one component of
`Privi|egeF|yer a package of services designed for the mi|eage—conscious traveler. The mi|eage—protection
`service was introduced in 1991, and currently covers more than 80,000 frequent flyers, 5,000 of whom
`have signed up since September 1 lth.
`
`"Page 2..
`
`Z
`
`Read comments or add your own insight!
`Add a comment...
`
`Facebook social plugin
`
`Free Deal Alert Newsletter
`
`Let the travel experts do the work—get the
`best deals sent to you!
`
`Enter your email address
`
`0 Flights
`From:
`
`Vacations
`
`Hotels
`To:
`
`Cars
`
`Cruise
`
`Ft. Lauderdale, FL (FLL)
`Depart:
`
`|
`
`|
`
`Return:
`
`|O2/19/2015
`|
`02/12/2015
`Send me low fares from Ft. Lauderdale, FL (FLL)
`
`enter your email address
`
`Advertisement
`
`
`
`Sponsored Deals
`
`Vacation
`
`Hotel
`
`Airfare
`
`Cruise
`
`Car
`
`$81
`
`$149
`
`$182
`
`Quality Suites Airport on Sale:
`Book 3 Nts in an Fr §81+(Nt
`Expedia
`
`Courtyard by Marriott Fort Myers
`Cape Coral in |an: $149 & UQ
`Expedia
`
`Candlewood Suites Fort Myers
`Sanibel ( Gateway in |an: $182 &
`Q2
`Expedia
`
`$1,031
`
`Luxury London Stay + Breakfast
`& Dining or Spa Credit
`Dea|Base.com
`
`London Vacation Rental Deals
`From 26
`CheapCaribbean.com
`See All Hotel Deals by BookingBuddy 0
`
`SmarterTraveI
`
`29,124 people like SmarterTrave|.
`
`Facebook social plugin
`
`Follow us on Twitter
`
`
`
`1/23/2015
`
`Looming bankruptcies threaten airline miles - Sm arterTrave|.com
`
`
`
`http:/lwww.smarterirave|.comltrave|-advice/Looming-bankruptcies-thrten-air|ine.htm |?id= 10712
`
`4/4