Newsstand - Frequent-flier mileage could be in jeopardy if big airlines go under

Until now, I've been relatively unconcerned with the safety of future tickets and accumulated frequent-flier credit on financially weak major airlines.

I've pointed out that the bankruptcy process has essentially no effect on either outstanding tickets or mileage balances. And even in the rare previous cases of complete airline shutdown, acquiring airlines have always picked up the pieces: Few, if any, travelers have lost either the price of their tickets or their frequent-flier credit.

Now, however, I think it's time to raise the warning level on some lines from yellow to orange -- and for you to think more carefully about buying future tickets and how to manage your frequent-flier accounts.

The big uncertainty we face is the possibility of a complete shutdown -- not just bankruptcy -- of a major airline. In the most notable previous failures, Eastern had already merged its frequent-flier program with Continental's, United and Delta took over outstanding Pan American tickets and frequent-flier miles, and American took over outstanding TWA tickets and miles. As far as I'm aware, no passengers or frequent fliers lost anything.

Contra Costa Times link (http://www.mercurynews.com/mld/mercurynews/living/travel/9587568.htm)

I'd be worried if I was a US Dividend Miles member with a large balance.

That's no slam against US, nor a "the end is near" message. (I fly UA exclusively and I wouldn't carry more then 250K with them). But I do not see UA taking on that "debt", much less a non-STAR carrier like AA or DL/CO/NW.

To be sure, those airlines will try and "cherry-pick" the more lucrative customers (if your statements show you generate 20+ cents a mile in revenue, I bet they will happily match your miles 1:1), but the 4-6 cents a mile "cockroach" will most likely be left in the lurch.

I just don't see any major absorbing US' ops and assets in totality. The only ones who could would be the LCCs, and while I expect WN to launch a full-court press in CLT, they probably don't want most of US.

And if US does go under, it kind of helps UA as STAR needs UA to survive to provide O&D traffic beyond the "entry hubs" (LAX, JFK, SFO, IAD, etc.).

In every case of a US carrier going kaput in the past, FF mileage accounts have been bought by and credited to another airline's FF program. I had a bunch of PanAm miles converted to Delta, for example. Is there any reason to believe this will be different now than in 1991 or 1999?

In every case of a US carrier going kaput in the past, FF mileage accounts have been bought by and credited to another airline's FF program. I had a bunch of PanAm miles converted to Delta, for example. Is there any reason to believe this will be different now than in 1991 or 1999?

Yes, there IS a reason to believe it is different, particularly when you begin reaching back to 1991. For one thing, non-expiring miles are a fairly recent innovation in the FF world and the associated liability is therefore different. There other factor is the general health of the overall industry and its ability to absorb such things.

In every case of a US carrier going kaput in the past, FF mileage accounts have been bought by and credited to another airline's FF program. I had a bunch of PanAm miles converted to Delta, for example. Is there any reason to believe this will be different now than in 1991 or 1999?

I honestly believe there is. When the last two rounds of majors went away, they were usually directly absorbed by their competitors (so AA incorporated all of TWA's assets, including their mileage program). For those that were not, especially in 1998, the remaining majors were in "the happy times" of high fares and could afford to take on folks because they were making money hand-over-fist.

This time, I don't expect US to be bought by another airline. So there will be no existing entity who has agreed to take on that obligation. Now, that doesn't mean every Dividend Miles member is screwed. But I do expect the airlines to cherry-pick DM members just as much as they do US planes, routes, employees, and facilities. High-revenue passengers will be welcomed with open-arms and 1:1 mileage matches, I am sure. The "cockroaches" will most likely be left with nothing, however. On the plus side, they can just start saving money and fly LCCs instead of trying to do it all over again. The money they save will allow them to buy First Class international tickets, probably. :)

None of the majors is in the financial position to absorb the almost seven million awards that US DM members have outstanding. Not without risking alienating their own customers and their own financial positions.

And I can't see LH (or some other Star Partner) coming in and offering 1:1 M&M benefits because what good does it do LH? They need UA to survive, not US, as their North American partner.