The aviation industry suffered significant damage during the COVID-19 pandemic. The pandemic caused a collapse in demand for domestic and international travel, leading to flight cancellations and grounding of aircraft.
How do frequent flyer miles work?
Airlines offer frequent flyer miles as a means of cultivating loyalty among their customers. Initially, travelers could earn frequent flyer miles for a specific airline just by booking flights.
Now, however, consumers have many opportunities to earn those miles. This can vary by airline, including using co-branded credit cards, spending with airline partners, shopping online through designated portals, and making everyday purchases.
Once you’ve earned enough frequent flyer miles, you can use them to book award tickets with the airline, upgrade to a higher class seat, or redeem them through other redemption options within the loyalty program.
Airline Challenges During the COVID-19 Pandemic
Airlines have been hit hard during the COVID-19 pandemic. According to OAG, a travel data provider, scheduled flights in the U.S. decreased by only 0.4% from the previous year in March 2020, then by 57.8% in April 2020, and by 72.6% in May 2020. By April 2021, flights had increased but were still 43% lower than in April 2019.
Despite some recovery from the early pandemic, 2021 was a tough year for the aviation industry. The recovery of air travel during the busy annual travel season at the end of 2021 was hindered by the spread of the Omicron variant.
To assist airlines and maintain the workforce in the industry, Congress included another round of $15 billion in stimulus and relief for airline employees and contractors in the American Rescue Plan Act of 2021.
What happens to my miles if the airline goes bankrupt?
First, it’s important to note the difference between bankruptcy and a total shutdown of the company. Some well-known airlines have filed for bankruptcy in the past twenty years, including American Airlines, Delta, and United, and have continued to operate.
What happens to frequent flyer miles in the event of an airline’s bankruptcy depends on the outcomes of the legal proceedings. For example, if the company enters a debt restructuring plan and continues to operate, your loyalty miles are likely to remain secure.
However, if the company completely ceases operations, you may lose your miles and all the value that comes with them.
The value of most airline miles can change over time depending on fluctuations in the cost of base airfare with market changes. Companies may also reset the value of their miles at any time. Thus, while the airline and its loyalty program may survive bankruptcy, the value of your miles could be diminished in the process.
Ways to redeem your loyalty miles now
Even if an airline goes bankrupt, the company and its loyalty program may continue to operate and provide value to customers. However, if you’re worried about the worst-case scenario — or even just a decrease in your miles’ value — and wish to use your miles while you still can, you can redeem them for other benefits. Depending on the company, you may have other redemption options, such as:
- Booking another trip
- Booking local experiences
- Buying merchandise
- Purchasing gift cards
- Requesting magazine subscriptions
Before making a redemption, carefully consider how likely it is the company will cease operations. If it doesn’t, you could end up leaving money on the table by using your rewards to redeem for lower-cost non-award flights. This is because the best value for airline miles is when they are redeemed for booking award flights.
Conclusion
If
I was worried about my miles as the pandemic continues to reduce travel demand, so stay informed about news from your favorite airline. At the same time, check your program for details about other redemption options or transfer possibilities. If there is a chance of a devaluation of your miles or worse, you’ll be ready to act.
Consider putting your co-branded travel card aside and switching to a general travel rewards card linked to Chase Ultimate Rewards, American Express Membership Rewards, or Citi ThankYou Rewards. These cards allow you to use your points for a variety of travel purchases, not just airline tickets. Some even allow you to transfer points to airline loyalty programs, so when things settle down, you can move the points you’ve earned back to your favorite airline’s loyalty program – as long as the company is still operating.
Source: https://www.thebalancemoney.com/airline-bankruptcy-and-frequent-flyer-miles-5093611
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