Frequent Flyer Points; Love or Hate?

Airline points have become the crack cocaine of the travel world. Fly, buy dinner, fill up with gas and you get rewarded with scrip called rather optimistically “Frequent Flyer Miles”. They come in a variety of guises, and like every other currency have extremely variable exchange rates.

Oddly, it seems that the most valuable part of many airlines today is the division that gives stuff away for nothing, and therein lies the rub.

“Points” are a currency; nothing less and nothing more. Airlines sell them to a variety of partners for (say) 4 cents each, and then sell seats back to flyers for these points. Profitable and a fine system.

Until the money supply gets out of hand, and inflation strikes. While the various schemes have yet to reach Zimbabwean levels, there are some distinctly nasty clouds on the horizon. Airlines often churn points out by the million; a recent financing deal between United and their primary bankers involved the exchange of hundreds of millions of United’s Mileage Plus. These points are dangled in front the banks’ clients as lures to some commercial activity, and hey presto, there are thousands more consumers dreaming of palm trees.

Think, however, of the problems caused by increasing the money supply (points) while simultaneously reducing the overall number of seats available on the airlines’ systems – a 20 million drop in available seats throughout the North American system compared to last year.

How will the carriers respond? Gently, I think, but in the traditional way; prices will rise. Delta announced a major increase last year, by offering three levels of reward seats; by increasing the number of points that you use, they will open up more seats. Fair enough in a way, but a price increase by any other name.

My advice? Book early, and remember that there is only a small fee (currently $90 or so) to cancel and put your points back; book next summer’s trip to Europe now, and think of the $90 as an option. Use them up as fast as you can, because their value will shrink away in front of your very eyes.

Unless you want a kettle, of course. Exchanging airline points for kitchen equipment or haberdashery seems odd to me, but there will be increasing pressure to do so.