| Will
airline bankruptcy wipe out frequent-flier miles? | | |
| Chapter 7 bankruptcy is what consumers don't
want to see. Petersen doesn't expect to see any airlines going out of business
in the next 12 months, at least. "It's a bad time for fuel to be spiking,
going into the slower winter season," but closings don't appear to be imminent.
Action options
Today's airline
industry alliances, which allow miles to be redeemed on partner carriers, provide
an easy out for consumers who are beyond worrying about a program carrier. Star
Alliance, for instance, is a 16-member global network with US Airways and
United, as well as Air Canada, Air New Zealand and others. The nine-member SkyTeam
includes Continental, Delta and Northwest, plus Aeromexico, Air France and others.
The eight carriers of Oneworld
alliance, meanwhile, include American Airlines, British Airways and Finnair. What
does all this mean when your reward miles may be at risk? Say you have
300,000 miles, Petersen says. Book two business-class tickets to Europe for a
trip 10 months' out, at 80,000 miles apiece, with an alliance partner carrier,
and you have some protection. If your airline were to liquidate, the rewards would
be out there, and you might later change the destination city or dates. If, as
the trip gets closer, the situation at your own airline seems better, you might
redeposit those miles back into your account. Another question Petersen
gets often is about racking up future points: "Should I build up more miles
in a program I'm worried about?" Airline alliances can help here, too.
Say you have an account with Delta, and you're concerned. "Maybe just start
an account with Continental, so you can continue to fly Northwest or Delta, but
you're building up miles within Continental," Petersen suggests. A
tempting option for those not planning a trip is to trade in earned miles for
gift certificates or other items from a site like Points.com. "If
you really wanted to give up half your miles, I suppose that might be valuable,"
Mann says. Petersen calls it self-select devaluation. "I've heard
frequent fliers accuse the airlines of devaluing their miles," he says. But
with an exchange that only gets you 10 or 20 cents on the dollar, you would be
choosing to devalue the miles yourself. Recent enhancements to the American
Express Membership Rewards program may offer another solution to frequent-flier
anxieties. The rewards remain connected to the credit card account until a card
member decides to redeem points by booking a trip. "You only move them over
when you're going to fly," Petersen says. Bottom line: Frequent fliers
have more choices today. "In the past you were on your own," Petersen
says. "Members did not have ways to safeguard their miles. Now there are
some things you can do to get a little better sleep at night." Melissa
Ezarik is a freelance writer based in Connecticut. | 
