[Video] What happens to Frequent Flier miles if the airline goes bankrupt?

[AggieMike88]

Interesting new piece that answered some of my “how it works” questions and the title question.

And I wasn’t aware FF miles were such a profit center

 

[NoHeat]

A well done video.

But regarding “profit center,” no, when airlines sell miles to banks, that will generally not add to net profit.

Instead, the transaction will just create an asset (cash) and an offsetting liability, in the same way that taking out a loan does.

The miles are a liability, because the airline expects in the future deliver something of value (tickets, etc) to the holders of those miles.

The liability is valued at its ‘fair value’. If airlines sell miles to banks at that value, then the airline’s profit from the transaction will be zilch.

Worse, if (as the video says they are now doing to raise cash) the airline sells miles more cheaply, their net profit will be negative for the transaction.

 

[Let'sgoflying!]

hell, what happens to my ticket if the airline (Norwegian) goes down the tubes??

(or, if I have to cancel because upon arrival I am required to quarantine at destination for 2 weeks...its not like they cancelled so no refund "Enjoy your stay, staring at the four walls of your hotel room, within our scenic country which you won't be able to see lol"

 

[unsafervguy]

bottom line, its up to the bankruptcy judge.

 

[Ravioli]

Frequent Flyer miles are much like Gift Cards. The expected value needs to be kept on the books as a continuing liability. Neither are ever considered top of the BK judges payouts because there are a huge amount of low value claims to made.

In the case of the Frequent Flyer programs, they are almost always described as "for the life of the program" and the BK puts them to death. It's a bummer.

What I'm curious about, as a multi-million mile American AAdvantage member, is if the airlines will give 2019 status to everyone despite 2020 being a dismal flying year. That would be HUGE for many of us.

 

[nauga]

What I'm curious about, as a multi-million mile American AAdvantage member, is if the airlines will give 2019 status to everyone despite 2020 being a dismal flying year. That would be HUGE for many of us.

Can't speak to AA but ANZ already has.

Nauga,
the barbarian at the gate

 

[Ravioli]

Thanks @nauga - Based on your info I looked it up:

FORT WORTH, Texas — American Airlines is recognizing the loyalty of AAdvantage® members by extending their elite status amid reduced travel related to the coronavirus (COVID-19). Changes include:

• Extending elite status for AAdvantage members until Jan. 31, 2022.
• Reducing elite status qualifications for 2020.
• Extending Admirals Club® memberships purchased from American for 6 months.*
• Introducing up to $400 special credits for future travel on American Airlines Vacations packages for elite members.**
• Every dollar spent on an eligible AAdvantage co-branded credit card through the end of 2020 will count for one mile toward Million Miler℠ status.
• Award reinstatement fees waived for travel through September 2020.

 

[bflynn]

If the airline goes bankrupt...

buh-bye.

 

[Seanaldinho]

Thanks @nauga - Based on your info I looked it up:

FORT WORTH, Texas — American Airlines is recognizing the loyalty of AAdvantage® members by extending their elite status amid reduced travel related to the coronavirus (COVID-19). Changes include:

• Extending elite status for AAdvantage members until Jan. 31, 2022.
• Reducing elite status qualifications for 2020.
• Extending Admirals Club® memberships purchased from American for 6 months.*
• Introducing up to $400 special credits for future travel on American Airlines Vacations packages for elite members.**
• Every dollar spent on an eligible AAdvantage co-branded credit card through the end of 2020 will count for one mile toward Million Miler℠ status.
• Award reinstatement fees waived for travel through September 2020.

Delta and United have done similar. I think Marriott did something also but foggy on that one. I am normally on the road at least 2 weeks out of a month and expected this year to be even worse, but not to be. Very good of the airlines to extend loyalty perks.

 

[frfly172]

The airline might go bankrupt ,but the bank behind the program won’t. The question then becomes how does the bank make it right.