FF Programs
 

How safe are the FF programs? Will major airlines eliminate the programs to safe money?

The FF programs earn a lot of money for the airlines, from the sale of miles to banks and other partners. I don't see them eliminating the only part of their business that turns a profit.

What might happen, however, is that the restrictions on the usage of the miles and the various fees and mileage requirements get so high that it isn't worth worrying about them any more.

Question has been asked here many times. Much speculation, but no one really knows. I tend to agree with first responder, but in the end, it is only an opinion.

If dramatically higher fuel costs become the standard going forward, then my belief is that frequent flyer programs are destined to change significantly. It will be for the same reason that that certain types of pension programs have become a thing of the past. What you have is a case of benefits being earned under one set of economic assumptions and then being cashed in under an entirely different scenario. It makes the programs unsustainable in their present form. The solution will be essentially the same one that occurred with retirement plans, which will be to balance the contribution of the flyer/customer much more accurately against the future benefit that can be received. That's what the programs don't do right now.

Travelgourmet gave the right answer. Airline mileage programs are cash cows to the airlines. When Air Canada went into bankruptcy a couple of years ago, they sold off their Aeroplan FF scheme to private investors. The sale price exceeded the book value of what was left of the airline.

One of the keys is the same as gift certificate schemes from department or big box stores. The "leakage" - i.e. the difference between what is sold vs. what is redeemed - is humongous. I have something like 8,000 Delta miles sitting fallow - earned on some partner airline a year or two ago - that I will never use. Somebody paid maybe 1 cent per mile (or less) to DL, so call it $80, for those miles. The may represent a contingent liability on DL's books, but in reality they represent $80 of pure profit, since I'll never use them before they expire. Multiply that times millions of other people with a few miles here and a few miles there, and we're talking serious money.