Agree with original poster that its a dubious tactic to hold onto you miles, especially into retirement. With all due respect to Randy for his work in this "industry" and providing this forum, I do believe his objectivity is affected by the advertising he receives from the majors. (I mean, he doesn't even have an Airtran forum, presumably out of deference to DL.)

FWAA makes an interesting point about the cost of obtaining miles is likely to go up. While I agree that fares are about as low as they can go, I think redemption cost increases will exceed the cost of earning miles. I now get miles from my drycleaner - DL is printing miles faster than they can be redeemed. Not only will redemption levels increase, but competition to redeem the few available awards will increase. So while I agree with his point, its overshadowed by others.

The language in the 10-K in plain English is shady accounting. If an airline accounted on a cash basis, it would recognize the income from the sale of miles on the day they are sold. However, under accrual accounting you try to match revenues with expenses. So the airline recieves $550m for the miles, but it records a liability of only a fraction of that. The last thing the airline wants to do is record the miles on their books at two cents a mile. So they make all these assumptions. Apparently, the same assumptions have to be made with respect to the revenues from the sale of miles. Either that, or they wish to defer the revenue out into the future for some reason.

If you really want to scare yourself, look in the footnotes of the 10-K and try to determine 2 facts: the number of miles outstainding and the dollar cost at which that liability is shown on the books. Divide the latter by the former and you will get the value per mile that the airline records the liability. For example, at DAL, they won't disclose the number of outstanding miles. Instead, they make certain assumptions, such as a large number of PAX will never get enough miles to redeem an award (a questionable assumption with mileage credit cards, iDine, etc.). After making a host of assumptions, DL states that they estimate that 10,000,000 flights will be redeemed. Who knows how many SkyMiles are really outstanding? Anyway, they record a liability of $228 million for these 10 million flights, of $22.80 per flight! If you assume 25,000 miles per flight, that works out to 1100 miles for a dollar! Now, I understand how financial statements are put together and what the airlines' managers are trying to accoplish. But from a creditor's perspective, you have to realize that the airlines are purposefully trying to hide the number of miles outstanding and the "cost" of such miles.

I find it amazing how most of us don't trust the airlines when they say our equipment is delayed due to [insert excuse] but some of us are willing to keep our miles into retirement. I'm not so trusting.