With U.S. passenger traffic down by 90%, airlines are desperate to fill seats and are offering big incentives to keep their most reliable customers loyal. But what happens to frequent flyer miles when almost no one is flying and can an airline loyalty program survive if an airline goes bankrupt?
For the cash-strapped traveler who dreams of sipping champagne in first class, a frequent flyer program is a must-have.
Airline loyalty programs offer passengers free flights, seat upgrades and access to elite business class lounges.
They are also a massive revenue generator for U.S. airlines.
“It’s big money for these airlines, bigger even for a lot of airlines than all those baggage fees,” said Seth Kaplan, aviation analyst and principal with Kaplan Research.
But this year, U.S. airline passenger travel tanked when the coronavirus pandemic shut down businesses and states enacted stay-at-home orders. Passenger traffic is down by 90% and more than half of U.S. passenger planes are parked.
“The challenge in the business right now is demand,” said Delta Air Lines CEO Ed Bastian. “With all the stay-at-home orders and the challenges with respect to travel, it’s well documented we’re operating right now at less than 5% of a normal passenger load.”
Frequent flyer programs are a lifeline for the nation’s air carriers.
Airlines make money by selling billions of dollars worth of miles to hotels, car rental agencies and especially to their credit card partners.
Delta has a co-branded credit card with American Express. United Airlines has a 30-year credit card relationship with Chase Card Services. And American Airlines is partnered with Citi and Barclaycard.
American also makes money off some rewards cards that aren’t branded, such as the popular Chase Sapphire Reserve card. Here’s how that works: The bank purchases miles from the airline and then issues those miles to the cardholder as a reward for spending.
While the terms of such agreements are generally not made public, Delta said it took in $4.1 billion from American Express in 2019, and the airline expects to increase that to $7 billion by 2023.
In a February filing, United said it had agreed to a contract extension with Chase to 2029 that would increase cash flow in 2020 by $400 million.
With U.S. passenger traffic down, airlines are offering big incentives to keep their most reliable customers loyal.
In April, Delta announced its SkyMiles Medallion members will be able to keep their current status through the end of 2021 and qualifying miles from 2020 would be rolled over to 2021. Medallion status is reserved for Delta SkyMiles’ most elite flyers and is earned through a combination of flying and spending.
The carrier is also expanding other benefits, including the extension of travel vouchers and flight credits to SkyMiles members and Delta cardholders. The SkyMiles program has more than 92 million members worldwide.
United offered similar incentives for members of its MileagePlus program. The program’s top flyers who have attained Premier status will have their benefits extended through Jan. 31, 2022.
American AAdvantage members who have achieved the program’s Elite status level will see reductions in status qualifications for 2020 and extended airport lounge membership for an additional six months.
But with would-be passengers sheltering in place and fearful airplanes could be a breeding ground for Covid-19 infections, many are choosing to postpone travel. The situation begs the obvious question — do airline miles expire and will all these perks still be around when people choose to get back on planes?
United, JetBlue and Delta said the miles on their frequent flyer programs never expire. American said its miles expire after 18 months from the date of your most recent activity.
“Your frequent flyer miles are safe during the pandemic,” said Henry Harteveldt, travel industry analyst at Atmosphere Research Group. “Nothing’s going to happen to them.”
That is, of course, if an air carrier stays in business. Watch this video to find out more about what happens to frequent flyer miles if an airline files for bankruptcy.
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What Happens To Frequent Flyer Miles If An Airline Goes Bankrupt?
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Asia Miles was pretty stingy with awarding miles.
I heard British Airways let many points expire even during the pandemic.
Oh that's not good having a strand of covid-19 named Delta is probably not going to help Delta Airlines says a stupid friend of mine.
*Thepointsguy has entered the chat.
So just skip to 8:00….to the point.
Nice content <3
There are many fools such as Flyertalk posters buying gift cards on their airline credit cards because the rewards are much better than cashback cards. Right now there are folks with over a million miles from credit card manufactured spend. Good luck trying to spend down the millions of frequent flyer miles vs. cold hard cash even with no airline bankruptcy.
Claim those miles at least once a year.
Answer: he/she won't be flying so frequently anymore.
A 10 minute video to tell us something that can be condensed into 30 seconds:
-if the airline goes through ch11 (protection), business as usual
-if the airline shuts down or merges, you probably lose all your miles.
if you manage to see whats coming and transfer within 24 hours or as soon as options shows then you might be lucky
I think hotel points are a better value than airline miles. Nicer amenities enjoyable over a longer time, wider and more stable options, less carbon output per patron, and not as likely to suddenly disappear since properties can be sold much easier than a plane.
Ahhh, CNBC answering the big questions that we want to know. Its not like theres anything else to talk about right now…
So a 10 minutes video, only at the 8th minute does the question get answered. 20% efficiency. Great job! CNBC.
I will take cash instead. Any company can go bankrupt at any moment. Imagine you have Enron mileage, or MCI Worldcom mileage, Sears mileage, JC Penny mileage.
caution, you are now getting into wendover productions territory
My airline miles have decreased in value like crazy not happy!
Bankruptcy is different from liquidation. In liquidation, it’s bye bye all. There’s the key. Saved you time watching the video.
I'm pretty sure those bankrupted airlines may emerge with a better plan in future. Take a look at this vlog about facts and examples.
https://youtu.be/973a7x-kxaY
09:25
05:09
02:09
Answer: better get a credit card that gives you cash back in $ not points
Planes park like vehicles lol
Has this inspired Air Mauritius?
https://www.youtube.com/watch?v=jjg3GUq5unM
everyday bussines knows you have too be prepared for hard times not live day by day. Big business crys wolf 1 day closed. Lets them die.
We are in the middle of a global pandemic, nationwide social unrest, soon to be followed by a recession and some people are worried about their frequent flyer miles? Screw them.
Annnd United just brutally devalued their miles…. Now's worth nothing
You guys needed to analyze Southwest Airlines as well because they’re considered an American giant like AA and UA
If a airline files for bankruptcy, as they have done before, the owner of it's stock might as well place the stock certificates in their bathrooms next to the toilet. The same applies to the frequent flyer miles.
These videos need to get straight to the point, MAKE THEM SHORTER!!!
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