A reader asks about the safety of their miles, and if some of the smaller airline currencies they have aren’t as safe whether it would be a good idea to book travel now using those miles to fly on one of their partner airlines (that’ll still be flying)?
Big U.S. Airline Mileage Balances Are Safe
Frequent flyer programs are the most valuable assets that large airlines have. So even if it wasn’t almost a foregone conclusion at this point that the airlines get government bailout cash, your miles would be safe.
Delta, United, and American have all been through bankruptcy – and predecessor carriers of United’s (Continental) and American’s (US Airways) have been through bankruptcy more than once. The first thing each airline did – on day one of bankruptcy – is petition the court to reaffirm their mileage programs.
Airlines generate profit selling miles to banks, and will need their loyalty programs to fight for market share with empty seats.
Nonetheless I have a preference for bank points that transfer to a variety of airlines at this point. That’s not just a protection against bankruptcy but as a hedge against devaluation. In the short run there will be lots of award seats for redemption. However as airlines print miles to drum up business and planes later fill back up they’ll be looking to adjust award charts.
I expect many frequent flyers to make a ‘flight to safety’. The reader asked specifically about what to do with their Avianca LifeMiles and Aegean Miles & Bonus miles.
Right now LifeMiles as a separate entity seems safe, the risk would be to Avianca (again, absent a bailout) and what any future Avianca risk means to the ability of the LifeMiles program to access Star Alliance award seats. Aegean also faces risk.
Booking Future Travel On A Partner Is No Guarantee Of Travel
One strategy that’s been suggested is that you should consider redeeming your miles from a riskier carrier for future travel on a partner airline. For instance, redeem Aegean’s miles for travel on TAP Air Portugal.
However if the program whose miles were used for the ticket is no longer in business, you shouldn’t automatically assume that the ticket will be honored. You may have a ticket and reservation to travel on TAP, but if the airline issuing the ticket goes out of business TAP won’t get paid.
When Avianca Brasil went out of business last summer, TAP Air Portugal refused to honor redemption flights. I saw reports about the same thing happening with United (I asked United about this and they did not respond.)
Star Alliance used to have a rule requiring alliance members to honor redemptions issued by members that had gone under. It was put in place after Ansett Australia went into administration. Initially Ansett-issued awards were being dishonored by Star partners. That changed, and those whose tickets had been cancelled were allowed to rebook. Based on what happened with Avianca Brazil recently that no longer appears to be in force.
Nearly All Of Your Miles Are Safe
I don’t have financial concerns about the large banks with transfer programs at this point. Nor am I worried about the large U.S. airlines, or the large European flag carriers like British Airways, Lufthansa, or Air France. Looking to Asia Singapore Airlines Krisflyer miles should be fine as well.
Even before the current crisis I wouldn’t have been bulking up on South African Airways Voyager’s currency. And if I had a big stash I wouldn’t bank on a redemption for, say, domestic United Airlines travel will necessary be honored.
Timely subject Gary, I think your spot on as long as you have your stash in a major airline we should be fine. I was just looking at my point balances which are now very high due to cancelling several booked flights.
Of note when I look forward to the end of third and into fourth quarter very little international space in business or first.
I think United has desired Avianca and the routes for some time. Ultimately United will incorporate Avianca (or parts thereof) into United, including the loyalty program. The loyalty programs don’t really cost the airlines much and will serve to promote future travels.
@ Gary — I sure hope those Avianca (Colombia) LifeMiles we purchased are safe. I’m not too hopeful, but maybe their prospects have actually improved from pre-COVID. Before, I doubt the Colombian government would have bailed them out, but now they have an excuse to receive a bailout. If Avianca does hose its FF members on their Life Miles, I imagine they would have trouble ever being trusted again.
Seems like Air Berlin could be a good example of what happens when an airline fails and nobody steps in to buy the airline. The biggest risk in my unprofessional opinion says Avianca goes under in April. Will any airline be a position to buy them or merge. After researching this a bit it seems that Lifemiles is based in California so I assume some US laws could impact this program in event of failure.
@Gary – Any thoughts on flying on at-risk airlines? I booked my wife on a Cathay flight in January with AA miles but given the situation, I’m not sure that Cathay will even be around at that point.
@Christian – it’s an american airlines issued ticket, so if there’s another way to travel (eg Japan Airlines Hong Kong – Tokyo, American Tokyo – Dallas) they may be willing to rebook. If we’re talking about January of next year I wouldn’t worry too much at this point.
@DaninMCI – remember that Pan Am miles became Delta miles. topbonus would have at least continued as an independent entity a la intermiles if they hadn’t had the bulk of their assets in receivable fro air berlin (unpaid miles for transportation).
IMO a smart move for the airlines would be to start selling award miles for verrrrry low prices, maybe 1.3 cents per mile, something like that, or 150% bonus. This would generate immediate revenue, and once travel becomes a bit “safer” it would encourage pax to start filling the planes and…. travel.
I am a bit worried about Korean, plus I had wanted to use them before their chart changes next year. I was thinking of booking them on Delta and hoping that delta would honor even if they went under.
Gary,
I see someone else also asked about Korean, ( I have substantial miles with them, as well as Cathay Pacific and Asiana ). Unfortunately, the only other line you mentioned was Singapore Air? What’s your take on Korean, Asiana and even more importantly, the miles I have accumulated on Cathay Pac?