Do frequent flyer miles survive airline bankruptcies? It depends

With the aviation industry thrust into sudden, unprecedented
turmoil in the last few weeks as a result of the spreading coronavirus
pandemic, some frequent travelers have begun to fret about what
will happen to their stockpile of miles if their favorite airline
goes bankrupt or out of business entirely.

It may not be the most pressing issue of the day, but it is a
legitimate question as people think about life after the pandemic

In short, there are basically two possible outcomes for frequent
flyer miles once the crisis ends, according to Henry Harteveldt, a
travel industry analyst and president of Atmosphere Research.

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“If an airline declares bankruptcy but continues to operate,
nothing happens to your frequent flyer miles. Absolutely nothing.
They remain there and your account remains active and valid,”
Harteveldt said. But, he added, “if your airline shuts down and
isn’t merged into another airline, then you lose your frequent
flyer miles.”

Since 2000, there has been a sea-change in the U.S. aviation
industry, as many carriers went through bankruptcies, mergers and
other structural changes.

“Considering that American,
United and
Delta have
all gone through bankruptcy, we have fairly recent experiences with
this,” Harteveldt said. In all those cases, passengers’ miles
remained valid, even as the carriers went through financial
difficulties. Mergers — which have frequently followed
bankruptcies during that period — also allowed frequent flyers to
keep their miles, even if the airline that issued them ceased to
exist as a brand.

Coronavirus-related waivers and schedule changes in place at U.S.

The list of examples is long. Among them:

United Airlines

United Airlines filed for bankruptcy protection in late 2002 and
remained there for a whopping three years. In early 2006, United
finally emerged from Chapter 11 – as did its MileagePlus program.
Like the other big U.S. airlines that endured bankruptcy, United
eventually found a merger partner in Continental. Continental’s
OnePass frequent flyer accounts were merged into United’s when
that deal closed in 2010.

Northwest Airlines

Northwest filed for Chapter 11 bankruptcy protection in 2005
before emerging in 2007. Members of the carrier’s WorldPerks
program came out unscathed. Northwest made deep cuts during its
bankruptcy reorganization, but the carrier continued to operate
normally – as did the carrier’s loyalty program. A year later,
Northwest and Delta announced their plans to merge. The deal was
cleared, and Northwest’s frequent flyer program was integrated
into Delta’s.

Delta Air Lines

Delta Air Lines sought Chapter 11 protection in 2005. It fought
off a hostile takeover bid from US Airways before emerging as a
standalone carrier in 2007 – its SkyMiles frequent flyer program
intact. But Delta wouldn’t remain stand-alone for long, thanks to
that merger with Northwest that came in 2008.

In 2020:
Delta to emerge a much ‘smaller’ airline from coronavirus

American Airlines

American joined the rush of major airlines into bankruptcy
protection in late 2011. It and its AAdvantage program would
eventually emerge two years later as part of a merger with US

US Airways

US Airways survived several close calls earlier this century.
The airline was thought to be perilously close to liquidation as it
filed for bankruptcy twice during a two-year span beginning in
2002. But the carrier survived, emerging both times from Chapter 11
bankruptcy reorganization. The carrier’s Dividend Miles frequent
flyer program pulled through as well.

But US Airways’ Dividend Miles accounts have been through more
than just bankruptcies. They’ve also seen several mergers. In
2005, America West initiated a merger with US Airways that saw the
combined company keep the US Airways name and frequent flyer
program. In that case, America West frequent flyers saw their miles
ported over to US Airways. A similar scenario unfolded nearly a
decade later, when US Airways merger with American in a 2013 deal.
Just as before, US Airways frequent flyer accounts – and their
miles – were folder into American’s AAdvantage program.

CHARLOTTE, NC - September 17: Aaron Hancock, a trainer for American Airlines, drives on the ramp between planes as staff and employees at Charlotte Douglas International Airport in Charlotte, NC are preparing for the US Airways and American Airlines merger into one company - American Airlines. (Photo by Jason E. Miczek/For the Washington Post)When
airlines merge, their frequent flyer programs usually do, too.
(Photo by Jason E. Miczek/For the Washington Post)

Frequent flyer status also has historically survived along with
the miles.

As a general rule, Harteveldt said, “If you have status in an
airline, your status remains intact.”

While past changes in the airline industry offer some guidance
on what frequent flyers can expect after the pandemic passes,
Harteveldt also sounded a note of caution that there are no
guarantees the industry will look or act the same after this slump.
If Congress does not pass a generous aid package for airlines and
other travel companies, he believes bigger structural changes may
be on the horizon.

Not passing such aid, Harteveldt said, “increases the chance
of airlines going bankrupt or the potential for some airlines not
being able to survive this period.” He added, “The airlines
that are left may not have the cash to invest in another
airline,” which would mean that if an airline can’t keep itself
afloat through this period, it might go out of business entirely,
nullifying the frequent flyer miles it issued along with it.

US ‘big 3’ well-positioned to survive possible coronavirus
crisis shakeout, analysts say

“What we really have to hope for is that all the airlines we
have going into this crisis survive and come out on the other
end,” Harteveldt said.

Without a government bailout, or a buyout by another airline,
frequent flyer miles on a bankrupt carriers generally disappear.
When Air
went out
of business in 2017
, no other airline came to its rescue, and
its miles quickly
became unusable
, even on other Oneworld airlines.

dpatop - A row of Air Berlin planes in Tegel airport in Berlin, Germany, 21 September 2017. The board of creditors of the bankrupt German aviation concern Air Berlin met today to discuss sale offers. Photo: Wolfgang Kumm/dpa (Photo by Wolfgang Kumm/picture alliance via Getty Images)When
an airline entirely goes out of business, its frequent flyer miles
usually disappear. (Photo by Wolfgang Kumm/picture alliance via
Getty Images)

Miles earned through co-branded credit card purchases aren’t
protected when an airline goes out of business, either, so you may
be better off for now spending on a card that earns general-use
currency — like Chase
Ultimate Rewards
American Express Membership Rewards
points — until the dust

Related: Some
airlines have all but shut down as a result of the coronavirus

For now, Harteveldt emphasized, it’s important to give
airlines time to deal with the immediate crisis of the sudden,
unplanned-for drop in demand.

“Don’t bother airlines right now, don’t call the frequent
flyer line, don’t email the frequent flyer support desk with
questions about your frequent flyer status,” he said. Airlines
care a lot about their most loyal customers, he said, even if they
don’t show it “when circumstances are normal.”

Harteveldt, who worked for a number of airlines including TWA
and Continental over his career, said that those travelers are
usually at the top of executives’ minds when they plan any major
changes to their businesses.

People should think about the bigger picture before getting too
hung up on their frequent flyer accounts right now, Harteveldt

“I would just urge everyone to put things in perspective and
let’s focus on the important matters here, namely getting through
this health crisis and hoping that the country doesn’t go into a
deep recession.”

More: Complete
guide to traveling during the deadly coronavirus outbreak

Featured photo by Darren Murph/The Points Guy.

Source: FS – All-Travel destinations-News2
Do frequent flyer miles survive airline bankruptcies? It depends