Despite the gloomy outlook for US Airways' long-term prospects, airline loyalty program experts are not advising the carrier's frequent flyers to rush into reward redemption. They do, however, offer some suggestions to help nervous frequent flyers protect their accrued mileage, such as using paper tickets and considering reward bookings on partner airlines.
Shortly after US Airways' second bankruptcy filing in just over two years, president and CEO Bruce Lakefield sent a letter to Dividend Miles program members, assuring them of continued operations and uninterrupted program benefits. He said the Chapter 11 filing "will not affect your ability to earn or redeem Dividend Miles to the more than 750 worldwide destinations we offer as a Star Alliance member airline."
Of course, such a declaration would be rendered moot in the event US Airways is forced to liquidate
(BTN, Oct. 4). For now, while the airline continues to operate and work through bankruptcy proceedings, it is "not seeing any trends" related to reward redemption, according to a spokesperson. "There are peaks and valleys, but percentage-wise we're relatively flat as compared to last year."
Randy Petersen, editor of Inside Flyer magazine, however, said US Airways' recent redemption rate was running 30 percent to 40 percent above normal, "but it is not a real serious run on the bank. Remember that since US Airways' first bankruptcy filing, they added the new partnership with United Airlines, giving frequent flyers many more redemption options."
Petersen also suggested program members not be too hasty in burning their miles since US Airways is expected to continue operations at least into January. "You have options now," he said. "If you start using up all of your miles, you won't have any options should US Airways become a low-cost carrier that is part of a major alliance, which is a pretty attractive combination."
Nevertheless, there are a few realities to keep in mind. For starters, industry analysts are less optimistic about US Airways' ability to emerge from bankruptcy compared to its last foray through the courts. Moreover, most airlines retain the right to change frequent flyer program rules without notice and can end partnerships as circumstances warrant. According to United's PerksPlus rules, for example, "United shall have no liability for partner withdrawals from the program or for award cancellations caused by partner withdrawals, discontinued United or partner service, or award or mileage accrual cancellations for any other reason."
In other words, after a US Airways shutdown, United—US Airways' sole domestic partner—could choose to redeem mileage earned on US Airways, but is in no way required to do so.
"If an airline moves into liquidation, frequent flyer members are unlikely to receive relief from bankruptcy court," according to a recent report issued by IdeaWorks, a brand development and marketing consultancy. "Competitors might poach higher-earning members through special offers; they might purchase the membership list of the failed airline. The fate of award tickets that were issued by the failed airline, but remain unused by the member, is less certain."
For that reason, IdeaWorks suggested frequent flyers consider paper tickets when booking reward travel with a troubled carrier, even if there are fees associated with not choosing an available electronic ticket. "Consumers should be aware that once an airline shuts down, so does its computer system," the report said. "Possession of a paper award ticket may represent the only evidence a traveler can provide to another airline."
Matthew Bennett, editor and publisher of FirstClassFlyer.com, agreed that paper reward tickets serve as a means of protection, but he also suggested that consumers "hedge their bets" by moving miles from a troubled carrier's program to that of a partner carrier. "You can always redeposit your miles later," he said, though fees would apply.
Petersen agreed that such bookings on partner carriers could provide "cheap insurance" but pointed out that Star Alliance carriers Singapore Airlines, Lufthansa and All Nippon Airways are limiting how far in advance they will accept redemption reservations from United and US Airways' frequent flyers. "It has never happened before and sets a dangerous precedent," he said. "I am a little surprised the governing body of the Star Alliance would allow that."
Bennett, who also pointed to the Star members' new restrictions, said, "If that's not an indication of partners getting skittish, then I don't know what is."