German Court Rules Cos. Can Mandate Use Of FF Miles For Business

German travel buyers look set to step up their seizure of employees' frequent flyer mileage following a landmark court decision on the issue in favor of employers. According to the German travel management association VDR, one-third of its members already require employees to use their mileage for business purposes. However, said spokesman Gerd Otto-Rieke, "Of those companies which have not used the bonus miles of their employees so far, about one-third are considering changing."

The news that more German travel managers are considering a crackdown follows a ruling in April by the German federal labor court in the city of Erfurt. It rejected a case brought by an unnamed sales manager for a company in North-Rhine Westphalia. The executive had sued his employer for insisting that mileage he accumulated during business trips must be used for business flights instead of personal use. The value of the 350,000 Lufthansa miles was calculated at ?9,700 ($12,250).

Travel managers around the world long have disliked frequent flyer programs. They believe that since the employer pays for the flight, the employer should receive any benefits, not the employee.

Most travel managers have experienced travelers breaching corporate policy to book flights that award them mileage for their favorite loyalty program. For example, Copenhagen-based travel purchasing consortium TravelpoolEurope retains mileage earned by the employees of almost half its 23 member companies. For those members, the marketshare of dominant local carrier SAS is 35 percent. For the half that let travelers keep their miles, the marketshare of SAS is 60 percent.

Yet, only a small number of companies deprive employees of loyalty programs. Travel managers are most aggressive about seizing mileage in countries where it is taxed as a benefit in kind, such as Germany and the Nordic countries. In contrast to the VDR, the U.K. & Ireland's Institute of Travel Management is unaware of any members who appropriate mileage. They are deterred by fear of employee resentment.

The United States is similar to the United Kingdom, said Steve Petersen, president of Travelware, a Holladay, Utah-based firm that helps fewer than 20 companies track employees' frequent flyer mileage and use it to book flights for business.

Petersen said European companies are more open to the idea of appropriating employee mileage. However, he questioned the VDR figures, noting that some companies that have a written policy of denying mileage to travelers do not follow up in practice. "I would be interested to know how many of VDR's members are actively managing this," he said.

Petersen said the German court ruling would embolden more travel managers in Germany and beyond to take decisive action. "It will confirm to companies with a policy on mileage that they were right, while others will say, 'I thought these miles were ours; let's take steps to use them.' "