Questions, Answers

Quest= ions, Answers

About bankrupt airlines and your mileage
Travelers unlikely t= o feel major impact, but some routes could be affected

With four of the na= tion’s 10 biggest air carriers in bankruptcy, business and leisure travelers have every reason to wonder whether their plans will be affected.

So far, the somewhat surprising answer is that air travelers have little reason to worry, indust= ry experts say.

Both United Airline= s and U.S. Airways have managed to fly with little disruption despite operating u= nder bankruptcy protection. There is every indication that Delta Air Lines and Northwest Airlines, both of which filed for Chapter 11 protection Wednesday, will be able to do the same.

Here are some common questions and answers for passengers considering air travel soon or already holding tickets:

I’m consid= ering traveling to visit my family for Christmas. Should I avoid Delta and Northw= est?

No. Industry experts recommend you choose your carrier as usual, based on price, convenience and personal preference. But as always, it is highly recommended that you pay by credit card. That way if there is any dispute over flight cancellations you will have a better chance of getting your money back.

I already hold t= ickets on Delta or Northwest. Should I be concerned about my flights?

No, but be sure and= check the status before you head to the airport. Airlines are using bankruptcy la= ws to reduce their costs, and often that can mean eliminating aircraft and reducing schedules. Airlines should notify you if your flight has been chan= ged or cancelled, but it is always safer to verify that your flight is still departing as scheduled.

What about booki= ng travel farther into the future?

Travel industry att= orney Jeffrey Miller recommends travelers avoid booking flights on Delta and Northwest more than six months into the future, because schedules are virtu= ally certain to change. Based on past bankruptcies, both carriers are likely to reduce frequency on some routes and eliminate other routes entirely. That m= eans a convenient, non-stop flight could be replaced by a far less convenient fl= ight with a connection and a long layover.

If my flight is cancelled, do I have any options?

Yes, you can demand= a refund, according to Christopher Elliott, a travel columnist for MSNBC.com = and other publications. But Miller cautions that airlines will not necessarily = make it easy to get a refund. Be prepared to do battle, or to be flexible in you= r travel plans. Elliott recommends travelers read the “contract of carriage= 221; that easily can be found on the various airline Web sites. (Delta’s, which is 55 pages long but relatively easy to understand, is available here.)

What about my frequent-flier miles?

In virtually every = case, airlines have worked hard to ensure that accrued miles remain valid. Delta = and Northwest will probably almost immediately ask bankruptcy judges to allow t= hem to continue operating their mileage programs. “Frequent-flier miles a= re a liability in the regular days of business but actually an asset when you ar= e in bankruptcy. It’s one of the few forms of customer loyalty you have,&#= 8221; said David Field, Am= ericas editor for Airline Business magazine. But mileage holders are essentially unsecured creditors, so it is wise to cash in your points when you are able rather than stockpiling them.

Are there any ai= rlines to avoid?

Most carriers in bankruptcy are expected to reorganize and emerge with little impact on travelers. But some analysts are cautioning that Independence Air, formerly known as Atlantic Coast Airlines, could go out of business. If you have paid for your ticket using a credit card, you will get a refund. But other carri= ers are unlikely to honor the ticket, so you might be out of luck with your tra= vel plans, said Miller. A spokesman for the carrier, based in Dulles, Va., said the airline is operating "business as usual" as it considers options to strengthen its financial position. "Everything is on the ta= ble for consideration," said the spokesman, Rick DeLisi.

Is there any oth= er impact likely for consumers?

Higher fares. As ai= rlines retrench, they will cancel leases and cut service, reducing the supply of available airline seats. That will make it easier for carriers to impose ra= te hikes and make them stick. Higher fuel costs, which are helping to drive carriers into bankruptcy protection. also are likely to force up the cost of air travel.

What will happen to = my frequent-flier miles?

With more airline= s in bankruptcy, keeping miles is risky

Q: The big airlines= just can’t catch a break financially. What happens with my frequent flier miles if that company goes bankrupt or, even worse, quits flying?

A: With both Delta = Air Lines Inc. and Northwest Airlines Corp. filing for bankruptcy protection Wednesday — plus United and US Airways still under Chapter 11 protect= ion — it’s reasonable to consider what could happen to all those mi= les. Airlines typically fly through a bankruptcy, hoping to use the process as a means to cut labor costs and restructure leases and other commitments under= the court’s auspices.

Yet their precarious financial state means you have an asset in which you’ve invested R= 12; with the expectation of a future return — that is now at risk. The be= st route? Sell — cash in — as much of that asset as you can unload= now and keep enough miles for just a few trips or upgrades.

“If you hold = miles with an airline you’re essentially a creditor, and this is a terrible environment to be a creditor to an airline — especially an unsecured creditor,” notes Jay Sorensen, president of IdeaWorks, a Shorewood, Wis.-based brand consulting company that researches airline and other loyal= ty programs.

Delta has 40 million people in its SkyMiles program, which will operate by the same rules under bankruptcy as it now does now, spokeswoman Chris Kelly said. Northwest also= has no plans to alter its WorldPerks program now that = it has filed for bankruptcy court protection.

In the most recent = cases — UAL Corp.’s December 2002 filing and the two Chapter 11 petit= ions US Airways Group Inc. has filed since 2002 — members of those programs were not harmed.

But for consumers t= hese miles are all about marketing — they have little to zero value outside the airlines — and it’s wise to think of them as a quick perk a= nd not a long-term possession. Use as many miles as you can right now. Having hundreds of thousands (or more) makes little sense with such a degraded, perishable commodity.

When an airline fil= es for court protection, it’s reasonable to expect a rush to snag award seat= s, as people with miles scramble to cash them in. That would make landing an a= ward seat to many destinations even dicier than it a= lready is, and the airline could also respond by tightening the inventory it allots for such rewards. (No airline would ever publicly admit doing this.)=

No major airline has liquidated in recent years, taking one of the gargantuan mileage programs i= nto history. AMR Corp. bought TWA’s assets four years ago and absorbed th= at carrier’s Aviators program into its own AAdvanta= ge plan, which has some 45 million members. The same will happen in the pending combination of US Airways Group Inc. with America West, with no mileage los= ses expected.

However, it’s conceivable with the current financial risks that a carrier could go away, selling some or all of itself to a rival. In that scenario, mileage holders would face a murky path, and possibly end up out of luck. The larger your mileage balance the more likely another airline would come to court you and would possibly convert some of your old miles into their own.

Keep in mind, amid = all the headlines of financial gloom, that the mileage operation of any big air= line is immensely valuable, likely to be the healthiest piece of its business.

Because of the lucr= ative returns from selling miles and the marketing partnerships built around them, competitors would love to buy access to a fallen rival’s most valuable customers.

As an example, UAL = moved its Mileage Plus operation to a subsidiary three years ago and that unit now accounts for 5 percent of the whole company’s revenue — $822 million last year, more than twice the sales from United’s Central and South American operations. The subsidiary, United Loyalty Services, is the = only part of UAL to turn a profit each year since 2001, according to IdeaWorks