• Frequent flyer miles harder to redeem
     | January 19,2005

    NEW YORK — Frequent-flier miles are easier to come by as airlines sell more miles to partners like credit card companies and hotels, but they're harder than ever to redeem.

    Behind-the-scenes deals with corporate partners are helping cash-strapped airlines rake in millions of dollars at a time when high fuel costs and lower fares are killing their bottom lines. At the same time, these deals give companies that buy miles a sought-after incentive to offer their customers.

    But frequent-flier club members shouldn't think all the freebie miles they've racked up will add up to free trips. Even with more miles floating around, airlines are cutting flights and flying more crowded planes, limiting the seats available to frequent fliers.

    "It's not that there's fewer seats out there, it's that the rest of the plane is full so there's no more to give away," said Randy Peterson, president of InsideFlyer.com, a Colorado Springs website that tracks frequent-flier programs. "The other seats are taken up by paying customers."

    The difficulty some passengers have redeeming miles for flights that are convenient to them is leading many to use miles for nontravel-related rewards such as magazine subscriptions, or transferring them to hotel points programs when rules allow. Members of American Airlines' and US Airways' frequent-flier clubs received letters last month inviting them to spend unused miles on subscriptions; 500 miles got them 12 issues of Latina magazine, while 5,600 got 52 issues of Variety.

    "One of the big complaints from fliers right now is that they've accrued all these miles and they're unavailable to get the seats," said Mark R. Cestari, vice president of marketing at SmarterTravel.com, a Boston-based website that tracks travel trends.

    "There's kind of a movement among frequent fliers that the value of miles have been oversold, so now they're trying to use them to get satisfaction. That partially grows out of the fact that the airlines are making more seats available in the lower fares, so they're making fewer seats available for frequent-flier miles," Cestari said.

    Airlines won't disclose how much they made last year selling miles to other companies until they file their annual reports with the US Securities and Exchange Commission in March. Some declined to discuss details of their frequent-flier programs.

    Still, there is evidence that the practice is extremely lucrative for airlines.

    "The sale of miles is growing," said Mark Bergsrud, vice president of marketing programs and distribution at Continental Airlines. "It's good business whether the oil price is low or high and good business before fares started to decline."

    It may be particularly good now."

    Continental reported $24 million from sales of its OnePass frequent-flier miles to other companies in the fourth quarter of 2003, but Bergsrud said the actual amount was probably larger because airlines account for those sales over several quarters.

    Delta Air Lines landed $500 million in cash from American Express Travel Related Services Co. in October, when American Express paid for three years of points in Delta's SkyMiles frequent-flier program in advance. American Express offers a Delta SkyMiles credit card, which allows members to accrue miles as they make purchases with the card. Delta spokeswoman Tanya Dunne said she could not discuss the deal before the airline files financial reports with the SEC.

    Selling miles to companies that give them away is good for the airlines not just for the cash they produce, but because many of those miles go unused anyway. United passengers got about 2 million free frequent-flier tickets in 2003, but Mileage Plus members still had about 9.7 million trips worth of miles sitting unused in the same year, according to documents filed with the SEC..

    Members of US Airways' Dividend Miles program took 1.2 million awards trips in 2003, down 7.7 percent from the previous year, according to company filings. But the airline's frequent fliers were still hoarding miles worth 6.2 million trips.

    Even if passengers used more miles for trips, it would be unlikely to hurt the airlines because it doesn't cost that much to add passengers to a flight that already has hundreds of paying customers on it.

    If there's a seat available on a flight that hasn't been paid for already, "then we're not losing money," said Ned Raynolds, a spokesman for American Airlines.

    About half the miles earned in American's AAdvantage frequent-flier program come from products or services other than air travel, said the company. American frequent fliers can earn miles through 1,500 different companies by buying things like Kellogg's cereal, flowers from 1800flowers.com, long-distance services from AT&T, or using a special Citibank credit card.

    Still, the airlines are careful about how many frequent-flier seats are available on each flight. On most airlines, there are two tiers of frequent-flier free tickets. One tier will cost between 20,000 and 25,000 miles, but the tickets are usable only on a limited number of designated seats available on a flight. Once seats in that fare class are sold out, no more award tickets are available.

    If passengers are willing to redeem between 40,000 and 50,000 miles, though, they can typically get any available seat on a plane.

    Travelers say they have noticed that they have to burn more miles to use tickets.

    For a New Year's Eve trip to Albuquerque, Eric Soskin of Cambridge said he tried to redeem 20,000 miles — the normal amount to get a standard ticket on Northwest Airlines — to no avail. Northwest's flights were full, so Soskin, who flies about 60,000 miles annually on the airline, wound up burning 37,500 miles from his account.

    "I actually think it's become increasingly easy to find a ticket, but often at a cost of spending more miles," he said.

    Scott Henderson of Cambridge said he had no choice but to use 40,000 US Airways miles to get to Orlando last Thanksgiving. He tried to use fewer miles to get a seat in coach, but all those seats were gone, he said.

    "To get the dates I wanted to travel, I basically had to fly first class," and burn the extra miles, he said.

    Keith Reed can be reached at reed(at)globe.com.

    NYT-01-18-05 1140EST

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