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Airlines Rewrite the Rulebook on Expiring Miles

June 25, 2007 – These are dispiriting times for members of the nation’s travel rewards programs, who have watched the value of their frequent flyer miles gradually decline as a result of a flurry of recent policy changes.

The latest consumer-unfriendly policy change is from American, which announced on June 2 that beginning June 15, members of its AAdvantage program must have activity in their accounts every 18 months in order to keep their miles from expiring. That’s just half the three-year expiration period that until recently governed most major mileage programs.

As the world’s largest airline and operator of the original and largest mileage program, American has long been a trendsetter in travel rewards programs. And while they weren’t the first to amend the three-year mileage policy, their doing so signals the official demise of the old industry standard.

Of the full-service carriers’ programs, the current expiration policies are as follows:

  • Three years – Alaska Airlines Mileage Plan; Northwest Airlines WorldPerks
  • Two years – Delta Air Lines SkyMiles
  • Eighteen months – American Airlines AAdvantage; Continental Airlines OnePass; United Airlines Mileage Plus; US Airways Dividend Miles

With two of the top three U.S. carriers now in the 18-month camp, that’s clearly shaping up as the new reigning standard, which is likely to be adopted by Alaska and Northwest by the end of the year.

Changes are driven by financial considerations

The airlines typically don’t bother to justify mileage program changes any more than they explain ticket price increases. But the reasons for the changes aren’t far to seek. First, the new policy will inevitably reduce the number of outstanding miles in members’ accounts, which are carried on the airlines’ books as contingent liabilities. And reducing liabilities makes for healthier balance sheets, and happier accountants.

There’s also a revenue effect likely to flow from the new rules. Forcing program members to be more active will increase the number of tickets they purchase and the number of purchases they make with the hotels, rental car operators, and other partner companies which award miles in the programs. Both are good for the airlines’ bottom lines.

The newly tightened policies don’t amount to a stake in the heart of the programs. But it is another jab in what seems to many to be death by a thousand cuts.

While the new rules may rankle hard core frequent travelers, the real-world effect on their mileage accounts will be negligible. They travel so often that it will be easy to keep their miles viable, even if they participate in multiple programs. And if they cut back on trips — because they change to less travel-intensive jobs, for example — they’re still unlikely to be blindsided by the new rules.

But for the casual frequent flyer program participant, the shorter expiration period can be a difference-maker, requiring heightened vigilance and, for those who allow their attention to stray, resulting in the loss of millions of miles.

To retain miles, stay informed, active

The good news for those whose miles are at risk is that maintaining a mileage account indefinitely is a relatively straightforward matter, requiring more awareness than effort. Mileage retention is a simple two-step process.

First, mileage collectors must keep abreast of their programs’ latest policies and the expiration dates for banked miles. That date should be prominently displayed on the periodic account statements sent to active members. But note the Catch 22: generally only members with recent activity receive statements. So inactive program members will have to remind themselves to visit the airline website to access their accounts and review expiration information.

The second step is staying active — or at least sufficiently active to head off the loss of miles. Since any transaction which changes a member’s bottom-line mileage balance will extend the life of all miles in the account, there are many low-impact options available if airline flights and hotel stays aren’t on the horizon.

On the earning side, the airlines’ mileage malls allow program participants to earn miles, and keep their accounts active, for everyday shopping. Simply make a purchase at one of the many online retailers participating in the airline’s program. American’s mall, as an example, includes over 200 online merchants, including Bloomingdale’s, Circuit City, Dell, GAP, Land’s End, Office Depot, Starbucks, Waterford, and so on.

And on the redemption side, most programs allow members to cash in as few as 400 miles for a magazine subscription.

Don’t forget that donating miles to charity, as permitted by most programs, works as well as more self-centered transactions in extending the life of miles — a rare win-win in the realm of mileage programs, where winning is harder than ever.