If NWA breaks up, do you think Partner Airlines (ie: CO, DL etc) will honor milage banked on NWA ?

No, however someone will purchase the mileage program (they are very profitable), and will therefore honor the miles.

We've had quite a few of these discussions lately, I believe most people feel we're not close to this occuring, history says someone would buy the database of WP members and protect their balances however given the status of the industry currently I'm not sure if this would happen or not

If I were to book tickets right now (i'm planning on booking 2 international roundtrips to europe), would I lose those if the program dissolved? I know were just talking opinions, but would you do it if they were your miles?

dave.

I think that the consensus opinion on other threads is that while you shouldn't feel like you need to dump your NW miles just to burn them just yet, if you are worried, the safest thing to do would be to get paper tickets on a partner airline with your miles. Check otu the other threads on the subject for more detailed info and a wider range of opinions. Best of luck!

peace,
~Ben~

Since the introduction of frequent flyer programs in 1981 by American Airlines, three major airlines have shut down completely. In each case, program members' miles survived the death of the airline.

When Eastern Air Lines liquidated in 1991, Eastern miles were honored in Continental Airlines' program. In that same year, when Pan Am succumbed, WorldPass members and their miles were folded into Delta's program.

More recently, when TWA called it quits in 2001 after three Chapter 11 filings during 12 consecutive years of losses, 14 million Aviators members and their miles were transferred into American's AAdvantage program.

A Look Ahead

While frequent flyer program members and their miles generally have fared well even when their airlines have not, the odds are that future major carrier liquidations will not play out so benignly.

A failed airline's frequent flyer program represents both a marketing asset (the loyalty and future business of vested members) and a significant contingent liability (the cost of delivering award travel when the miles are redeemed). In good times, the marketing benefits trump the costs. But in an environment of deteriorating balance sheets and financial desperation, airline managers are more likely to focus on costs.

Members of troubled carriers' programs who hope for a repeat of the TWA scenario should ask themselves: Today, which airline has the will and the financial resources to absorb the miles of a major program like Delta's or Northwest's?


Otherwise, barring the unlikely intercession of another airline willing to fold miles into its own program, members of a failed airline's program face the prospect of frozen accounts and lost miles.

Program members who have redeemed their miles for award tickets prior to an airline's liquidation are in somewhat better shape. While they would be under no legal or contractual obligation to do so, other carriers might honor tickets issued by a defunct airline on a space-available basis.

Section 145 - Passenger Protection (Perhaps)

In the wake of 9/11, Congress passed the Aviation & Transportation Security Act (ATSA). In response to the demise of Midway and in anticipation of more airline liquidations to follow, Section 145 of the Act specifically mandated that U.S. airlines assist passengers ticketed on insolvent carriers to the best of their ability -- i.e. on a space-available basis -- for a fee not to exceed $50 roundtrip.

Although the ATSA expired on Nov. 19, 2004, an amendment extending Section 145 for an additional 12 months was included in the intelligence reform act signed into law in mid-December. So the passenger protection afforded by Section 145 will remain in effect until Nov. 19, 2005.

While the extension is welcome news for stranded passengers holding revenue tickets, the amendment does not address one glaring omission carried over from original legislation: Congress never clarified whether Section 145 applied to frequent flyer awards.

What to Do?

The right approach to defending against lost miles depends on a number of variables, including the member's best guess as to the likelihood of the host airline's liquidation and the number of miles banked.

Sit Tight

A filing for protection under Chapter 11 of the bankruptcy code may well shake consumers' confidence. But miles are at risk only if the airline in question is headed for liquidation, Chapter 7. (For more on the distinction, see the "Bankruptcy Primer" section below.)

So unless an airline is on its last legs, its customers may continue earning and redeeming miles, secure that Chapter 11 won't translate into lost miles. At least not in the short term.

That was certainly the case with United and US Airways, both of which operated their frequent flyer programs normally throughout their stays in bankruptcy.

The difficulty, of course, is handicapping the airlines' chances of survival longer term.

United is expected to emerge from Chapter 11 in February 2006, after 38 months under protection of the bankruptcy court. But the company's reorganization plan -- its strategy for regaining and sustaining profitability -- is predicated on oil prices of $50 a barrel, a price point which today seems like wishful thinking. Will United survive, post-bankruptcy? No one can say.

Redeem

There's only one sure way to protect the full value of miles: use them now, for travel awards, while the airline which hosts the program is still flying and paying its bills.

If possible, book award trips sooner rather than later.

If later, book awards on partner airlines. Then, if the host airline shuts down, there's no need (or service fee) to have the tickets reissued.

And when booking award travel on partner airlines, there's a potential advantage to choosing carriers within the same global alliance as the distressed carrier. Reason: in the event of an alliance member's failure, other member carriers have an incentive to come to the rescue of stranded passengers, to preserve the alliance's brand equity.

Members of Delta's program, for example, might redeem miles for award travel on Continental, which is both a fellow member of the SkyTeam global alliance and, despite its own problems, arguably on firmer ground. Since Northwest is also a SkyTeam carrier, the same tactic could benefit WorldPerks members.

Redeeming miles for magazines, an option in most programs, also represents good dollar-per-mile value. But award levels start at 400 miles for some subscriptions, and there's a limit to the number of magazine awards anyone could practically use.

As a general rule, given the uncertain state of the industry and the devaluation of loyalty programs, consumers are probably best served by redeeming miles regularly, rather than succumbing to the hoarding instinct which leaves travelers with too many miles to dispose of quickly when things go bad.

Convert

The conversion strategy -- exchanging miles from an endangered program into miles in a program with better long-term prospects -- has always been attractive in theory. In practice, the number of miles lost in the conversion process makes it palatable only for those in the most desperate straits, or those with small caches of miles.

There are three variations on the conversion theme.

Points.com, an online mileage-exchange service, allows conversions between participating programs in a single transaction.

Of the most troubled carriers, Delta only accepts Points.com exchanges into its program, and neither Northwest nor United participate at all.

Other exchange options combine the miles-to-points and points-to-miles functions of the Diners Club Rewards and Hilton HHonors programs.

But Diners only permits miles-to-points conversions from American and United's programs. And in Hilton's program, none of the most distressed programs allows miles-to-points transfers.

not that it matters in this forum, but ua just sent out correspondance saying that they will no longer participate in the diners club rewards program after 4/27... .

Great analysis, TRVLRZ. This question has been asked several times and I always note that there are quite a few people who take the position, quite confidently, that their miles and the FF program are not at risk. It may be unlikely that WP just disappears one day because it's generally profitable to issue miles, many of which simply don't get used.

However, the devaluation of the miles continues... for example, I can't find a single standard SFO-SIN WBC award in the next couple of months, despite the fact that I'm a plat. The same is true of the business saver award at UA, can't find any at all. Airlines are going to continue stretching our tolerance to the limits by reducing availability, increasing the number of miles issued, and devaluing status. The only thing we can do ito protect ourselves is to use those miles when we can and keep a small balance.