US Airways Dividend Miles (Pre-FlightFund Merger) - What are the chances ? (and please correct me)

I was talking to my boss... and he asked me what I had heard about US Airways declaring bankruptcy. Here is what I told him... so please correct me if I'm mistaken

1) It is looking very likely that US will declare bankruptcy within the next couple of months; no later than the end of this year.
2) Based on quotes made by US managment; if bankruptcy is declared, it will be a dissolving of the company and not restructuring.
3) If that occurs, then any US DM miles will be worthless. (He has 130K - I've got 55K).

He got a bit nervous about that ... and asked me the following questions:

A) Could he exchange his US DM miles to another program?
I said yes; thinking Points.com .. and incorrectly thought that the exchange rate would be around 50% (20% seems more like it, if you go through eBay Anything Points).
However, is there a way to go from US to Delta ? (Being that we live in the Atlanta area)

B) If he made a reservation using DM miles... and US went under... would the ticket still be honored?
My initial thought was yes ... thinking that there is a law in place that offers some protection from traveleres that get stuck if something like this happens.
However, I did not know if the protection was the same whether the ticket was purchased via $ or via miles.

C) What are the chances that something could occur without warning?
My answer was that it is possible; and it has happen before with other airlines. However, I did not know if US Airways would do something similar... especially be a "big" airline.

Any thoughts about my answers or additional answers to my boss' questions? Not trying to spread FUD or anything like that; just want to be sure that I am understanding everything correctly.

Thanks,

Jeff

I was talking to my boss... and he asked me what I had heard about US Airways declaring bankruptcy. Here is what I told him... so please correct me if I'm mistaken

1) It is looking very likely that US will declare bankruptcy within the next couple of months; no later than the end of this year.
2) Based on quotes made by US managment; if bankruptcy is declared, it will be a dissolving of the company and not restructuring.
3) If that occurs, then any US DM miles will be worthless. (He has 130K - I've got 55K).

He got a bit nervous about that ... and asked me the following questions:

A) Could he exchange his US DM miles to another program?
I said yes; thinking Points.com .. and incorrectly thought that the exchange rate would be around 50% (20% seems more like it, if you go through eBay Anything Points).
However, is there a way to go from US to Delta ? (Being that we live in the Atlanta area)

B) If he made a reservation using DM miles... and US went under... would the ticket still be honored?
My initial thought was yes ... thinking that there is a law in place that offers some protection from traveleres that get stuck if something like this happens.
However, I did not know if the protection was the same whether the ticket was purchased via $ or via miles.

C) What are the chances that something could occur without warning?
My answer was that it is possible; and it has happen before with other airlines. However, I did not know if US Airways would do something similar... especially be a "big" airline.

Any thoughts about my answers or additional answers to my boss' questions? Not trying to spread FUD or anything like that; just want to be sure that I am understanding everything correctly.

Thanks,

Jeff

We have discussed these issues ad nauseum.

The answers are found in this forum if you would only do a search -- but there are really no firm answers to many of the questions that you have asked.

Thanks...

After posting my message - I saw the Washington Post and Charlotte Observer articles... which did answer alot of what I was looking for.

Sorry for not "looking before I posted"

It looks like he either read all the posts or did the searches.

Your answers are as good as any others, though I personally am still hoping they don't go into bankruptcy, or if they do, they get out of it as a still functioning airline.

I hope this because

1) I don't want my stash of miles (small in comparison to some, but still...) to become worthless

2) I have a silly sentimental attachment to the airline

3) I don't want to fly Southwest out of Philly, and doubt that I can accumulate enough flights on another single carrier to maintain elite status

This doesn't exactly sound like an airline that is in trouble........

New hub for US Airways
US Airways announced today that it's creating a large international hub at Fort Lauderdale with nearly five times the number of its current destinations. The Miami Herald (free registration) reported today that the airline will add non-stop service to 15 cities from Fort Lauderdale, which the carrier confirmed at this morning's press conferernce. The airline will begin service from Fort Lauderdale to several new Latin American destinations, including Guatemala City; Kingston, Jamaica; San Salvador; and Panama City, Panama. The US Airways will also increase its daily non-stop service from Fort Lauderdale to 13 East Coast cities, with connecting options for its Latin American flights. Does the move make sense at a carrier seeking $1.5 billion in cuts to avoid a second trip to bankruptcy court? "If US Airways remains an operating entity, it could be a very successful concept and very competitive with the American [Airlines] presence in Miami," said Coral Gables aviation consultant Stuart Klaskin, partner in KKC Aviation Consulting. Updated at 10:55 a.m. ET

This is on usatoday.com now in the travel section.

Oh, and I can answer one of your questions fairly firmly.

Delta is not partnered with another airline so points can be exchanged. This included CO and NW. Points.com makes it clear that DL is not a partner in its site, and I know of no way to get points into a delta account from another airline. They're just elitist like that.

Your best bet may have something to do with turning the miles into credit card points and then turning those into hotel points, but that seems a bit complicated for lil ol me.

At any rate, the travel expert at USA Today has said that for now DM are safe and that people should enjoy them and keep earning them. And this is a question the guy has been asked hundereds of times this year.

Here is Randy Peterson's column from August 3:

US Airways is making readers nervous
Our expert answers your questions about frequent-flier miles.
Question: I am a frequent flier with US Airways. If it goes bankrupt, what might happen to my miles?

Answer: A common question these days, but let's remember, they have already been in bankruptcy the past few years and nothing happened to members' miles. But, there's a huge difference in types of bankruptcy.

The Chapter 11 bankruptcy they were previously in is fairly harmless. I sincerely don't mean to trivialize it, but it's often a financial reorganization. The other bankruptcy which has a more serious effect is Chapter 7 and that calls for liquidation of the airlines assets in most cases. That one isn't so good and my opinion is that if US Airways is forced into that type of situation, your miles will become fond, and perhaps not so fond, memories.

But we're not there yet. US Airways has a TWA-type of resilience to them. They have been written off already by every travel expert and financial expert, but they are still here. There is some potential long-term danger to be aware of but for the short term, I'm still fine with this program. If you were to re-ask this question (and you may) five months from now you may get a different answer, bit for now — enjoy the benefits of earning and using your Dividend miles.

Oh, and I can answer one of your questions fairly firmly.

Delta is not partnered with another airline so points can be exchanged. This included CO and NW. Points.com makes it clear that DL is not a partner in its site, and I know of no way to get points into a delta account from another airline. They're just elitist like that.

Your best bet may have something to do with turning the miles into credit card points and then turning those into hotel points, but that seems a bit complicated for lil ol me.

At any rate, the travel expert at USA Today has said that for now DM are safe and that people should enjoy them and keep earning them. And this is a question the guy has been asked hundereds of times this year.

Here is Randy Peterson's column from August 3:

US Airways is making readers nervous
Our expert answers your questions about frequent-flier miles.
Question: I am a frequent flier with US Airways. If it goes bankrupt, what might happen to my miles?

Answer: A common question these days, but let's remember, they have already been in bankruptcy the past few years and nothing happened to members' miles. But, there's a huge difference in types of bankruptcy.

The Chapter 11 bankruptcy they were previously in is fairly harmless. I sincerely don't mean to trivialize it, but it's often a financial reorganization. The other bankruptcy which has a more serious effect is Chapter 7 and that calls for liquidation of the airlines assets in most cases. That one isn't so good and my opinion is that if US Airways is forced into that type of situation, your miles will become fond, and perhaps not so fond, memories.

But we're not there yet. US Airways has a TWA-type of resilience to them. They have been written off already by every travel expert and financial expert, but they are still here. There is some potential long-term danger to be aware of but for the short term, I'm still fine with this program. If you were to re-ask this question (and you may) five months from now you may get a different answer, bit for now — enjoy the benefits of earning and using your Dividend miles.


Some people are just dense.

That is not what he said.

That "travel expert" from USA Today that you mention, uh, he owns this website/bulletin board. Hmmmmmmmmmmm. :rolleyes:

Some people are just dense.

That is not what he said.

That "travel expert" from USA Today that you mention, uh, he owns this website/bulletin board. Hmmmmmmmmmmm. :rolleyes:


Wow, if this is how you treat people who don't normally post here, it is a wonder anybody would ever come here and post.

I'm not dense! I'm actually quite well educated, but that's beside the point. I answered his question and tried to offer him some reassurance as to the value of his boss' miles. I am right on that you can't transfer miles into a Delta account. Delta is like an island in that respect. You also have a problem transferring miles out of Delta, as I have experienced recently. That is something I know, and it is something he asked about.

The Randy Peterson article is something I threw in to offer some bit of reassurance that US Miles aren't worthless. How that could be taken as dense is beyond me. And as far as Randy Peterson owning this board, I didn't know that. I know he owns another frequent flier board, but I had no idea he was remotely connected to this one. I just saw the article a few days back and thought it might help.

And if personal attacks are your style with the US board, then rest assured that I won't be posting here anymore.

I was talking to my boss...
1) It is looking very likely that US will declare bankruptcy within the next couple of months; no later than the end of this year.

If it doesn't happen in the next 30 to 90 days they'll probably make it another year. IMHO.

2) Based on quotes made by US managment; if bankruptcy is declared, it will be a dissolving of the company and not restructuring.

That's how it has been interpreted/reported but that isn't really what Bonner said. I doubt that they will go straight into chapter 7. They may end up there but it will take two steps.

3) If that occurs, then any US DM miles will be worthless. (He has 130K - I've got 55K).

That's what some people would like you to believe. It may be true but nobody really knows. Those miles, or more precisely, the customer that goes with them are the companies #1 most valuable asset. How best to preserve that asset? Throw it in the garbage? I think not.

What would an airline eyeing them like you to think? Certain parties gain a lot by spreading fear that the miles will be lost. They:

1) Cow their own frequent fliers (customers are, after all, the enemy in this industry).

2) Scare the bejeebers out of US Airways customers.

2a) and then welcome them with open arms

2b) and laugh as US bookings evaporate

3) Get to look like a hero to US customers if the do "generously" decide to acquire DM.

3a) at a serious discount after poor-mouthing the possibility so enthusiastically

3b) and on favorable terms with the grateful customer

Call me a cynic but I think a lot of the press about the fate of miles is being planted by parties with a clear agenda. It's a shame that so many swallow it hook, line and sinker but I suppose I shouldn't be surprised.

B) If he made a reservation using DM miles... and US went under... would the ticket still be honored?
My initial thought was yes ... thinking that there is a law in place that offers some protection from traveleres that get stuck if something like this happens.
However, I did not know if the protection was the same whether the ticket was purchased via $ or via miles.

The law expired.

Just guessing but I think it is reasonable to think that return segments would be honored on a first come first served, space available basis out of "good will". Don't count on anything more though.

If you're really nervous make sure you only fly to SWA markets -- that way your exposure is a SWA walk-up fare.

C) What are the chances that something could occur without warning?

If they shutdown it will be without warning. Planes will be turned back in mid-air. If you happen to notice that the whole international bank is mysteriously being held while the last couple of return flights from Europe get off the ground some day then you'll know that it's over. They do it that way to protect the assets from creditors.

Wow, if this is how you treat people who don't normally post here, it is a wonder anybody would ever come here and post.

I'm not dense! I'm actually quite well educated, but that's beside the point. I answered his question and tried to offer him some reassurance as to the value of his boss' miles. I am right on that you can't transfer miles into a Delta account. Delta is like an island in that respect. You also have a problem transferring miles out of Delta, as I have experienced recently. That is something I know, and it is something he asked about.

The Randy Peterson article is something I threw in to offer some bit of reassurance that US Miles aren't worthless. How that could be taken as dense is beyond me. And as far as Randy Peterson owning this board, I didn't know that. I know he owns another frequent flier board, but I had no idea he was remotely connected to this one. I just saw the article a few days back and thought it might help.

And if personal attacks are your style with the US board, then rest assured that I won't be posting here anymore.

Blah. Blah, Blah....

If you are so "educated" then why did you misread what Randy stated with respect to US Air miles?

What Randy has said in this and other citations -- yes, if you had read the board, he has been cited in other articles -- is that sitting on your DM FF miles by keeping them in your account is a sure way to their annihilation. If USAir tanks, as I have been warning about for quite some time now, you will have zero, zilch, zippo, nada, nought, and nothing!!

Unless, of course, some carrier picks up the DM program, which some have argued on this board has some intrinsic value. Apparently, Randy does not share their optimism.

With respect to tickets already "purchased" with your DM for which you are to fly on United or even perhaps some other Star carrier, Randy believe that at least in the case of United, such tix are safe.

However, he provides no support for such a contention, and from the little we know of past airline bankruptcies, airlines are more likely to not honor them as apparently they do not get paid until the flight has occurred.

I have posited that United's creditors, the ATSB or any other entity involved in United's bankruptcy proceeding, may not look to kindly upon United's honoring these tix upon the promise of payment in another US Air bankruptcy, especially one where it is at least 50:50 that US Air will not emerge from Chapter 11 and instead will liquidate.

In that instance, United may be forced not to accept such tix as it can at least be argued that they would be breaching a fiduciary responsibility by honoring those tix with no real prospect of ever getting paid by US Air -- or its estate, and at most may realize pennies on the dollar, if that.

I do not disagree that given the choices, the best alternative would appear to be converting those miles into United tix and flying them ASAP -- as I am doing over Labor Day -- but I differ that it is a lock, as Randy pronounces without any support, that the tickets will be honored even if US Air liquidates.

That is very different than what you have written, and sometimes those with a bit of information are more dangerous to others than those who know nothing.

I stand by my observations. :cool:

Oh, and I can answer one of your questions fairly firmly.

Delta is not partnered with another airline so points can be exchanged. This included CO and NW. Points.com makes it clear that DL is not a partner in its site, and I know of no way to get points into a delta account from another airline. They're just elitist like that.

WRONG. Delta is partnered with CO and NW and AF and the rest of SkyTeam, but you cannot mix and match miles between them, however, you can use miles to fly their partners.

The problem is, however, you cannot convert US Air miles into Delta miles.

You can convert US Air miles into other airlines, AA being one of them, via Points.com, but the conversion is horrendous. A couple of months ago, there was a special whereby roughly 1/2 of US Air miles could be converted into AA miles, but that expired the end of May, I believe. Now the conversion stinks.

Your best bet may have something to do with turning the miles into credit card points and then turning those into hotel points, but that seems a bit complicated for lil ol me.

It is a bit complicated, because it CANNOT BE DONE WITH US AIR MILES!!! Other airlines' FF miles can be converted to Hilton HHonors points -- again, at a horrendous conversion ration -- but not so with US Air. Cannot be done. Wrong, again.

At any rate, the travel expert at USA Today has said that for now DM are safe and that people should enjoy them and keep earning them. And this is a question the guy has been asked hundereds of times this year.

Here is Randy Peterson's column from August 3:

US Airways is making readers nervous
Our expert answers your questions about frequent-flier miles.
Question: I am a frequent flier with US Airways. If it goes bankrupt, what might happen to my miles?

Answer: A common question these days, but let's remember, they have already been in bankruptcy the past few years and nothing happened to members' miles. But, there's a huge difference in types of bankruptcy.

The Chapter 11 bankruptcy they were previously in is fairly harmless. I sincerely don't mean to trivialize it, but it's often a financial reorganization. The other bankruptcy which has a more serious effect is Chapter 7 and that calls for liquidation of the airlines assets in most cases. That one isn't so good and my opinion is that if US Airways is forced into that type of situation, your miles will become fond, and perhaps not so fond, memories.

But we're not there yet. US Airways has a TWA-type of resilience to them. They have been written off already by every travel expert and financial expert, but they are still here. There is some potential long-term danger to be aware of but for the short term, I'm still fine with this program. If you were to re-ask this question (and you may) five months from now you may get a different answer, bit for now — enjoy the benefits of earning and using your Dividend miles.


"The other bankruptcy which has a more serious effect is Chapter 7 and that calls for liquidation of the airlines assets in most cases. That one isn't so good and my opinion is that if US Airways is forced into that type of situation, your miles will become fond, and perhaps not so fond, memories."

Alot has occurred in the interim -- like Bronner indicating that it is highly unlikely for US Air to emerge from another bankruptcy filing, if there is one. Or, the pilots union releasing a report by their own investment advisor indicating agreement with management's contention that US Air will likely file for bankruptcy sometime in mid-September, if things are still at a standstill.

Of course, that opinion was rendered before Bronner issued his opinion on US Air's survivability, which consequently sent whatever ticket sales that were left into a tailspin, so much so, that the CEO was forced to issue a press release indicating that he thought that US Air would survive another bankruptcy filing (right :rolleyes: )

Or, today's news that the talks between the management and the pilots -- remember, the pilots are the only union who thus far has even indicated a willingness to reopen talks on their contract -- not so the other unions -- have broken off and are at impasse.

Of course, Randy also made a more recent pronouncement in the Charlotte Observer which you are completely unaware of, even though it is posted elsewhere on this board. See: http://www.flyertalk.com/forum/showthread.php?t=348595&referrerid=17411

In it he reiterates his belief that United tix are safe -- although IMHO, this is yet to be proven. Implicit is his failure to state that DIV miles sitting in an account will be safe. In fact, he apparently urges one to book tix now.

I disagree with him that it is a done deal that United tix are safe, and I personally think that he is way too optimistic in thinking that US Air award tix for flights within the next 2 months are also probably safe.

So much for your citation to an article that is well past its information value.

Again, I stand by my observations that a little knowledge in those who don't know better can be a dangerous tool, and that advice should be given sparingly, if at all, if one is not fully cognizant of many of the intracacies of the situation, as well as its historical antecedents.:cool:

That's what some people would like you to believe. It may be true but nobody really knows. Those miles, or more precisely, the customer that goes with them are the companies #1 most valuable asset. How best to preserve that asset? Throw it in the garbage? I think not.



I agree with Tom. I am more optimistic about my DM miles even if US goes in Chapter 7. When did this happen with a US carrier? Didn't AA take TWA's FF program members and miles? I know it has happened in Europe, but when has it happened in the US? I could be wrong, but I don't know of this happening. It is hard for me to believe that a carrier who wants to step into US's routes would let US1's (and probably even US2 and US3's) disappear and start over from scratch--what better way (and cheap way) to earn goodwill than to lure them into their airline program. It would not surprise me if UA and AA fought over the US customers--they have a very loyal customer base.

One more point -- looking to the past to predict the future is problematic. In the case of FF programs there really isn't all that much precedent to go by. There are problems with all of the examples one might look to. Too small, too long ago, different marketplace, different makeup of customers and so forth.

Plus the "market" for these sorts of transactions is still emerging. It's not like there is a regular opportunity for these things to trade hands. But I do think that the industry is much more aware of the value of a FF program as an asset in BK than it used to be. Gates, planes and tangible assets have a whole lot less value without the customers that pay to use them.

Wow, if this is how you treat people who don't normally post here, it is a wonder anybody would ever come here and post.

Use the ignore feature.... it's works like a charm ;)

Nevermind :cool:

It is hard for me to believe that a carrier who wants to step into US's routes would let US1's (and probably even US2 and US3's) disappear and start over from scratch--what better way (and cheap way) to earn goodwill than to lure them into their airline program. It would not surprise me if UA and AA fought over the US customers--they have a very loyal customer base.

The problem with this line of thinking runs down several paths:
1. The US1's, US2's, and US3's likely have the vast majority of outstanding US miles in their accounts. The mom and pops who travel once or twice a year would seemingly have small account balances and minimal or no liability for award tickets. So an airline offering to pick up US1-3's picks up the vast majority of the liability for award tickets as well. Add that to the complexities of processing only US1-3 accounts for movement to a new airline, and the reality suggests that it is an all or none proposition....take everyone's miles or take no one's miles.
2. It's very likely that US assets will be auctioned off to several airlines. If I'm an airline, I'm not going to be interested in someone who has acquired their status flying routes that I don't service. I'm also not going to be interested in giving something to someone to acquire their business if I'm the only game in town (after US is gone). Cherry picking of customers who would be profitable to my airline would be a more complex task than that noted above. Doing this also requires that I own the Dividend Miles database, as that too is an asset.
3. In the past (and present), the typical method of airlines luring FFs from competing airlines is to match status. An airline could match your US status, feeling that is enough incentive to give them your business, without transferring a single mile.

In conclusion, I don't see another airline picking up existing DM account balances unless they take everyone. The airline that did this would have to acquire the DM database, and doing that only makes sense if you are also acquiring the vast majority of routes previously served by US. Otherwise there is no real way to leverage that purchase. Given the state of the industry, it's more than likely that airlines will try to acquire only select routes of interest to them and leave the liability of the Dividend Miles program behind.

P.S. - I hope I am wrong.

It really wouldn't be all that hard to segment the DM database. It is probably close enough to do it based on "home airport".