1/23/2015
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`Looming bankruptcies threaten airline miles - Sm arterTravel.com
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`Home > News & Advice > Columns > On Frequent Flyer Miles > Looming bankruptcies threaten airline miles
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`0n Frequent Flyer Miles
`by Tim Winship
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`Editor's Note: This story was originally published on October 15, 2001. To see the most
`recent SmarterTravel 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 1 i, 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 already—in—bankruptcy list includes Ansett, Midway, Sabena, and Swissair. Some of
`these carriers continue to operate, temporarily propped up by government largesse or private financing.
`Others have grounded their planes completely, possibly forever.
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`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 belly—up in 199], 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
`airlineéas 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
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`1/23/2015
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`Looming bankruptcies threaten airline miles - Sm arterTravel.com
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`The natural tendency, when faced with the prospect of losing one's hard—earned miles, is to use them
`before they disappear. | 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—floundering 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.
`2. Diners Club Rewardséhas both Miles—to—Points and Points—to—Miles 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 mileage—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 InsideFlyer, AwardGuard is one component of
`PrivilegeFlyer a package of services designed for the mileage—conscious traveler. The mileage—protection
`service was introduced in 1991, and currently covers more than 80,000 frequent flyers, 5,000 of whom
`have signed up since September 11th.
`
`"Page 2"
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`Looming bankruptcies threaten airline miles - Sm arterTravel.com
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