=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/06= /01/TR250984.DTL ---------------------------------------------------------------------- Sunday, June 1, 2003 (SF Chronicle) Airline bankruptcies may clip frequent fliers' wings Ed Perkins "What's going to happen to my frequent-flier miles if American, United, = or both fail?" That seems to be the No. 1 worry for many readers these days, and it's no surprise. All the public talk about bankruptcy and/or liquidation has made frequent fliers very nervous. I wish I had good, definitive answers -- or even bad ones, if they were truly definitive -- but I don't. I suspect that many travelers will lose substantial value in frequent-flier programs, "not with a bang, but a whimper. " By that, I mean not in a sudden collapse and wipeout, but in a slow and inexorable erosion of earning potential and award value. Here's my take on the current situation: -- Filing for bankruptcy influences frequent-flier programs only slightl= y, if at all. US Airways and United are both operating as before, providing full frequent-flier benefits, and American would almost surely do the same. If nothing worse than Chapter 11 happens to United, American, or any other big line, your miles are safe, at least in the near term. -- Complete failure -- shutdown, liquidation, or whatever -- might well = be a different story. Historically, when any big airline went beyond bankruptcy and actually stopped flying, some other line or lines usually jumped in and took over its frequent-flier accounts, accumulated mileage and all. But the industry has never before faced the prospects of multiple failures or even a single liquidation when the remaining competitors were so close to failure themselves. Nobody can say for sure what might happen to frequent-flier miles if either one of the airlines stopped operating in the near future. One prospect that I haven't seen discussed much is conditional acceptanc= e. Rather than take in all of a failed line's frequent fliers and their accounts, for example, a surviving line might take in miles on, say, a 1-for-2 basis -- or it might take in only those travelers who typically buy expensive tickets, or it might require that the acquired frequent fliers "validate" their mileage transfer by a specified amount of flying on the survivor line. What the survivor line wants is a failed line's nucleus of really good customers, not thousands of leisure travelers who fly once or twice a year on cheap tickets. -- My overall guess is that even if United or American goes past bankruptcy and into liquidation, some smaller airline carrying the name of United or American would emerge and continue to fly. Whether -- and how -- that new entity would retain the old frequent-flier program is anybody's guess. -- Whatever happens in the short term, your real worry should be for the long haul. Already, there has been a creep in the mileage required for popular awards, which the big lines have been quietly upping, 5,000 to 15,000 miles at a clip. I would expect that trend to continue. Along with award creep, you can expect that the big lines will tighten t= he noose around the necks of travelers who buy cheap tickets. That means cutting the credit you earn on each mile you fly to from a full mile to just a half- mile, a quarter-mile, or maybe even no credit at all. For many years, I've figured that the big U.S. lines wish they'd started their frequent-flier programs, from the outset, keying credit to dollars spent rather than miles flown, or at least restricting mileage earnings to business fares. Several major foreign lines that came late to frequent-flier programs have structured them just that way. I wouldn't be at all surprised to see one or more of the big U.S. lines move in that direction. -- I believe overall that the odds of your mileage being safe in the sho= rt term are considerably better than 50-50. But I'd still use the miles up as quickly as possible. Even without any dramatic failures, indications are pretty clear that the airlines all intend to devalue their earnings and awards schedules over the next few years. My wife's watchword, "Frequent flier miles do not improve with age," was never truer. E-mail Ed Perkins at eperkins@xxxxxxxxx=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle