Got the Joe Brancatelli early morning E-mail. He says airline FF programs are in trouble because there aren't enough seats to cover the outstanding accrued miles. Since I'm not a subscriber I didn't get the full story but maybe someone who did read it can add to this.

I don't have to read this article to come to the conclusion that Brancatelli's article (as usual) is likely full of it. This is for several reasons:

1) Brancatelli has historically assumed that the only usage for miles has been domestic award tickets. (In fact, this is the same person who, earlier this year, concluded that the value of miles has decreased by giving the singular example of using 25,000 miles to buy a $200 transcon.) Given that airlines have been more flexible in how miles can be redeemed - be it through the redemption for upgrades or even for magazine subscriptions - I don't think that redemption is as limited or as in peril as Brancatelli would like people to believe.

2) The vast majority of miles go unused, due to capacity controls and expiration. And I'd venture that for every one person banking 1 million miles in their FFP account, there are another 1 million miles or more being banked by hundreds of people who each have a few thousand or less miles in their accounts.

In other words, millions of miles sit out there, unused, because they aren't in enough of a concentration to be used by any single person for a single ticket.

3) Even if there are too many miles out there, it's not the FFPs that are in trouble. It's the holders of the miles. Basic economics will dictate that if there is too much currency out there, prices will increase accordingly (in this form, the number of miles required for redemption). While this is something that no one here wants to hear, it's the more logical solution than having the FFP shut down altogether (especially given that, for many airlines, the FFP is the profitable element).

Mike

Brancatelli is really wrong about many things, and this is no exception.

** FF programs are profit centers. Mileage Plus is probably worth more than United Airlines right now.

** As the guy above stated, a huge percentage of outstanding FF miles are being held in increments too small to do anything with except buy magazine subscriptions.

** Only about 10 percent of FF members really strategize their programs. They're us. We are ahead of the game.

** Like any currency, miles grow less valuable over time. The trick is not to hoard them, but use them promptly and wisely. A 25,000 mile domestic award that would otherwise cost $250 is a dumb redemption strategy and Joe should know it. A $7,000 overseas business class ticket for 100,000 miles is still a great deal, especially if you got most of those miles renting cars and buying groceries.

I no longer pay much attention to J.B.

Joe keeps screaming about the same things. Amazing how anyone pays any attention to him.

And Franco is still dead.

Old news -- very, very, very old news.

What's even more amazing is that now people actually pay to hear his rants! I usta enjoy reading his website when it was free. But his pearls of wisdom sure aren't worth $50 a year!!!

Well, award levels are probably going to be hiked -- at least in effect (by this "saver" vs "choice" distinction game) -- before the programs are in immediate peril. But, when enough customers get frustrated with this increasingly limited availability at reasonable (i.e., current "saver") award levels, a fair amount of customers may quit "the game" and perhaps be market leaders by moving and convincing others to follow suit. Probably from the airline-affiliated cards to the hotel-affiliated ones .... like many of us have already.

But there is the interesting thought that because there is a 1:1 ratio for dollars spent to miles earned (at a minimum), inflation itself dictates that going forward an increasing percentage of total miles earned will come from credit cards, and not flying. The distance between two given cities doesn't change! Thus, this inflation in miles earned relative to flying does seem to indicate that award availability will go down unless airlines stop accepting so much cash from their passengers and decide to allocate more seats to FF redemptions. This seems unlikely in the near term given that in the current environment the airlines are getting away with having their cake (in the form of increased dollars from Amex, VISA/MC partners, etc) and eating it too (still allocate the same % of seats to FF redemptions) ... redemption difficulty will continue to increase going forward!

Long term solution: Airlines can allocate more seats to redemptions or increase the price paid by Amex etc to buy the miles for their customers (implicitly causing them to cut back on miles given out or break the 1:1 ratio). . . or just push it as far as possible until the programs implode in customer dissatisfaction, legislation or class action lawsuits. Ultimately, raising the award redemption price doesn't work because people who pay to fly would never be able to get a decent level of miles for a reward (again, going back to that little fixed distance between cities issue). Hmm...

I enjoy Joe's columns, and am a regular reader. But like anything in life, some folks have different opinions than I, and on this, Joe's opinion is different than mine. I think nako pretty much summed up how I feel about these mileage programs. And I will add that so far (I joined my first program (Piedmont) in 1987 as a teenager), I've experienced little to no difficulty in redeeming miles for exactly what I wanted and when I wanted it.

I think the small credit card points collectors will move to the cash back cards. I have seen this with friends, even some that do quite a bit of travel. Cash is easy to quantify.

I think you are right. But that didn't seem to work with Discover. Then again Discover never had much of a footprint compared to MC/V/AMEX.

Most who have Frequent Flyer accounts have no clue how to best redeem them. I have a friend who is fairly typical. He has a lot of KLM miles (lives in Holland). Every year, he tries to get his award tickets six weeks before his vacation starts, and complains that there is no availability. I have told him that if he wants to get 3 award tickets on a complex itinerary, he should book them 330 days out. He knows his vacation dates more than a year in advance, but again the next year, six weeks before. His miles keep stacking up, he chuckles bitterly that they are worthless, but he won't do what is necessary to redeem them. This year, we were meeting his family in England to vacation together. We were going during his son's spring break (in May). I e-mailed him a dozen times to find out what the dates were, no action, finally got the dates in February. I was barely able to get my award tickets, and I have some flexibility. He tried to book his awards in late March, came up empty again. Lots of people like him, and airlines love them. I just wish I could get them to will their miles to me.

Will this ever get to the point that a federal prosecutor might file fraud charges? Or what about a class action suit?

Uh, no. Because as already pointed out, you can use miles for things other than airline seats.

Whether those other rewards are good VFM is another matter entirely - because the point here is that people are not forced to only use their miles on seats. Of course, I'd be dead before I redeem 20k miles for a toaster... but others might want to

And of course, award seats are ALWAYS available at their 'unrestricted' award levels. No fraud.

What's really the nub of the issue is how the FFPs market the programs that stimulate our expectations by focusing on the 'restricted' award level redemption amounts.

As JoeB noted, higher (mostly top) tier members of FFPs tend to have better award availability.