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TURBULENT SKIES FOR FREQUENT FLIERS — AND SEVEN WAYS TO BEAT THE ODDS

Miles1 These are shaky times for airlines, and that means that frequent flier programs are in for a few bumps. Much of the conventional wisdom about the best way to maximize and use your miles (like letting them accumulate) no longer applies. And then there’s the specter of airlines going out of business altogether. What will happen then? Getting the most out of your miles in this tough environment means using some smart new strategies.

Let’s tackle the worst-case scenario first: The carrier on which you have frequent flier miles goes out of business. And frankly, it makes sense to worry, having watched airlines such as US Airways, Delta Airlines and United Airlines experience serious financial turmoil. In such an uncertain atmosphere, you’ve got every right to wonder about the stability of these airlines’ frequent flier mileage programs. What will happen to your miles on these carriers if they go under?

"You’re going to lose them," states Randy Petersen, mileage guru and publisher of InsideFlyer, an online newsletter that monitors frequent flier miles.

That’s a sea change indeed. In the recent past, frequent flier mileage programs attached to airlines that went into liquidation were considered valuable assets by other airlines. Back in 1991, Delta scooped up Pan Am’s miles and Continental grabbed Eastern Air Lines’ mileage program when those airlines failed. In 2001, when TWA went under, its miles were folded into American’s AAdvantage program.

But times have changed. Airlines are cash-strapped, and while it’s possible that a white knight could come along and purchase a liquidated airline’s frequent flier program, the odds are not very good.

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Next let’s look at a somewhat less disastrous case: What happens to your miles when an airline faces financial difficulties? The outcome here is a bit less dire. Unless it’s headed for liquidation, no airline, including the most financially troubled, is likely to phase out its frequent flier program. There are two very good reasons that these programs will probably be around for as long as the airlines that run them. First, they’re ideal marketing tools. Second, they’ve proven to be lucrative profit centers.

"As marketing communications go, these programs are the gold standard," says Tim Winship, who runs FrequentFlier.com. "They’re much more cost-effective than advertising, allowing the airlines to communicate with their best customers." In other words, airlines can market promotions and programs to their most loyal fliers, since they have a lot of data on hand about the travel and spending habits of these customers.

The second reason is equally compelling, says Winship, noting that "each airline sells its frequent flier miles to its marketing partners. An airline like American has more than 1,200 partners, from CitiCard to every car rental company and major hotel chain, and they all pay American on a per-mile basis. That’s tremendously profitable for the airline."

In other words, when you earn 500 American miles from Hertz for renting a car, those 500 miles don’t come out of thin air. Hertz has purchased them from American.

If your miles are on a financially shaky carrier, get ready to adjust your attitudes about spending those miles. Since the first mileage programs were introduced back in 1981 by American Airlines, the prevalent mind-set has been that you should accumulate, if not hoard, your miles. The notion was that they should be stored like bottles of fine Burgundy for use on the big trips years down the road. Some folks even advocated socking them away for their retirement, 10, 20 or 30 years hence, when they would have a lot more time.

The new thinking runs contrary to that. "Use ’em or lose ’em" might well be the order of the day. Some airlines will probably not exist in 10 years, let alone 20 or 30. Smart travelers should instead plan to use their miles as they earn them.

But say you’ve got real concerns about a carrier. As a cautious consumer, you can use your miles to book tickets up to 351 days in advance on a carrier or its partners. You don’t actually spend the miles until you use the ticket, so if you buy in advance, essentially you are parking your miles. And if you feel like the airline in question is healthy again, you can always redeposit your miles, though you will pay a penalty for doing so.

Securing a good seat in exchange for frequent flier miles has always been a challenge, but now it’s harder than ever. Airlines are flying with their load factors at all-time highs. The average flight is in excess of 80% full these days. And on the most popular routes, from New York to San Francisco or Chicago to Honolulu, are flying closer to 90% full.

You can blame some of that on the plethora of discount travel sites on the Internet, from cheaptickets.com to Priceline.com, which are selling tickets, in some cases, a few hours before takeoff. When an airline is in financial jeopardy, as so many are, it makes more sense to sell a seat even at a discount than to let it go to an award passenger. Also, airlines are flying smaller aircraft on many routes in an effort to save fuel in this time of sky-high fuel prices. And smaller aircraft equal fewer seats.

So how can you get the seat that you really want with your miles?

1.Go for a ticket in shoulder season. Don’t expect to necessarily get a free flight using your miles during high season. That’s especially true of the reduced mileage level (25,000-mile) seats, which are the cheapest in terms of miles. There’s enough demand for these seats that many of them can be sold at maximum revenue.

2. Try for an upgrade instead of a seat. Trading miles for an upgrade is a good use of your miles but even this is becoming tougher. And note that you are usually not allowed to use miles to upgrade lower-priced coach fare tickets. In order to upgrade to business class, you’d have to buy a more expensive coach ticket, and these usually cost just a few dollars less than a business-class ticket anyway.

3. Be flexible. This is the real mantra for using frequent flier awards. You have to be willing to make a few tweaks in your travel plans to get the ticket that you really want. If there are no seats on Monday, then try Tuesday or fly from a different airport. If JFK has no seats, try leaving from Newark.

4. Plan in advance. Far in advance. If you know you’ll be taking an African safari in 10 months, book the ticket today. Planning to go on a ski trip next February? Book it now.

5. Fly midweek. The slowest travel days are usually Tuesdays and Wednesdays, which means that they are also the best days to find an award seat. You’ll invariably have difficulty getting a seat on weekends, when more people are traveling.

6. Get creative. If you have a little time to play with and don’t mind a stop along the way, you can reap benefits. For example, there may not be any seats on a direct flight from New York’s LaGuardia to Salt Lake City. But if you were willing to fly via Delta’s Cincinnati hub, it might be a different story.

7. Be a big spender, bite the bullet, and cough up more miles for an award. I recently spent 100,000 miles for a coach ticket to Italy. This was six months out from the trip dates and I did it because the 50,000 mile saver awards and I can only guess how few of them were available had been gone for nearly a year. So "if you’ve got ’em, spend ’em." Unlike that Burgundy ageing in your wine cellar, there’s little evidence that your miles will improve with age.

This article first appeared in Diversion.

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