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Airline Mile Primer

Michael Heiko An airline mileage report folded into a paper airplane.

Photo: Michael Heiko

As unlikely as it sounds, some industry experts believe that these loyalty programs could be keeping the airlines afloat. "The joke," says Tim Winship, publisher of FrequentFlier.com, "is that the airlines are now running their core businesses as a way of servicing their frequent-flier programs."

Award seats are also harder to come by because of the number of passengers being jammed onto planes. According to airline strategist Michael Allen of Back Aviation Solutions, as of June, the seven so-called legacy airlines were filling a record 82.8 percent of their seats, topping a previous June record of 81.4 percent the year before. The reason: more people are flying, and at the same time airlines such as United are offering 17 percent fewer seats than they were five years ago. In October, American Airlines said that it planned to cut 1,800 flights over four months to counter rising fuel costs. The September bankruptcy plans of Delta and Northwest called for cutting up to 20 percent and 10 percent of their domestic flights, respectively.

At press time, none of the major carriers had made changes to their frequent-flier programs. But during 2005, most airlines lowered the barriers for elite-status qualification, which meant that there were more elite members competing for upgrades. And some airlines, such as Delta, have lowered overall first-class fares, resulting in first-class sections full of people who've actually bought their tickets with money—bad news for those seeking upgrades.

What This Means for You

• Devalued miles You'll continue to earn more miles, but they'll be worth less. Airlines will continue to profit from their mileage programs by selling miles to credit card companies and retailers, who will in turn offer them as limited-time promotions and double-mile bonuses. At the same time, Wisconsin-based IdeaWorks, a brand- and product-development firm that has generated co-branded credit cards for Frontier and ATA, estimates that the buying power of the award mile, based on the number of miles it costs to buy a domestic ticket, has fallen by 33 percent since 1994, from 2.1 cents to 1.4.

• Less frequent upgrades Bankruptcy and rising fuel costs will continue to spur airlines to squeeze more money out of each flight, further decreasing the number of award seats available, with a trickle-down effect that will mean fewer upgrades. Over the past 20 years, bankrupt carriers decreased capacity by 5 to 10 percent on average in the year following their filing, according to a Bear Stearns report issued in September. Mileage experts anticipate that airlines will continue to offer mileage bonuses to offset customers' worries about using their programs, which leads to a double whammy: more people vying to use more miles for fewer available upgrades.

• Fewer award seats—but better ways to find them With more miles out there and not as many seats available, there appears to be no relief in sight. But in the long run, experts believe, the situation may improve. Now that the credit card companies are bankrolling many of the mileage programs, Jay Sorensen, president of IdeaWorks, predicts that they will begin using their power to pressure the airlines to increase the number of available seats—or decrease the number of miles consumers need to redeem tickets, so that credit card customers like Victor Komlos won't be tempted to drop their mileage cards in favor of those with lower fees and lower interest rates.

At present, although award seats are still elusive, at least the airlines are instituting easier ways to find them. Northwest's Web site now has a color-coded calendar indicating which dates during a month have seats on the route you want. Continental has set up a calendar that allows you to book award miles on it and its code-share partner Northwest. And American Airlines now has a downloadable Hot Spots calendar that shows availability for popular destinations.

• Selling up You may see more on-the-spot markups—when 25,000-mile restricted-award tickets are unavailable, you'll be offered a 40,000-mile ticket instead. But at least, says Randy Petersen, editor of InsideFlyer.com, scenarios like the one Komlos encountered, in which the award price tripled, shouldn't become the norm.

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