These are usually the posts that we see every year on April 1. I wouldn't worry about it. Though maybe he is trying to push frequent flyer insurance? :)

The FF programs are the most profitable arm of many airlines. They are not going anywhere - and neither are the accumulated miles that you have. The only real risk is some watering down (more miles needed for a given award).

You forgot NRT. ;)

And the few owned decent planes have some value, too, but most of those are leased or otherwise encumbered.

I'm surprised this is a new thread...usually we just bump previous years' April 1st threads. :D

If an airline truly went Ch7, the airport slots could get sold off piecemeal - the buyer wouldn't need to necessarily acquire the entire airline or the FFP.

I think the distinction is this: the big FFP's have value because you have entire captive audiences who would have little to no choice but to use your product going forward. (EDIT: Well, they'd technically have choices, but you'd want to keep the loyalty program intact to keep them in their current habits assuming you're also buying some of their old routes.) The smaller FFP's that don't have that kind of critical mass or captive audience (especially in a couple of major hub cities) might not be worth much of anything.

In other words, if YX, F9, or B6 went belly-up, I wouldn't count on those miles being instantly bought by another carrier. You might get lucky and receive some sort of perk, promotion, or temporary status from whomever bought their most desirable landing slots.

It's not a given that the cost of the liability from acquired accounts would be less than the value gained from maintaining those accounts at full value as marketed currently to customers -- especially not in this economy.

No, it is not a given. But it is also not a given in the other direction.

Since the prorgam would be acquired at a discounted rate that is going to help the acquiring carrier. And buying the loyalty of those customers has way too much potential upside for all of the other carriers to simply walk away, IMO. Even if the program was acquired/integrated with a sunset provision (old points die after N years) the consumers still won't be left completely out in the cold.

The story basically stated that if a carrier goes Ch7 the points are guaranteed to be lost: "If they go bankrupt and they liquidate the carrier, the miles will be worthless." There is a chance that will happen. But there is also a rather significant chance that it will not. I'm betting on the latter.

The guy also suggests, "If you're buying a big ticket – Asia, Australia, Europe – for the fall or winter, you should seriously consider buying travel insurance so at least you’ll get your money back." Of course, he's mostly talking to a US-based customer base who is almost certainly buying such "big ticket" trips on a credit card. And if the carrier fails the CC company is on the hook, not the consumer, for the ticket costs. The consumer can just get their money back from the CC company.

He's spewing out bad advice and I have no qualms about saying so.

When Ansett Australia went under, all the miles are gone. I think the author does have a point if any airline ever goes to Ch 7!

And the credit card processor, more than likely, will have held back much of the money from the carrier....

At this time last year, United had $382 million held back, or 25 percent of advance credit card sales. United reached a deal with Paymentech and JPMorgan Chase Bank to cut that amount to $25 million, but the amount would rise if UAL's cash balance declines. UAL would also have to post reserves with American Express if its cash balance falls below $2.4 billion -- it was $2.46 billion on March 31, according to regulatory filings.

http://www.miamiherald.com/business/...y/1144331.html

I think it's hard to say what would happen if a major airline shutdown since it's been so long since it happened last. Pan Am and Eastern's programs were taken over by Delta and Continental respectively in 1991. TWA's was taken over by AA in 2001, but that was more of a merger.

In theory a bankruptcy court could invalidate the FF program, but it's never happened in any of the numerous reorganizations because it would be too disruptive to the business.

The minor programs have been left out to dry -- ATA Travel Awards, Aloha AlohaPass, and Independence iClub are all worthless.

Did you read the previous posts in the thread??
Right, and no one bought whatever ATA was using for their program though the LGA slots did get sold. The carriers being discussed as most likely to disappear - UA and UA - have FF prorgams that are of value. Those programs are not simply going to vanish.
:D :D That was funny. No it wasn't.

Also remember that most airlines will enter chapter 11, not chapter 7. They have access to credit and investors to help cover operating costs while reorganizing.

Also remember that the FF programs carry many more people than passengers. The also bring all the credit card holders with them--or at least the banks who buy all those miles and would want to maintain the continuity of their product.

Really? How many of the most recent bankruptcies went that route? The answer is very, very few. Of course, those that closed up shop were also the smaller ones with no real value even in their FF programs so it is hard to say for certain, but a blanket assumption that the next airline to declare bankruptcy will get Ch11 instead of Ch7 is somewhat questionable to me.

I have little to no concern of the airlines going belly up. Certainly it would suck if UA were to go chapter 7, but the chances of Chapter 7 filing are basically non-existent without first filing chapter 11 and trying to re-organize. One thing I have done is I've diversified my mileage holdings and now have about 110k NWA miles available, about 100k Amex Points, 30k with ANA, and 40k SPG. I would certainly take a hit if a program was scrapped, but no reason to burn them at this point at any more than the usual rate.

That depends on what the "usual rate" is. If you are hoarding them and never burning then it is always a good idea to consider burning. Ironically, I think that the folks most likely to get up in arms over such an article are the ones with their 15,000 hard-earned points tucked away, dreaming about finally getting to redeem them eventually. Those folks have way less to lose anyways.

This is absurd. For no other reason than the current administration is loathe to let any enterprise go kaput if thousands of union jobs are at stake.

Read my lips: no major US airline liquidation will occur during this administration. Now by major I mean AA, DL, UA and CO. The others are expendable (except WN which is in no danger).