| Will
airline bankruptcy wipe out frequent-flier miles? | | |
| He points to
Eastern Airlines, Pan Am and Trans World Airlines -- all cases in which reward
miles transferred over to programs at other airlines. Still, some insiders believe
those days are over.
"It's a different environment.
I don't think any airline is strong enough to buy another airline," Petersen
says. "If any expert says, 'Don't worry, another airline will honor those
miles,' I'm thinking, 'Do you think they've got money to open up their airlines
to flying for free?'"
Historically speaking, outcomes haven't
been so rosy for smaller airlines. Just ask loyal customers of Legend, MGM Grand
Airlines and National Airlines; frequent-flier programs dissipated when each shut
down. But didn't their customers have rights? As it turns out,
"There are no federal rules that specifically address frequent-flier programs
by the airlines," says Bill Mosley, a spokesman for the U.S. Department
of Transportation. "The programs are generally covered under
rules about deceptive practices by airlines." So naturally,
fine-print disclaimers are commonplace. In the 1980s, some major carriers' attempt
to "play fast and loose with the program" terms got slapped with a class-action
suit in Chicago, Mann says. A settlement taught the industry to be more careful.
Now, nearly every frequent-flier program ad states that terms can be changed or
that the program can be terminated altogether, typically with some notice. The
merger of US Airways and America West has brought announcements of a merger of
their frequent-flier programs. "We're telling people to continue using their
mileage just as they would in any other event. It's business as usual for us,"
says US Airways spokeswoman Amy Kudwa. The airline filed for
Chapter 11 bankruptcy in 2003 and has been lining up new equity funding for the
merger. Its cost-savings synergies are resulting in more destinations, such as
new Hawaii service, Kudwa says. Worry or not?
Here it comes: Bankruptcy, that is. With reports of airlines in financial trouble,
consumers may dread the end of access to miles being banked for use at some unspecified
future date. "The fact is, airlines go into bankruptcy, and it's just
another business plan," Mann says. "I'm sitting on hundreds of thousands
of miles with various carriers. I'll redeem them when I get around to it." Part
of Mann's confidence spawns from the role of banks, that operate frequent-flier-associated
affinity credit cards, have had in providing equity after an airline bankruptcy.
Experts behind the Web site FrequentFlier.com
point out that "sometimes Chapter 11 is a first step toward liquidation,
sometimes not." | 
