One of the more common questions about miles and points is, “are my miles safe when files for bankruptcy?”
And it’s amazing how many bad answers there are. This story in today’s Daytona Beach News-Journal may take the award for the worst advice yet. Responding to a question about Delta miles, Bob Desiderio writes:
- You have cause for concern, because while survivor airlines have in the past honored the mileage programs of bankrupt airlines (As Delta did for TWA customers), the major airlines now are hanging on the ropes and no one is stepping forward to help them. If an airline goes bankrupt and sells off its assets, mileage programs disappear because they are viewed as a liability; the eventual cost is transporting a passenger for free. So, in addition to using them or losing them, you can exchange your miles with Hilton’s Honors program, which deals with 55 different airlines. Unfortunately the convenience can be dear, up to a 50 percent loss of your original miles.
First, American honored TWA miles when purchasing their assets out of bankruptcy. Perhaps the author is thinking of Pan Am, whose members did find refuge in the Skymiles program.
Second, filing for bankruptcy is not the as liquidation. As long as the airline is operating, miles are likely to be able to be redeemed. Unfortunately the author quickly conflates the two scenarios in a single sentence, “If an airline goes bankrupt and sells off its assets…” If Delta files for bankruptcy it will be as a tool to lower its costs and emerge as a viable business, which means that long-term bankruptcy may be necessary to save its mileage program.
Third, USAirways and United mileage members have done just fine in bankruptcy. Certainly USAirways frequent flyers have a reason for concern (though things are by no means over), but even they have managed to hobble along. Delta is by no means at the current risk level that USAirways is.
Finally, the author is hopelessly behind the times in suggesting an escape hatch in exchanging Skymiles for Hilton points. That option hasn’t been available for some time. Delta miles cannot be transferred out of Delta into another currency, period.