If you spent the pandemic holed up at home, dreaming of the day you can jet away on vacation using all those miles you’ve banked, you may want to wake up.
Airlines Are Under Heavy Pressure To Devalue Your Mileage Points
Five of America’s largest airlines collectively owe frequent fliers $27.5 billion worth of free air travel, or other products and services that can be paid for with the mileage points earned in their frequent flier programs.
That’s up a record $2.9 billion, or 11.6%, based on the annual reports of Delta, American, United, Southwest and JetBlue. In part that’s thanks to the near-total absence of frequent flier award trips during the Covid-19 pandemic, when few people have been traveling. In a normal year, those carriers’ frequent flier liability totals grow at rates below 4%. It’s also partly the result of frequent fliers still continuing to earn points in loyalty programs even though few people actually flew during the pandemic. In 2019 U.S. consumers earned $12.6 billion worth of mileage points. But instead of that number falling to near-zero mileage points earned, loyalty program members still earned $6.8 billion worth of mileage points in 2020, almost entirely by charging purchases to credit cards linked to their preferred carrier’s loyalty program.
But as odd as it may seem, that’s actually not a good thing for travel consumers. At least that’s what the experts on frequent flier programs are warning us about now.
You see, per General Accepted Accounting Practices airlines must disclose on their balance sheets how much free travel they owe the public should every frequent flier cash in every mile they’ve earned – all in one year. Of course, that’s never going to happen, but since the airlines owe that free travel to their frequent fliers every bit as much as they owe billions of dollars to the banks, other institutions and bond holders from whom they’ve borrowed money, it has to be publicly disclosed.
