Tim Winship at The Real Deal covers a proposed law in Ontario, Canada and asks if expiring miles should be illegal?
In some jurisdictions you can’t expire gift cards. Or it’s unclaimed property, the value of which would be treated under escheat rules.
Ontario, Canada isn’t important enough for any program based outside of Canada that the author acknowledges,
And as a practical matter, if passed, the bill would only apply to residents of the province of Ontario. Rather than carve out special policies for Ontario citizens, loyalty-program operators would be more likely to prohibit them from participating in the programs altogether.
Expiring Miles are Fair — and Good for Engaged Members
The broader question is an important one. In Italy programs themselves are required to expire. But you can imagine laws going the opposite direction. However I don’t think expiring miles are all that unreasonable.
- From a loyalty program’s perspective they want engaged customers. Asking for some kind of earning or redemption — even an online purchase or crediting one rental car every year and a half is a fairly de minimus level of engagement. For the truly passive buying 1000 miles every year or so works too.
- Loyalty programs are businesses, with budgets, they have to decide how to allocate their expenses across their members and redemptions. One kind of investment is to change expiration policies. No expiration defers revenue until redemption occurs and reduces breakage (increases costs). That means not investing elsewhere in the program, choosing to invest in infrequent un-engaged members rather than investing in more frequent customers.
Canada’s Air Miles were going to enforce a new points expiration policy starting January 1. They’ve decided to withdraw that policy. That’s a $200 million hit to their bottom line but they’re planning devaluations to compensate so this probably doesn’t wind up as a win. (HT: Chris R.) Be careful what you wish for complaining about points expiration!
Two Airline Programs in the US Don’t Expire Their Miles — They Aren’t the Good Ones
It was somewhat odd when Delta made the change because they were a pioneer in expiring miles, and in shortening expiration times. Having cleaned up their balance sheet and recognized the revenue (capturing years worth of benefits from expiration) they eliminated the policy.
Until they re-institute it, after all Delta once advertised during the Superbowl that their miles would never expire, before introducing expiration. When they ended the Delta Frequent Flyer program and launched SkyMiles, with expiring miles, they promised that miles earned under the old program would never expire. But then they decided that old miles would be merged into SkyMiles, and those old miles would therefore.. expire.
Delta had also committed that any elite member who continued to maintain their status could always redeem their old Frequent Flyer miles under the original program’s award chart, that promise went poof as well. Delta’s explanation? The terms and conditions of the program said they could change the rules.
In 2007 the head of the SkyMiles program said “anyone who hasn’t had activity with Delta in anyway in the last two years, is not all that valuable to us.”
Stop Complaining About Expiring Miles
Airlines get so much more criticism for expiring points but hotel programs are more draconian, often with 12 month expiration (Hilton, Starwood) and not always counting all activity in extending the life of an account (Marriott).
Why do we complain about 18, 24 or 36 month expiration?
Tim Winship writes, “Sure, it’s easy enough to extend the life of miles, by making the occasional qualifying transaction or using a program-affiliated credit card. But such tactics aren’t widely understood..”
He acts as though programs don’t tell members about expiration, hiding the ball. That’s certainly not been my experience. Should members have any expectation of them to know about the program and pay attention to the emails they get? Or to use something like AwardWallet that will tell them about expiring miles?
Toward a Middle Ground?
Is there a difference between expiring 3,000 miles in the account of a member who hasn’t done much else to engage with a program – ever – and expiring 300,000 miles from a long-term customer that’s gone dormant for a period of time, perhaps retiring after a lifetime of earn and burn?
I tend to think that airlines (and other loyalty programs) shouldn’t be required to keep all miles as liabilities on their books indefinitely.
But there’s something squirrely about discarding a good long-term customer who accumulated rewards in good faith over a period of time but has become inactive. I don’t have a fundamental problem with saying they must stay active in some de minimis fashion every 18 months (and some allowance should be made for a program that doesn’t hear from a member not to have to search to determine whether they’re deceased, although there are many ways programs handle this).
Perhaps big balances ought to have more generous expiration terms than small balances, or accounts with a certain tenure or activity over years ought to be treated more generously than new and immediately dormant accounts.