Mileage Pro The Insider's Guide to Frequent Flyer Programs

LOVE MAY BE ETERNAL. MILES and points are not.

When American’s AAdvantage program launched in 1981, members’ miles expired after 12 months. Two weeks later, when United countered with its own program, Mileage Plus, there was no termination date imposed on the miles—one of several “Plus” benefits United hoped would differentiate their program from archrival American’s.

Since then, travelers have been subjected to an ever-changing patchwork of policies ranging from miles that lasted forever to miles that automatically disappeared after just one year.

After the long period of experimentation, the largest airlines settled on a mileage expiration approach that split the considerable difference between American’s initial draconian use-’em-or-lose-’em policy and Continental’s and Delta’s eternal miles. Let’s call it the Rolling Three-Year Rule:

Miles do not expire as long as there is some account activity—either earning or redemption—every three years. Or, to put it differently: The life of all miles in an account is extended by three years from the date of any account activity.

That policy began taking shape in 1988 when United imposed a three-year lifespan (no extensions) on miles in its program. In 1995, Delta was the first major carrier to introduce a version of the current three-year rule, which links the life of miles to account activity. But initially only Delta or Delta Connection flights triggered an extra three years of life for banked miles.

It was not until 1999 that an industrywide move toward the current version of the three-year rule took place. It was led by Northwest, which in March of that year announced that, henceforth, any earning activity in a WorldPerks member’s account would extend the life of all miles for 36 months. So, essentially, you could have your miles forever as long as you have some form of activity every three years.

An AAdvantage member could protect his or her miles simply by engaging in any of the following transactions once every three years: Flying on American Airlines, American Eagle and more than 20 other airlines participating in the AAdvantage program (which includes airlines in the oneworld alliance), or earning miles with participating hotel companies, car rental firms, the Citibank AAdvantage credit card and hundreds of other partner companies offering AAdvantage miles.

United, always responsive to American’s moves, took the concept one step further, revising its mileage expiration policy less than a week later to protect miles for three years after any account activity, whether a member added to or subtracted from his or her account balance.

The following week, Delta embraced United’s policy, which subsequently was adopted by most other major airlines, including American, and remains the de-facto industry standard today, except among the low cost carriers (see below).

Discounters Go Their Own Way
There are some significant exceptions to the three-year rule. Led by Southwest, whose successful business model has been emulated and revised by new generations of low cost carriers, some discount airlines have hobbled their programs with an expiration policy that traces its roots back to American’s first effort:

Miles expire one year after they were earned and cannot be extended.

Southwest liberalized their one-year expiration policy in August 2005 to allow Rapid Rewards members two years to earn enough credits for an award. But the list of carriers that still have one-year rules includes AirTran, JetBlue and Independence Air.

Indianapolis based ATA also expires flight miles after 12 months, but allows miles earned from using its program-affiliated credit card to persist for 36 months. Even with Southwest now owning ATA, there are no plans to change these rules.

Deviating from other discounters, Denver based Frontier followed the lead of the full service airlines, including United, its principal competitor at Denver International Airport, in allowing miles to be extended by account activity, but uses a two-year extension period rather than the more widely used three years.

And just to prove there is no inherent reason why low cost carriers cannot be as generous in this area as full service airlines, America West operates its FlightFund program along the lines of mainline carrier programs, with a three-year rule on mileage expiration.

Combined with their limited partner rosters (JetBlue’s program, for instance, has no airline or hotel partners) the one-year expiration schedule used by most discounters makes it difficult, or even impossible, for any but the most frequent flyers to earn a free trip in their programs.

Good Miles, Bad Miles
To some extent, changes over the past 24 years reflect the airlines’ evolving relationships with frequent flyer miles; a relationship that is fundamentally ambivalent and likely will remain so.

For airlines and hotels, a mile or a point earned in their programs is both an investment and a liability.

On the one hand, a mile or a point earned in a company’s loyalty program represents an investment by the consumer, giving that person a reason to continue doing business with that company, and with its program partners, in order to add more miles or points to his or her account and eventually reach an award threshold or to attain elite status. As marketers like to say, miles and points create “stickiness,” another word for loyalty.

That is the marketing perspective on miles and points. It explains why, when American Airlines purchased many of bankrupt TWA’s assets in 2001, American was willing to assume the liability represented by the billions of outstanding miles in the accounts of TWA Aviators members. By vesting TWA customers in American’s program, American hoped to redirect their loyalty from TWA to American. In dollars and cents terms, the ticket sales generated by that loyalty were expected to more than cover the costs of free travel when miles were redeemed.

On the other hand, as executives on the airlines’ financial sides will quickly point out, an earned mile represents an eventual cost to the loyalty program operator, but only if the member has enough miles in his or her account to qualify for an award. Because of this, a potential cost for flying an award passenger does exist. In accounting terms, this is called a contingent liability.

Bearing in mind the competing marketer and accountant perspectives, the commonplace assumption is that the airlines and hotels would like nothing better than to terminate your miles and points, sooner rather than later. This is not only simplistic but it is downright wrong.

Hotel Points
Major hotel programs are notably more conservative than their airline counterparts with regard to expiring program points. The rule in place at Best Western Gold Crown Club International, Hilton HHonors, Hyatt Gold Passport and Starwood Preferred Guest: points expire after 12 months if there is no account activity during that time.

In a slight departure from the norm, Marriott expires points in its Rewards program if no points are earned in a 24-month period.

Providing the exception to the rule that all things come to an end, Priority Club Rewards boasts that “points never expire” and that accounts remain in their system indefinitely, even when there is no activity.

For the significant number of hotel program participants electing to have their stays rewarded with airline miles rather than hotel points, the hotel programs’ policies are a non-issue. But, for points earners in hotel programs with the one-year rule, vigilance is key to keeping accounts active.

Save the Miles
We have established that miles can expire and it goes without saying that losing miles is to be avoided if at all possible. So, how do you make sure your miles are not terminated?

First, all loyalty programs maintain policies regarding mileage expiration. Unfortunately, those policies are typically buried deep in the fine print of the programs’ terms and conditions. Still, the policies are worth unearthing and then committing to memory. A mileage expiration schedule that does not square with your earning pace can put rewards out of reach, making program participation an exercise in futility and frustration.

It is important to monitor accounts, especially less active accounts, for impending expiration dates. If miles are about to expire, it only takes a single transaction to save them for another 36 months. That is particularly easy on the earning side, because the larger airline programs award miles for the purchase of just about any imaginable product or service through their extensive partner networks. (Do not forget the mileage malls that allow program members to earn miles for purchases at many popular online retailers.)

On the redemption side, short of using 25,000 miles for an award trip, there are fewer options. But, one low cost award now offered by most programs is magazine subscriptions, typically available for as few as 400 miles. Extend the life of your miles and get a year’s subscription to Popular Mechanics or Cosmopolitan.

Other preventive measures include signing up for recurring services that earn miles. Phone or Internet services, for example, are billed monthly. So, using a company that awards frequent flyer miles for those kinds of services auto extends the life of your miles every month.

And of course another way of accomplishing the same thing is to use a loyalty program-affiliated credit card.
What to Do if Miles Expire

Expired miles are not always lost forever.
American recently launched a promotion, offering to reinstate AAdvantage members’ expired miles for a fee ($50 for every 5,000 miles revived, plus a $30 processing fee). It is conceivable that this limited time opportunity will be written into AAdvantage as a permanent program feature. And from there, it would be a short step to mileage reinstatements becoming a standard offering among all large airline programs.

While consumers may welcome the flexibility of such a feature, the fees undermine its real world value. The cost to reactivate 25,000 miles, enough for a free domestic ticket in most programs, would be a hefty $280. For that price, you could purchase a revenue ticket on many routes without the bothersome capacity controls associated with restricted award tickets.

Although the American promotion is not the solution to the problem of expiring miles, it is a reminder that, as a practical matter, miles and points can be reinstated, provided the entire account was not deleted from the program’s database. (An airline sometimes deletes inactive accounts simply so they are not taking up space on the airline’s computers.) Since miles can be revived, it is worth throwing yourself onto the mercy of a customer service rep and requesting that your expired miles be reinstated. Ask for this favor in consideration of the business you have given the airline in the past and will promise to give them again in the future. Perhaps there was a compelling reason behind your lapse in loyalty. Or maybe there was a transaction that would have saved your miles but which, through no fault of your own, was never posted to your account.

Any number of approaches can be taken when petitioning to have miles returned to life. The important thing is not to take the expiration notice at face value. It never hurts to push back, gently, diplomatically and shrewdly.

Finally, the best approach is to keep miles from expiring in the first place. With the three-year rule and the multitude of earning options, there is no good reason to find yourself on the receiving end of the shattering news that, indeed, your miles have expired.

REMEMBER THIS:

• Know the mileage expiration policy of your programs.
• In the programs of the larger airlines, account activity every three years will extend the life of your miles indefinitely.
• Caveat: Miles in the programs of most discount carriers expire after just one or two years.