US airlines latest headache: frequent fliers
With rising fuel and stranded customers, the US’s airlines are facing another crisis: frequent flyer miles.
“Frequent flyer reward schemes have ballooned over the years and accumulating points has become as common as buying a carton of milk. Carriers now risk paying a high price for the glut,” reported Reuters.
Airlines have awarded more than 19 trillion frequent flyer miles over the past 25 years — roughly equivalent to circling the globe 760 million times — and more than 14 trillion of those miles are unredeemed.
The rate of awards is increasing annually, according to frequent flyer site WebFlyer.
While many of those miles may never be swapped for trips or merchandise and they expire more quickly than before, that overhang of unredeemed miles represents a risk for airlines.
AMR Corp., the parent of American Airlines, operates the world’s largest frequent-flyer program. The company carried a $1.6 billion liability on its books at the end of 2006, about $100 million more than a year earlier and up from $976 million in 2000.
Free travel awards represented 7.5% of American’s passengers in 2006, compared to 7.2% in 2005, according to company filings.
“The airlines just can’t handle that level of reward redemption,” said Rick Ferguson, editorial director at loyalty-program consulting firm Colloquy. “The liability’s a big problem.”
Report by David Wilkening
David
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