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What do airlines and banks have in common? Answer: They are likely to go bust overnight.    What are the airline equivalents of Lehman Bros. and Goldman Sachs?   Will governments bail out failing carriers in a similar way?    If not, what can I do if I have booked a ticket with an airline that collapses?

The prospect of airline failure looms large for many travelers. High  fuel costs and the credit crunch have already seen more than 20 airlines go bust this year. (Alitalia’s future had looked doubtful until a last-minute agreement appears to have rescued it from bankruptcy.) And, in the early hours of September 12, XL Leisure Group, the third largest UK tour operator collapsed, leaving 90,000 customers people stranded abroad, and 23,000 holding advance bookings.

XL customers who had booked a package holiday  (flight  plus accommodation) were protected under Britain’s Air Travel Organizers’ Licensing scheme for tour operators, which is overseen by the Civil Aviation Authority;  those abroad were repatriated;  those  who had not yet traveled got their money back.

But people who had simply bought tickets direct with XL Airways were not covered by ATOL, or an alternative bonded scheme, and had to pay their own way home.

Whether or not you can get reimbursement from an airline which has gone bust depends on where you buy your ticket, how  you pay for it – and the small print of your travel insurance. Trip cancellation terms of most travel insurance policies do not cover scheduled airline failure.

Credit cards offer the best protection, whether you pay for tickets direct with the airline, or through a travel agent.   Should the airline be grounded, you can claim the money back from the card company, or bank, if you were due to travel.  If you are left stranded abroad, the card company should refund the cost of the flight home.

Debit and charge card transactions are not protected in the  same way, and you are most likely to lose your money; although  Visa debit card holders are covered by a ‘chargeback’ procedure  on the basis that goods or services have not been delivered, or are not as they were described.   According to Visa Europe, in such cases the chargeback rules allow its card issuing banks to recover money paid on all Visa debit and credit cards from the retailer’s bank.    Visa chargeback claims must be made within 120 days of the purchase or from the date the goods or services were due to be delivered.  

If you book flights through a travel agency, whether online or terrestrial, make sure that it is a member of the International Air Transport Association (400 airlines and 6,000 travel agents around the world) and participates in its ‘billing and settlement plan’ –  through which agents remit money from ticket sales to airlines. The BSP facilitates the cash flow between passengers, agents and airlines, and processing refunds.

‘When Alitalia appointed an administrator, we, according to the rules of the system, secured a deposit allowing the airline to continue participation in the BSP,’ says Lorne Riley at IATA in Geneva. ‘This minimizes the risk to participants, the airlines, the travel agents, and by extension their customers.’

So is it better to buy tickets through a travel agent  rather than an airline?  ‘You could make that speculation,’ Riley says. ‘I wouldn’t.’

Some travel agents now offer ‘Scheduled Airline Failure Insurance,’ either free of charge or for about $10 for a business class round-trip flight.   Two big providers of SAFI are brokers Marcus Hearn in London (www.scheduledairlinefailure.co.uk), who sell only to agents; and International Passenger Protection, a company that offers insurance directly to travelers through its Web site – www.protectmyholiday.com.

The long-haul travel specialists Trailfinders.com in London, guarantees ‘that clients will not lose any money paid to us for travel in the event of a collapse of an airline, tour operator, or any other provider.’

‘This pledge has been honored since our foundation over 38 years ago,’ says Nikki Davies, PR & marketing manager of Trailfinders in London. ‘It makes no difference at all how they pay; we put client’s money into a trust fund; if an airline goes bust, we’ll give them a full refund, or sort them out on the next best alternative, whichever they prefer.   They will not lose any money.’

Monica Beaupre, a manager for public affairs at American Express in New York, says, ‘The best travel companion you can take along is travel insurance. We offer a wide variety of travel insurance benefits here in the U.S.  Global Travel Shield is for card members and non members; Travel Assure is a package of protection just for card members.’

Both policies provide cover ‘if a covered trip is cancelled or interrupted due to… financial default or bankruptcy of a tour operator, hotel, resort, rental car company, other travel supplier or Common Carrier Conveyance.’

I would argue that this covered ‘scheduled airline failure;’ But if I were buying the policy, I would like it to be spelled out, in a ‘what if?’ scenario.

The devil, after all, is in the small print.

A small glitch as glitches go: Stuck in the departure lounge at Gatwick Airport for a frustrating 40 minutes waiting to board our Easyjet flight while the air bridge to the door of the plane was repaired. EasyJet apologized for the delay; but it was the airport’s fault. Had we missed our take-off slot, no doubt we would have blamed the airline.

When things go wrong at airports, everybody is quick to blame everybody else. Airlines blame airport authorities or air traffic congestion, along with civil aviation policy; airport management blames customs, immigration, and security staff, over whom they have little or no control; travelers are as likely to blame an airline as an airport, or both, or everyone in range, when things go awry.

Jean-Claude Baumgarten, president of the World Travel & Tourism Council, said, ‘Airlines would love to be able to control the whole customer experience but they can’t. Whoever runs the airport has the responsibility but not the overall control. That is the problem that needs thinking about.’

This sentiment is echoed by James Cherry, president and CEO of Montreal-Trudeau International Airport, which is at the forefront of self-service technology, such as check-in kiosks, self-boarding gates, fast-track options for pre-screened travelers, self-tagging of baggage, and mobile-phone check-in.

‘The real frustration, the real challenge we have is trying to serve our customers without having complete control and influence over all aspects of service,’ Cherry says.

‘Check-in, for example. We give airlines all the facilities they need, but sometimes they don’t staff the counters properly, and people have to wait in line; the same thing with customs. We have a very large customs hall with 26 posts, but sometimes they are only half staffed, although they know the schedules, arrival patterns, what loads are coming. If they don’t meet the staffing, the airport looks bad. I’ve been blamed for things you wouldn’t imagine. You have to count on the support of other people. We get crucified sometimes because waiting time in customs is 45 minutes, when our target is 20 minutes at peak time.’

Montreal-Trudeau’s fast-track program called NEXUS, based upon iris and fingerprint recognition, allows pre-approved Canadian residents or citizens, and U.S. citizens, to clear customs and immigration in about 30 seconds, if they just have hand baggage.

‘Fast-track programs are seen in other parts of the world,’ Cherry says. ‘Business passengers can check in on their PDAs, like Blackberries, and get their boarding passes; so we’re quite innovative in things like that. We had long lines at security like everybody else, but we’ve dedicated ample space to search points, and lines actually quite manageable. We focus not on the average wait time, but on wait times at peak periods. Some government agencies confound the issue by saying, our average wait time is very good. But it doesn’t matter how long it takes to go through at 10 in the morning; what matters is the time you go through at the rush hour.’

Cherry interviews 1,800 customers every quarter, tracking their impressions of the airport, and how well they think it is doing, based on 75 variables that they believe are important.

‘And we are doing better all the time,’ Cherry says.’ The most important things are security, a sense of safety; signs and communications have to be clear, which way to walk; the availability and presence of staff; people being treated with respect; and fluidity of movement through the airport. And that’s a big deal when you think about having to park your car, bringing your bags in to the counter agent; going to different check-points; there’s a lot of ways where the system can go off the rails. It’s not one single thing; it’s a combination of things.

Cherry is active in the Airports Council International, a trade organization that he says is focusing increasingly on customer service - giving awards to airports that do a good job. He has been ‘impressed and inspired by things I’ve seen in other airports,’ such as Vancouver; Copenhagen; Munich (’terrific);’ Zurich (’reasonably good in serving the customers’); Kuala Lumpur; Inchon in Korea (’these guys are going out of their way to improve services, the customer experience’).

Unlike some airports, where shareholders’ profit motive interest is arguably inimical to the public interest in what is often a local monopoly, Montreal-Trudeau Airport is an unusual form of ‘privately-held not-for-profit organization.’ It is run by a board of 15 directors, which comprise representatives from the Federal and Quebec governments, and local municipalities, and business people.

‘The Canadian model, when we were privatized in 1992, was to lease the airport to not-for-profit organizations,’ Cherry says. ‘We are independent financially, pay rent to the government and make our own investments; any surplus has to be reinvested in the airport itself - there are no shareholders to benefit.’

‘If we wanted to have best customer service in the world, we’d have to pour more money in,’ Cherry adds. ‘But if we wanted to have the best financial result, the easiest way would be to cut back on customer service. We are constantly trying to find the optimum balance between making enough money to make ends meet, and reinvest, and making it a good deal for the airlines that operate here; maximizing the quality of service, and being very respectful of the environment. I believe that being not-for-profit gives us that balance. We can’t let one or the other of those get out of whack, while letting the others suffer.’

It’s been said change is good. But for a growing number of frequent flyers, change feels more like broken promises. In a age when it is assumed that frequent flyer programs run the airlines, it might come as a surprise that airlines still run their businesses based on profit and loss and the ever-changing level of competition. This creates the need to drop routes that don’t perform, add restrictions to products that out perform to protect revenue, and re-price a product when it’s priced below market value. Sound familiar? It should, if you’re the typical frequent flyer who is involved in the same type of decision making in your own company. Certainly the difficult times that airlines in particular have faced going back to 2000 might be factored in to accepting these changes, but it’s becoming more and more difficult to understand the reasoning of some changes in light of missteps by programs themselves. In an industry that built its legacy on the word “loyalty,” it’s becoming easy to point out where this term is being redefined.

It’s been said that the only thing wrong with frequent flyer programs is that they are now considered a “God-given right.” And every time an airline even contemplates a change to a program, they’ll hear from those travelers who feel the rules and conditions are sacred. At some point nearly every program has implemented changes that caused dismay among their members. We have gathered some examples of these changes-changes that were made primarily for the good of business, but at the expense of customer loyalty, leaving a growing number of our readers asking, “Whatever happened to rewarding me for my loyalty?”

When frequent flyer programs began, awards had no capacity controls, no blackout dates and the miles in your account did expire. Over time, the airlines realized that they had to make changes to deal with all the miles building up toward free flights. It was openly a matter of time before an airline took the chance and changed the rules. In 1988, United Airlines was the first airline to introduce expiring miles. The changes that took effect on July 1, 1989, introduced miles that expired three years after accrual. Saver Awards were introduced with a domestic coach ticket being offered for 20,000 miles instead of 35,000 miles, but with blackout dates and capacity controls. Premium awards were also introduced for 40,000 miles (thus the term “double miles”). Another change introduced was the ability of members to transfer their awards to anyone they chose instead of only to family members. All of these features are now considered basic elements of frequent flyer programs. Looking back, there was a sense that programs tried very hard to balance these changes. While introducing expiring miles, they also offered reduced awards, albeit with restrictions. That seems fair. And that premise still exists today to some degree with changes recently announced by Southwest Airlines Rapid Rewards. While introducing some sort of controls on the redemption of their awards starting in 2006, they balanced that change with doubling the life of the existing credits being earned from 12 to 24 months.

But we must be clear that members of such programs often have short memories. For instance, when members complain that they can’t ever use their miles at a 25,000-mile award level, they aren’t factoring in the balance they got years ago when these awards became available for the first time. Would we not all choose to have the opportunity to redeem at 25,000 miles and risk staying active over a three-year period rather than have totally unexpiring miles and awards still at 35,000 miles?

Longtime readers might remember that ten years ago, the last major domestic coach award changes went into effect. American, Continental, Northwest and United changed the cost of their domestic awards from 20,000 to 25,000 miles, and Alaska Airlines went from 15,000 to 20,000 miles for a domestic ticket.

Members definitely were not happy with the new award redemption levels — especially if they had 19,999 miles in an account. But life goes on, and travelers have adjusted. Considering that programs had been around for 14 years and had raised the cost by 5,000 miles one time, the rate of inflation was low. Furthermore, if you take into account the vast increase in ways to earn miles other that flying, the 5,000-mile increase was reasonable.

Broken promises don’t always mean bad news for frequent flyers. There have been many examples when programs have offered additional value, assuming broken promises at the time. For instance, in 1995 when most programs were raising redemption levels, members of the Delta SkyMiles (then Frequent Flyer) program experienced the reverse. The award redemption for domestic flights was 30,000 miles and was lowered, not raised, to 25,000 miles. In changing these rules, it wasn’t considered a broken promise at all, but more like customer loyalty. Should Delta have said that miles earned before the change would have to be redeemed by the old rules? Delta could have, because miles earned to that date were “promised” as 30,000-mile domestic awards. But they decided not to take the risk. This type of reverse broken promise is prevalent today with American and United, from whose programs members can now redeem regional awards under 750 miles for only 15,000 miles. These are miles that had been earned with the understanding that the lowest award level was 25,000 miles.

In recent times, programs have not been so generous in balancing the changes, thus raising the suspicion that promises are being broken. Take for instance, three years ago, when all major programs set about repricing their upgrades. Not stopping at raising the prices for upgrades in some cases by over 100 percent, they also raised the number of miles required for cashing in miles as upgrades. The reasoning was that because fares were being lowered, these adjustments were necessary. Fares at the time were not and have not been lowered by 50 percent, which would have balanced the raising of prices by 100 percent. As well, programs raised the number of miles required for many of their international business and first class awards, hoping obviously to keep them available for sale demand even in a market that may face discounting when low-fare carriers begin competing in these markets as well. None of these changes were balanced for the good of their members.

Hotel programs are not immune from this suspicion either. When Marriott and Hilton a few years ago revamped their award charts, members felt cheated. At InsideFlyer, we understood that in many cases, members had enjoyed awards to Hawaii destinations are real bargains for years. Do we want changes yearly for inflation purposes or changes in bigger lumps spread apart? We’ll never know, because we all want something different. What we do want is the feeling that we can believe the loyalty programs we belong to. No matter what.

At the end of the day, there will continue to be a large number of members in all programs that will feel that promises have been broken. We will be among that group on certain changes. But having said that, the following is the best advice we can offer to all our readers: Accept the changes in the long run, this is the final solution. If you are getting some benefit from the program, stay with it and hope that the perks will out-weigh the changes you don’t like. Be reasonable. There are very few businesses that haven’t had to adjust their product form time to time. And be grateful for what you have. As members of Midway Airlines, Legend Airlines, National Airlines, Braniff and even internationally with the Ansett know, there can be times when your program can go bankrupt and the airline, program and the miles disappeared.

Who gets the miles?

No one goes into a marriage intending to divorce, and certainly no one likes to think about dying, but we are, after all, heir a thousand natural heartaches, and a little planning and awareness can certainly ease that pain.

Death
Nearly all of the major North American programs offer some means of transferring or using the miles of the departed. But as you might expect, those means vary significantly. Fees, documentation, even requirements as to whether or not the miles were specifically referenced in a will — vary by airline.

Despite the variations in methods, though, there are almost always ways to get the transfer done, and in most cases, survivors have been pleased by the airlines’ efforts.

Take the case of Arlene Harris of New York City, who was widowed in February of last year.

She and her husband both had accounts with a number of airlines — America West, American, British Airways and Delta. Her husband had a considerable sum of miles built up — somewhere in the neighborhood of 200,000.

When the time came, she got to work, calling each of the airlines and requesting the transfer.

“American charged $50, but there was no problem — they were just great,” she said. “And Delta was fine, Delta was just great — they really were.”

Few programs in the U.S. allow mileage pooling — that is, the ability for two members to effectively share their accounts. British Airways does, which makes things much easier for survivors. “With British we had a family account, and I just notified them that he had passed away, and just converted the account to my name,” said Arlene.

Interestingly, the only snag she found was with America West. In that case, though the bulk of her husband’s miles were transferred without question, a small percentage — 2,500 miles, to be exact — were never transferred. The airline said those miles came from her husband’s successful application for an affinity credit card, and refused to hand them over.

What was frustrating, Arlene says, was that those miles had been earned years previously, and her husband had more than made up for them in award spending.

The airline wouldn’t budge, however.

“I’m a terrible spendthrift, but I hate feeling ripped off,” she said. “I know it’s just 2,500 miles, but I thought it was tacky.”

Other consumers, while generally pleased with the results of their transfer efforts, have started to run into another obstacle: processing fees.

Not all airlines require a fee, and many will waive it under the right circumstances, but the $50-plus fees charged by some programs are simply too high for some members.

Carolyn Voegtlin of Chicago is facing the fee quandary now. She’s in the process of transferring her deceased father’s United Mileage Plus miles into her mother’s account. With Mileage Plus, that transfer requires $75.

“I am paying the fee but protesting,” she says. “They should take into consideration that she is an 82-year-old widow on a fixed income and that $75 is too high in her circumstances.”

In Carolyn’s case, her father’s account has about 25,000 miles — not a mileage fortune, to be sure, but enough for a free domestic ticket. With larger accounts — accounts that hold hundreds of thousands, if not millions of miles — a double-digit fee might seem more reasonable.

Fees aside, there are a few steps individuals can take to smooth out the transfer process.

First and foremost, accurate and accessible record keeping is a must. Arlene Harris understands the importance of detail, particularly after her own experience. “I’m very cautious. I want my kids to have those miles, so I keep very clear records.”

When planning their estates, members should indeed list their miles in a will, and specify how they would like them to be dispersed.

Also, it is probably best to name just one beneficiary. When programs allow the transfer of miles or points, they may well be bending their own rules. It’s easier, and the chances for success are much higher, if there is only one party to whom the transfer can be made.

In some cases, in fact, the difference between a single beneficiary and multiple beneficiaries can mean the difference between keeping miles active and being forced to cash them out.

According to United, for example, “If there are multiple beneficiaries, the mileage will be transferred into the account of the executor or personal representative of the estate, and they will assume responsibility for ordering award certificates for the beneficiaries.”

Not surprisingly, because of all the complications and fees involved in the transfer of miles upon death, many simply assume the role of the deceased for the purpose of cashing in awards. Often a survivor will have access to the deceased’s frequent flyer number and pin and will just use the remaining miles to issue tickets in whatever name they see fit. This is a popular method used to bequeath awards to charitable organizations.

This is, of course, against the rules. All airlines make a specific point in their terms and conditions that accounts belong solely to an individual, and that any attempt to “infiltrate” that member’s account by another party is taboo.

The obvious response is “How are they going to catch me?”

They may not. We are not aware of any cases in which an “identity-assumer” has been nabbed.

But the fact remains that this approach runs contrary to the spirit of the programs, and since there are “lawful” means of transferring these miles, the risks involved may not be worth it.

It would be unfortunate to compound the loss of a loved one with the loss of his or her miles.

Divorce
As with death, divorce laws vary considerably by state. There is no single rule of thumb regarding the disposition of miles.

As a general rule, any interest that may be considered “property” is subject to division, and therein lies the rub: Are frequent flyer miles property?

As of yet, no court has been willing to make that declaration outright. Two cases on record, one in Colorado and one in Florida, have treated miles as a marital asset without specifically declaring them property. In two other cases, one in New Mexico and one in Tennessee, the courts have divided miles between parties, a division that was not questioned on appeal.

Yet in Washington, in 1999, an appellate court specifically declared miles to be separate property, thus avoiding the division question entirely.

One of the keys to determining whether something constitutes property is the concept of transferability. Rarely will a property interest be found if the owner cannot transfer an asset to another.

In some cases, the courts have left it at that: Since, under the rules of most programs, transfers are not allowed, no property interest exists. A few clever attorneys, however, have suggested that miles are indeed transferable, regardless of what the rules say. There is, after all, an active black market in mile brokerage, with a number of Web sites devoted to that purpose.

“A lively market for the sale, exchange and barter of (miles) has existed for a number of years,” explains attorney Barry Roberts. “(Members) consider their mileage credits to be an asset that can be sold, bartered or exchanged in a free market just like any other asset.”

The drawback to this argument is that a black market does not necessarily constitute an “open” market. A court would probably be reluctant to attach a value to a commodity — in this case, miles — when the only means of determining that value is illegitimate.

Nevertheless, a divorcing spouse can try to make the case. If a valid third-party estimate of the value of miles can be attained, it’s likely the court would consider a division.

The problem is that establishing a value is tricky at best. Three cases, one in Florida and two in Virginia, simply rejected a monetary award in lieu of miles because no evidence of value had been presented. Legal experts suggest that that evidence is unlikely to arise anytime soon. Brett R. Turner, the author of numerous articles on the subject, says, “It is probably not possible to value frequent flyer miles with sufficient accuracy to permit an offsetting award.”

Some courts have indeed placed a value on miles, using the familiar “two-cent” rule (the cost of a domestic ticket — $500, divided by the number of miles required to earn that ticket — 25,000).

Of course, that assumes that the “two-cent” valuation is valid. As most frequent flyers know, however, it’s not always the best way to estimate value. Two individuals, given the same number of miles in the same program, can come up with a variety of award options, some of which are clearly more valuable than others. Value is entirely subjective.

In the absence of any clear, fair way to value frequent flyer miles, some have suggested the only equitable means of division is to simply split the miles. But, the program itself may not be willing to play along. In the absence of a court order, not every program will simply set up a new account. Take these unambiguous words from the Hilton HHonors terms and conditions: “Accrued points do not constitute the property of the member, and are not transferable in the event of death, divorce or operation of law.”

In that case, the division needs to be done “indirectly” — that is, strictly between the parties. Under a written agreement, the mileage owner will, over time, dole out awards in the other party’s name.

In the case of a hostile divorce, such a division is unlikely. In a more amicable situation, however, and with the help of good record keeping, such splits have been and continue to be made.

Solutions are really only as limited as the willingness of the parties.

Consider the case of Bob Schutzenbach of East Northpoint, N.Y.

Prior to his divorce, Bob had participated in the now-famous Latin Pass million-mile mileage run. Not surprisingly, then, his abundant bank of miles and points came up during his divorce. Faced with valuation difficulties, both sides came up with a novel plan.

“What we finally settled on, and this is actually in the written agreement, is that I had to give her enough points for a week in the Caribbean with Hilton,” said Bob.

“Hilton required a copy of the divorce agreement, then split the points into two accounts, and transferred the miles over. They were very efficient; they just assigned a new account number. It was really a piece of cake.”

The amicability of Bob’s divorce may not have been the norm, but the creative use of his points has helped maintain a civil post-marital relationship. Since the split, he has voluntarily used his mileage bank to send his “ex” and their children on vacations.

“Let’s face it,” he says, “you can buy some good will. It’s basically free, and can benefit the kids anyway, and it’s certainly a good way to negotiate — ‘You know what? I’ll throw in a couple weeks wherever you want to go.’”

Other Considerations
All this talk of “assets,” “rights,” and “valuation” begs the question: “Whose miles are they, anyway?”

The fact is that, though members often feel like their miles are individual property, the programs’ terms and conditions are quite clear: the miles are an intangible currency that belongs solely to the program.

Of course, a good case can be made that a property right does exist — witness the case of a few Delta flyers whose miles were confiscated by the program for violations of program rules. Their attorney is quite specifically calling those miles a property right, and it doesn’t hurt his case that in cases of death and divorce, the airlines treat them as such.

But there’s danger here.

As it stands, the Internal Revenue Service has said it has no interest in pursuing the taxation of miles at this time. If, however, the courts begin to create clear rules about the valuation of miles, it is not unforeseeable that this newfound property would be taxed.

Furthermore, when an airline offers to transfer miles in the case of death or divorce, they are, in essence, doing their customer a favor. If push comes to shove, it’s plausible that they could alter their rules to keep their liability low.

Which in turn illustrates the most important point of all (and one veteran flyers know all to well): You can catch more flies with honey than with vinegar.

Your approach, and your value to the program, can make all the difference. Airlines and hotels have rules, and when cornered, will happily roll out all the fine print you could ever want. “Policies,” on the other hand, tend to be a little more flexible.

Witness Bob Schutzenbach and Hilton. Though Hilton’s rules make it abundantly clear that miles will not be transferred in the event of a divorce, Bob — a longtime, active member of HHonors — found a way.

Flexibility comes with a price. If you’re a valuable customer, and your approach is civil and friendly, you just might be surprised at how flexible these programs can be.

The Legal Fine Print
(Special thanks to longtime reader Morty Herman for the following contribution)

Some elect to include a codicil (an addendum) to an existing last will and testament, though this often requires the assistance of an attorney. An easier solution might be to include this sample paragraph along with your will or, if no will is intended, this paragraph could be used if it is signed, dated and witnessed and kept with your personal papers:

“Upon my death I leave all my airline and hotel frequent flyer miles and/or points in my accounts to my (relationship), (name).”

The use of this paragraph will leave no question as to your wishes for your miles and points. But as you’ll note below, many of the airlines don’t really require mention of miles and points in your will. While these same programs are constantly changing their rules with regard to leaving miles to heirs and beneficiaries, the following rules from select programs will give you an idea what to expect (though it’s always wise to check their current rules).

American AAdvantage: Mileage does not need to be specified in the will but American does require a copy of the pages, which identify the decedent’s name, the executor’s or personal representative’s name, and a page showing the date of execution and signature of the maker. If the AAdvantage account is specifically mentioned, a copy of that page must be included as well. If the AAdvantage account has less than 10,000 miles, only proof of death is required; if more than 10,000 miles — a transfer fee of $50 will be charged.

Continental OnePass: Transfer to a surviving spouse or a named beneficiary may be done provided the inheritor is also a OnePass program member at the time of the account member’s death. The account does not need to be mentioned in the will, but Continental does require a copy of the death certificate and a testimentary letter appointing the executor who authorizes the transfer of miles to the inheriting member. Continental charges no fee for the transfer.

Delta SkyMiles: Mileage does not need to be specified in the will but Delta does require a copy of the will if the beneficiary is not the spouse. If there is more than one heir, and the account is not specifically assigned to any one heir, a letter from all the heirs is needed to assign the account to any one of them. Delta charges no fee for the transfer.

I recently got in my mileage mobile (aka the airplane) and went off to Washington DC to spend the day at the DOT. My interest? Your interest. Since most of the frequent flyers I know are more likely to tell me they are having a growing problem with redeeming their miles, the DOT has announced in the last few months an initiative to examine certain issues of frequent flyer programs, free seat availability being the key interest.

In 1981, American Airlines had a good idea. They knew that the consumer was facing choices of airlines in a deregulated industry. It was clear that the passenger would appreciate a wider range of prices for flying than the meager selection available. American also knew that they had a few empty seats each day and if they could persuade the customer to exchange loyalty for the ability to use some of these empty seats, then everyone would win.

But it is no longer 1981, and if we were to examine the intent of a letter mailed to 59 airline chief executives last December, the Department of Transportation is currently receiving consumer complaints about air services in substantial numbers. One subject that is growing among the fastest is the air travelers ability to cash in on the miles they so feverously have garnered over the years.

Currently, the Department’s deceptive practices prohibitions preclude airlines from imposing unreasonable capacity controls and/or unannounced blackout dates for the use of frequent flyer awards. To the extent airlines offer their frequent flyer awards for service to destinations, that traditionally are subject to high consumer demand, they must include in their promotional materials adequate disclosure that seats are limited-at times severely-and may not be available on every flight, if in fact that is the case.

I should say up front that I don’t think that the DOT actions are a do-or-die play for frequent flyer programs, but I do think that the actions of our government are a welcome addition to the very concern of the air traveler and with the proper actions of the DOT, provide guidelines the industry needs to stay out of court on a state level. The thing that I find so interesting is that the DOT is now stepping in at the same time that the Supreme Court has found that many of these matters are a state concern, witness the Wolens vs. American Airlines case.

That’s why I find DOT’s so-far timid approach to capacity control so maddening. Let’s assume for a moment that you’re not one of those frequent flyers who is likely to plan a free award trip to Albany, NY next winter. What does DOT’s actions mean to you?

Nothing.

By limiting the scope of their interest to unreasonable capacity controls that can be addressed by “adequate disclosure that seats are limited-at times severely- and may not be available on every flight,” the DOT has removed any chance these changes will effect the consumer. This means members won’t get more choice of free seats or, most importantly, more leverage on other changes.
The airlines could provide the necessary verbiage to disclaim the ability of the consumer to use their awards. But let’s be fair. All major airlines do provide the ability of all members of frequent flyer programs to use a free award if any seat is available, and that is why I think the actions and interest of the DOT can and will be limited. These “any time” awards while costing the consumer more miles, do get around the problem that most of us might be willing to whine about…I can’t get there from here…for free.

The DOT has said that they intend to continue meeting with the major airlines about the growing number of customer complaints to the DOT. If that is true, then I welcome the intent of the DOT for the traveling public-at-large. After listening and participating in an hours long conversation about frequent flyer programs, I have this to say to both the airlines and the DOT: The actions of the DOT should include a substantial list of guidelines that the industry must adhere to. While the original NAAG guidelines which included the suggestion that the airlines must accommodate a frequent flyer award request within a seven day window on each side will be a bit hard for the industry to absorb, it is imperative that something come out of this DOT initiative. Why? Because it is clear to me from the calls I’m receiving that the failure of the DOT and industry to come to some sort of award redemption guidelines will result in a continuing number of legal actions filed in state courts around the country, something I don’t think either side would agree is right for the times.

The past couple of years have witnessed dramatic changes in the airline industry in general, and frequent-flyer programs in particular. Most of these changes have been perceived by members as a devaluation of benefits, and a large percentage of members are reconsidering their loyalty — the very loyalty that these programs were designed to instill.

In a recent survey conducted by WebFlyer.com, nearly three-quarters of frequent-flyer program members expressed that the benefits offered by their favorite program have become worse this year, and 35.1 percent say they have already switched their frequent flyer program loyalty in 2003 or are planning to do so. These are alarming statistics and support the notion that programs are suffering a severe crisis of public confidence.

But what about the 64.9 percent of members who evidently feel their program is becoming worse, but are staying the course anyway? Who are these people and what would motivate them to remain loyal to a program that they themselves acknowledge to be crumbling beneath their feet?

Mileage Militants
A few years ago, one of America’s foremost trend experts, Faith Popcorn, identified something she referred to as growing consumer “militancy.” Though Popcorn’s prediction wasn’t directly associated with any particular industry, she foresaw an environment where consumers would begin to organize and, in the process, impart a greater influence on the way companies were managed.

In fact, this idea doesn’t seem to be new. In his 1982 book, Megatrends, John Naisbitt noted that “Consumerism is the economic expression of the American Revolution.” Naisbitt argued that consumerism is deeply rooted in American history and he predicted that it would increase during the 1980’s with the distinct possibility that it would become extremely militant late in the decade. And as far back as 1977, Lou Harris conducted a study, “Consumerism at the Crossroads,” wherein he estimated that companies had approximately 10 years, perhaps less, to begin including consumers in the corporate decision-making process — or face a virulent new strain of militant consumer action.

Now, more than 25 years after Harris conducted his study, consumer militancy appears to have become a reality in the world of frequent-flyer programs. Within just the past three years, no less than four major North American airline programs have been opposed by organized consumer groups whose aim has been to encourage the reversal of changes made to the programs. Continental members tried to “Deny Continental the Freddie,” US Airways saw some of its Dividend Miles members start a “Cockroach” campaign, Air Canada Aeroplan was faced with “Errorplan,” and now Delta SkyMiles members have renewed a “SaveSkyMiles” campaign, complete with its own Web site (http://www.saveskymiles.com).

Though disappointed with changes to their programs, the majority of members (as evidenced by the WebFlyer survey) are deciding that, rather than run to another program, they prefer to stay and fight to improve the program to which they’ve been loyal.

The convergence of frequent-flyer miles as a second currency with instant global communications and disillusionment with program change has created a movement we call the “militancy of miles.” The rallying cry: Be active, be involved, be inquiring and be demanding.

A Look at Recent Militant Movements
Though the rise of militancy among frequent travelers is a relatively recent phenomenon, the first tentative attempts at this form of protest were undertaken nearly 10 years ago, by none other than Inside Flyer.

In the 90s, the editors of this magazine led two movements in response to changes announced by Continental OnePass and United Mileage Plus. In 1994, OnePass implemented sweeping changes to its highly valuable upgrade policy, and shortly thereafter United introduced a Saturday night stay requirement with 14 day advance notice on award redemption. Those involved in these small movements asked the respective programs to reconsider these changes, and in both situations the programs rescinded the policies once they were made aware of the feedback from members.

These grassroots efforts demonstrated early on that ordinary members are not powerless and that with a concerted effort they can have an influence on the programs. Then, in the latter part of 1999 and early 2000, the members of the Continental OnePass program got together again and in much greater force — this time in an effort to “Deny Continental the Freddie.”

For years, Continental had enjoyed a tremendously loyal membership. Millions of OnePass members had flown and supported the airline as it struggled to survive bankruptcy. They delighted in the program’s generous upgrade policy and took pride in the airline’s success in the late 90s.

But in 1999, many of these same members began to sense that Continental was becoming complacent and was less concerned about keeping the loyal members satisfied than it was about attracting new members.

Much of the program’s advertising at the time boasted of the numerous Freddie Awards OnePass had received over the years (for more information about the Freddies, go to www.freddieawards.com). A group of members who perceived their benefits to be diminishing and who were frustrated with the program decided that the best way to make their concerns heard would be to undertake a concerted, organized effort to ensure Continental OnePass did not win any more Freddie Awards.

“Many of us were noticing a gradual decline in service over time,” said the movement’s founder, David Danto. “When we would complain to Continental, their general response seemed to be ‘Hey, we’re winning all of these awards, so you can’t be having problems.’ So we said, fine, then we’ll prevent you from winning awards.”

Though it’s difficult to determine the impact the campaign had on Freddie voting, Danto believes the movement’s message was more important than short-term results.

“It was probably ineffective at first,” says Danto. “But as time has passed, I do feel vindicated now that everything we predicted and the horrible trends we foresaw turned out to be true.”

“Deny Continental the Freddie” represented the first organized effort by a group of members to make their voices heard and directly influence a program’s policy decisions. And it certainly wouldn’t be the last.

Late in 2002, US Airways had a bug problem.

In September of that year, the airline announced sweeping changes to its Dividend Miles program, largely designed to change the behavior of its most frequent flyers. Among other things, the changes rewarded those paying higher fares, and reduced benefits for those flying on the cheap.

“We had customers who paid $2,000 asking us ‘Why is the person who paid $200 afforded the same luxuries as me?’” said David Castelveter of US Airways. A logical question, and one US Airways tried to address.

Of course, not everyone saw it that way. Many economy-minded, and distinctly loyal customers felt slighted. Some of them, spurred by angry posts to FlyerTalk.com, formed a group that called itself the “cockroaches.”

The name, they say, was taken from a pejorative post on usairways.com. Within weeks, 500 cockroach-shaped lapel pins (complete with the US Airways logo) were made. Some 400 have been sold.

For the record, US Airways never implemented the changes.

“What we might have said or done, we meant no offense,” Castelveter said. “Today, someone flying for $200 and someone flying at $2,000 get the same miles awarded into their account, and they all count toward tier status.”

Did the bugs win? In a sense. But the changes were rescinded long before such mainstream media outlets as USA Today profiled the cockroach movement. The direct impact, then, of the few hundred cockroaches out there, has been limited to an after-the-fact gadfly role.

Not so with the 22 hard-core members of Air Canada’s Aeroplan who, in January 2002, started up a satirical Web site — Errorplan.com — devoted to stopping changes to the program.

Though their identities remain closely guarded, the group appears to have had an impact on the airline, largely because of their clever use of printed newsletters and the Internet. Many of the newsletters, which warned of upcoming program changes even before they had been announced, made their way into conspicuous places on Air Canada flights and lounges. Needless to say, program executives were not amused.

“We were very upset because they were using our brand and our premises to distribute their newsletters,” said Aeroplan president Rupert Duchesne. “We regarded it as an infringement on our intellectual property rights.”

Still, Duchesne and his colleagues weren’t about to write off such an obviously well-organized group of customers. Air Canada executives willingly met with members of the guerilla front. The proposed changes were never implemented, and unlike just about every other loyalty program out there, Aeroplan has made no changes to benefits for 2003.

Most recently, Delta SkyMiles has seen its members organize what they call the “SaveSkyMiles” campaign.

Originally launched a few years ago, the SaveSkyMiles campaign has been reborn in 2003 in response to Delta’s recent elite qualification changes and changes to elite benefits. At www.saveskymiles.com, anyone can read the complaints of those who are spearheading the campaign and other SkyMiles members can even sign a petition to show their allegiance to the cause.

“We’re not lunatics. We’re looking for a few concessions, reasonable changes, so we can stay with Delta without feeling like suckers,” says Bruce Schobel, a New York-based actuary and two Million Miler on Delta who is active in the SaveSkyMiles movement. “Delta’s program is no longer competitive with those of other airlines, and we believe that this will drive away customers. Basically, we support Delta. We don’t want to see our favorite airline destroy itself.”

Why All the Fuss? Why Now?
With the above examples, we are witnessing a tidal wave of cynicism, fear and an insistence on responsible frequent-flyer program management. An increasing number of people believe these programs are out of control. They find the world of miles less tangible and beyond prediction, and they are extremely confused by the panoply of choices with which they are confronted. In the end, ordinary members suddenly find themselves disentitled from benefits that were long considered a God-given right.

Ten years ago, program changes came and went with nary a mention in the media (other than in this magazine, of course). But times, and members, have changed. Members want something back, they want rewards for their loyalty — and they don’t want the benefits and awards granted them today devalued over the time it takes to gain benefit from them. Members believe they have a right to share in the value they create and are increasingly viewing loyalty as a two-way street. It is this belief that helps fuel these movements.

But what ignited this recent firestorm of mileage militancy? Part of the reason may stem from a failed attempt by the U.S. government to address the rights of travelers. In 1999, the U.S. Congress proposed a bill that would address many of the concerns facing frequent travelers. Not wanting to suffer any type of government regulation, the airlines joined together and introduced what was then called the “Customers First Initiative,” with the stated purpose of providing more information and power to frustrated travelers. Frequent flyers, tired of feeling helpless when attempting to take advantage of supposed program benefits, looked forward to the increased leverage the initiative sought to provide. But when all was said and done, the only thing the airlines committed to disclose were their frequent-flyer rules. (And who doesn’t want to spend all day reading the rules?) Alas, there was no direct implementation of frequent flyer program requirements, such as a much needed minimal number of saver award seats per flight, etc.

In the end, the government backed off, preferring instead to let the airlines handle the situation internally, and frequent travelers were left with what they perceived as little more than a smokescreen. Still frustrated, and with no more illusions that the government would come to the rescue, frequent flyers turned to each other — and they did so via the Internet.

If the information age has taught us anything, it is that we are not alone. In numbers there has always been power, and with current technologies such as email and online bulletin boards, numbers have never been easier to acquire.

“I do think the Internet has everything to do with the formation of these types of movements,” says Mark Sullivan, managing director-loyalty marketing, Continental Airlines.

Witness FlyerTalk, an online bulletin board devoted to frequent travelers. This year alone, FlyerTalk will likely see nearly 2 million posts, all on topics related to frequent-flyer programs and travel. Now, like never before, members can instantaneously share information, along with their opinions about the changes being made to these programs.

With this access to others who share similar experiences, member protest has taken a more global approach. Gone are the “nimbys” (not in my back yard) who protested changes to their programs, but were unconcerned with the activities occurring in the larger world of frequent flyers. Today’s militants oppose program changes on principle and strive to garner the combined strength of frequent flyers to oppose any change that might negatively impact the entire industry.

This is why members involved in the SaveSkyMiles effort have tried hard to get members of other programs involved with their efforts, as it is feared the changes in the Delta SkyMiles program may have an affect on potential partner programs Northwest WorldPerks and Continental OnePass. Nimbyism is not about solving problems, it’s just about shunting problems into someone else’s program. Nowadays we are seeing “opposition on principle.” A belief by members that they have a “right” to benefits, combined with a general disillusionment in the government’s ability to assist and ready access to thousand of others in the same boat proved a perfect set of circumstances for the proliferation of today’s brand of militancy.

Is Anybody Listening?
The militancy of miles is transforming the relationship between programs and members, even as some program executives remain strongly resistant to this form of consumerism. Those that oppose the idea of allowing these types of movements to actively influence program operational decisions argue that, though vociferous, these militant groups represent only a small fraction of the membership population.

“We like to hear the opinions of all of our customers, and we often get good information from those who post on FlyerTalk,” says Sullivan. “But we do not make program changes based solely on the feedback of one segment of the OnePass population. We try to address the opinions of all OnePass customers and come to decisions based on how we can make the program better for everyone.”

Therein lies the rub. Though every program executive realizes that the surest way to success rests in learning how to better satisfy members — and successfully retaining loyal customers takes on even greater importance today, as airlines struggle to navigate the treacherous waters ahead — they are left with the question; How much weight do you give to the complaints of any given sub-set of members? For some at least, the answer is, “each member’s feedback carries equal importance.”

It must be said, however, that not all program executives are quick to dismiss these movements. When Air Canada announced the changes that spawned the introduction of Errorplan, executives from the Aeroplan program willingly met with representatives of that member effort. The President of Aeroplan, Rupert Duchesne, even volunteered to appear on the popular FlyerTalk Live! chat forum to address member concerns and returned two months later to report on the progress that was being made to mesh the economies of the industry with the expectations of the members.

SkyMiles program director, Robert Borden, is another program executive who expresses the need to actively communicate with these distressed groups of customers.

“With these most recent SkyMiles changes, we started a Q&A thread on FlyerTalk to answer customer questions in an effort to guard against misperceptions,” says Borden. “We also are actively using delta.com and email, in addition to regular mail, brochures and phone calls. All of this is in an effort to reach a broad cross-section of customers in an attempt to give perspective on our changes and to respond to their questions and concerns.”

In fairness, we know of few major programs that have made major changes without first running a few ideas and concepts by member focus groups. When a program meets regularly with an informal member-advisory group, it is providing access to the corporate decision-making process long before the point of change. Of course, programs will not always go along with its member group’s recommendation; but you can be sure more and more programs are including members as part of the process of arriving at decisions.

A Militant Revolution
In the past few years in particular, major programs in North America have suffered a severe crisis of public confidence. With the bankruptcy of two major airlines (and the resulting fear of loss of awards and benefits) and the loss of all earned awards by members of the National Airlines and Ansett frequent-flyer programs, consumers have lost slavish brand loyalty and instead have become shrewd members seeking a blend of program quality, value for their loyalty and, most of all, safety from devaluation of their miles and awards.

Gaining the loyalty of the frequent-traveling public has always been a little like trying to hold onto a wet fish with a buttered hand. Most frequent flyers have never been hesitant to shop around, always looking for a better program, one that meets current needs or that holds the allure of greener pastures. Perhaps due to this fragile “loyalty,” programs in return have continued to slash benefits, have failed to meet the rising expectations of award redemption and have engaged in a litany of personal peccadilloes (who can forget in 2002 when the Chairman of Continental Airlines, Gordon Bethune, stated in an in-flight magazine that there would be no changes to the OnePass program, only to be trumped days later when OnePass executives did, in fact, announce changes?).

In their newly militant form, however, members now seem to believe only they can be relied upon to stop a slide into powerlessness. Members have learned that their voice counts, and that when they work together, they have a new legitimacy. Ironically, this militancy appears to re-enforce program loyalty, and could actually serve both the members and the programs well — at least those programs that realize militant members are members who are willing to fight to remain with their program of choice.

The militancy of miles is a fine-tuned, better-provisioned and more outraged and active version of the Inside Flyer actions in the early 1990s. Consider the arsenal: 89 million members of programs worldwide, some 80 percent or more with Internet access and over 5 million elite members in North America whose benefits seem to wane over time. Combine that with the attention of major media worldwide and it is clear militancy is a force that is already shaping the 21st century of miles.

You probably don’t realize that history has just been created. But if you are one of any number of frequent flyers out there that believe the legal system will be the savior of your hard earned frequent flyer miles, I’ve got news for you.

In a decision on June 16th, a Texas District Court Judge dismissed the claim of a member of the American AAdvantage who alleged that American breached its contract with AAdvantage frequent flyer program members by changing eligibility requirements for a free travel award earlier this year. The AAdvantage member, Joseph Benway, filed the lawsuit in February after American raised mileage requirements for a free domestic discount coach award from 20,000 to 25,000 miles. The Judge dismissed the lawsuit as a matter of law, agreeing with American that the airline had the right to change the mileage requirements for their frequent flyer awards.

What makes this news important to you? Several things. First, this is the first court case to be decided on the merits following a U.S. Supreme Court decision early this year limiting the scope of such lawsuits to state courts. Fortunately for American, it was decided in their favor in a summary judgment, that is, with oral arguments of the lawyers involved and not before a jury with discovery. In most legal cases, Judges like to reference their decision on past decisions. That is, cases that have similar merits. Since there are to my knowledge, at least four other cases involving frequent flyer member lawsuits against various airlines pertaining to the recent changes in frequent flyer programs, it is my best guess that all will meet with similar fates citing perhaps, the case of Benway vs. American Airlines.

Now that I’ve told you the bad news (if you thought that the legal system would uphold your miles), I’ve got a little better news. I think that this case is a weak one. First of all, the case went through the court system way too fast, similar cases are months behind in legal posturing. Also, while the suit was first filed as a class action suit, it was later withdrawn by Mr. Benway and was decided solely on the individual claims of Mr. Benway. Certification as a class action case would have proven to the court that such actions were indeed serious to those frequent flyers filing the case and the legal resources for such a case might have been pooled. I’m quite sure that finding other frequent flyers mad about the changes would have been relatively easy. By the way, calls to Mr. Benways lawyers and to Mr. Benway himself were met with “No comment,” “No interviews at this time,” and “I can’t comment while the case is still pending.”

In reviewing some of the documents associated with the case, it becomes very apparent that American is merely protecting the rights they have posted. In interpreting the guidelines of the National Association of Attorneys General, it would appear that the American Airlines AAdvantage program has followed to the letter, recommendations from the chief state law enforcement officers. Those guidelines provide that airlines can make changes affecting even vested miles (miles accumulated prior to a member receiving adequate notice of an airlines right to make changes) so long as they give at least one year advance notice of the change. American did that. Also, the guidelines state that an airline may (with proper notice) “raise mileage levels, add an unlimited number of blackout dates, or limit the number of seats available.”  Similarly, the United States Department of Transportation voiced this opinion in response to a congressional inquiry regarding the Department’s position with respect the airlines changing the requirements for frequent flyer awards. They responded by saying, “A review of airline frequent flyer program brochures clearly indicates that air carriers do reserve the right to…change…awards and mileage levels at any time. It appears that what the airlines offer participants is not a specific award but a wide array of conditional benefits. Thus, restrictions imposed at any time do not constitute “bait-and-switch” tactics, since a contract for a definite service is never offered.”

I believe this suit will have some effect on other pending lawsuits involving changes to other frequent flyer programs, including a similar suit in Illinois against American Airlines and a Pennsylvania suit against USAir because of the facts that American does seem to have the backing of both state and federal authorities. Additionally, this case also might have some effect on the highly visible Wolens vs. American Airlines case still to be heard in the State of Illinois. But Attorney Gilbert Gordon, who is involved in that case says, “These two cases aren’t of the same argument. And it might be that the language used in 1989 to warn members of potential changes to the AAdvantage program was different than todays’ (language).”

Does this mean that frequent flyers have lost and frequent flyer programs have won? No. The mere fact that the subject of miles even ended up in court means that both sides are losers. I’ve often said that while these programs have become successful tools for the airlines, frequent flyers cannot afford to stretch their greed. Don’t take this last comment too personal. The facts do remain that a free domestic ticket from any major frequent flyer program at 25,000 miles is still one of the very best bargains in travel today. There will be other cases, and probably other results from the legal system. But today, the score stands at Frequent Flyer Programs-0, Frequent Flyers-0.

Let’s all pick up our miles and fly our separate ways.