The days we’re living in are the toughest times in modern history airlines have ever faced. In 2008, after a global economic collapse, travel demand was low but people still needed to get around, and there was no outward fear of travel, just a lack of funds.
Now, it’s all the above – fear, lack of funds, environmental issues, and it’s likely going to get worse before it gets better. For some airlines, it will mean undoubtedly bring extinction.
Airlines are asking for bailouts, but even when, and if they come, there’s uncertainty around airline mileage programs, and more pointedly – the livelihood of your beloved miles. Should you worry about losing your frequent flyer miles? Not really, but it kinda depends on the airline…
Why You Generally Shouldn’t Worry About Losing Miles
It’s important to look at airlines as much more than air transportation companies. They’re hospitality groups, data analysts, marketing agencies, fuel hedgers and so much more. Even if planes stopped flying, airline loyalty program would still be incredibly valuable, and yes, they can be spun off into independent entities.
There’s just so much rich data about you, how you search, how you spend money or miles, and where you like to travel that many businesses would buy these programs, even without an airline attached to them.
From time to time, airlines have actually sold off their frequent flyer or mileage programs to outside firms, and only bought them back when business or finances improved. Going further, miles have survived numerous airline bankruptcies, where loyalty programs were protected in tact during debt restructuring.
Perhaps most importantly, loyalty programs are one of the few compelling tools airlines have to lure you and your friends back into the skies, when the world deems it safe to do so again. As odd as it is, the best time to be frequent flyer, or have lots of miles, is when business or the overlying economy is bad.
Still, it depends on the airline…
Unfortunately, some airlines will fail. Airlines with strong national ties, like some of those in the US, UK, Germany, France, Singapore, Japan, and Netherlands will almost assuredly be offered levels of assistance by their respective governments. What would France be without Air France?
US Airlines have already received bailouts and no government has specifically stated it has no appetite to help their own sovereign carriers. This doesn’t mean all airlines will be saved, but the more vital they are to a nation, the better the chance.
Singapore Airlines is Singapore. Emirates is Dubai – you just wouldn’t let an entity like that fail.
If you have miles with a program that doesn’t sound vital to a nation, you’re potentially more at risk than those that are, but it’s unlikely you’ll be left with nothing, with a few wacky mileage programs exceptions you hopefully never bothered with anyway.
Even if the airline fails, the loyalty side of the business may be purchased and brought into a broader ecosystem. It may not be nearly as attractive to you, but it may still be something – and really, you don’t have a way out at this point anyway, so take solace in your lack of control.
Few Safe Hedges…
There’s a fallacy that booking a ticket on an airline partner now would create safety for your miles. That’s not entirely accurate. Historically some tickets issued by failed airlines have been honored, but others have not.
You’re still rolling the dice by trying to liquidate your miles now.
A few at risk programs do allow transfers to other airlines, or to hotel partners and since that’s immediate, it provides a slightly higher level of safety than an airline ticket to be flown in the future. Even then, it’s also not guaranteed.
You know you’re in a bit of trouble when the airline with whom you have miles begins to shut off the taps and stop these external transfers.
To make a long story medium, any points currently in an airline program might as well be left to sit, with hopes of a safe passage. More than likely, they will make it, and when times improve, miles will be more useful than recent years, as airlines open up seats and opportunity to fill planes.
The Right Points Strategy For 2020
The right strategy, for now, is to embrace the fact that your miles should mostly be safe, provided you chose good programs from the beginning. If they’re not ultimately going to be, there’s little you can do to help it at this point anyway.
You might as well focus on the bigger picture and not stress about things you cannot readily fix, right?
The bigger picture is that wherever possible, any miles earned from not actually flying or staying in hotels are safer earned in a flexible currency, such as American Express Membership Rewards, HSBC Premier Miles (UK), Capital One Venture Miles, Citi Thank You Points or Chase Ultimate Rewards.
These currencies are much less likely to fail, and allow you to transfer points into a variety of airlines and hotels at will, rather than being stuck with just one. Read as: most of the money you’re spending shouldn’t be on credit cards of the airlines or hotels themselves right now, or cash back.
There’s nothing wrong with hitting spending perks with cards tied to a specific loyalty program, but you don’t want to spend any more than needed to trigger said perks. That additional money would be better spent building balances in currencies which put you in the driver seat.
Present times are an example of when flexibility is key, and highlights the niches of a few cards which cross over cash back and travel rewards, such as Capital One Venture. Used properly, Venture is a 2% cash back, or 1.5x airline miles per dollar spent card. Having the option of either is handy.
You can enjoy similar, fantastic results with the Chase Freedom (currently offering $200 cash back after spending $500 in the first three months). If you have another card account that earns Ultimate Rewards Points, like Sapphire Preferred, or Sapphire Reserve the cash back points can be converted into airline miles, or hotel points.
Basically, you can earn up to 5x points per dollar with the no annual fee Freedom card, and then convert that 5x cash back earning to Ultimate Rewards Points which can become miles, if you have an Ultimate Rewards earning card.
For cash back alone, Citi Double Cash and Bank Of America Premium Rewards are also good.
Citi Premier, Amex Gold and other cards can almost work in both ways as well, if you use the cards points as cash towards purchases on ThankYou.com, Amex Travel, etc.
I’d rather be able to choose from Delta, Emirates, Etihad, Cathay, British Airways, Virgin Atlantic, Air France and more, than just one of the above with my points, and that’s precisely what these flexible bank currencies create.
A Mileage Program Renaissance
When planes are empty and lucrative frequent flyers are tough to find, airlines dig into their marketing programs, also known as loyalty programs to change that. When travel is advisable again, miles will be more useful than in recent years and your ability to use them will be easier than ever.
Airlines are already opening the floodgates on once mythical seats using points, and big bonuses are out there for earning elite status and miles to tempt people back. That trend will only continue when the world knows more about a concrete end date to current woes, and when borders will open once again.
Already now there are great opportunities for travel in 2021, and having lots of points which can be converted to lots of other different types of points will put you on the best footing to take advantage of all the great offers, when they land. And yes, they will land eventually.
I need to cancel my Citi Prestige card, before the annual fee of $495 is due. The fee is no longer worth it, especially since I have no intention to travel for at least the remainder of 2020.
The trouble is, once you cancel/downgrade a Citi card all TY points that were earned via that specific card now have an expiration date (30 or 60 days) form the date of the downgrade/cancellation. In my case, 165k TY points are at stake here.
There is no redemption currently available that I want to use the points for, but I also do not want to lose the points. I do not want to exchange points for gift cards.
Which airline should I xfer the points to? My original intention was to transfer to VS for an ANA redemption. But VS in the same dire straits as all the other airlines – perhaps more so.
I can’t see spending $495 for another annual fee just to maintain these points.
Great write up!
I am reading that we are going into a deep recession, even after the virus.
If this holds water and the banks get into trouble (a deeper stock market crash), would programs from Amx, Citi, Chase, BofA, etc be in trouble? For instance, a reduction in miles transfer ratio to be lower than today (i.e. Amx to Delta change to 1:0.75)?
Also, do you think that the Amx Schwab Plat to cash out @ 1.25 is in jeopardy?
If you downgrade to a TYP-earning card (eg TY Preferred or the no-fee AT&T card) no expiration clock starts for your points. You would just need to upgrade or transfer the points to someone with a premium card in order to transfer to airline partners.
I have over one million miles with Virgin Atlantic. I just retired at 66 and thought these could help me travel now that I have a reduced income. But news the other day that Virgin Atlantic may need a Government bailout sent me into a deep depression. I don’t know how I’ll react if those miles just vanish.
If it’s any consolation, I’ve got about half a million with Virgin. I feel safe with them 🤞.
And how about miles that expire, like Singapore with extremely limited extension opportunities ? Any thoughts?
Singapore has (thus far) failed to address this in other loyalty extension offers. Hoping that changes.
These are dark days whens cash is king and airline points are risky. I’m no Nostradamus, but I predict at least one virgin must be sacrificed before this plague is over, a bird twice fallen from the sky may not rise again, and a smaller state will take over a larger one. The times are very uneasy, the spirit seems broken and there may be no silver lining in the clouds.
I agree that airline and hotel loyalty programs are very valuable for the data they provide and the stickiness of the consumers to that brand. Also I doubt any program for large airlines (as you stated) large hotel groups (Hilton, Marriott, Hyatt, IHG) and casinos (Caesars, MGM) are at risk regardless of any bankruptcy filing keep in mind:
– Even these programs could void or materially change a program in bankruptcy. There is nothing sacred about them. There is value to the ongoing business entity in maintaining them but they could be shut down in Chapter 11 just like leases, pensions, etc.
– Smaller companies are very much at risk (in US Frontier, Spirit, smaller hotel chains, etc.). Many likely won’t survive. If there is value to their program it would likely be “bought” by a larger company to attract those customers but no guarantees. There are examples of programs just going away.
– Frankly (and I have millions of air miles, approaching a million hotel points and hundreds of thousands Membership Rewards/Chase Ultimate points) whether your frequent traveler plan survives should be very low on your priority list! Even 1 million air miles is only valued at around $13,000-$14,000 and there are much bigger issues in practically all our lives than that. I’m retired so mine is seeing my stock portfolio drop over $100,000 a day but I’m lucky not to still be working. I’m estimating over half of workers in the US will be laid off, have hours reduced, be furloughed or forced to take a salary reduction. That is reality before this is over so your miles shouldn’t occupy any of your time right now.
I had my son a ANA FC ticket using 110k Virgin Atlantic miles in June. Due to the virus his friends aren’t going and we’ve tried multiple times to redeposit the miles in my VA account no one will answer!
What about the people who’s jobs which could be and have been lost in the airline industry? Much bigger things to be worrying about.
I have like 10000 comments and messages about how I hope no one loses work, but that’s not the topic in question. Discussing one doesn’t exclude you from caring about the other.
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