A new legal challenge to mileage expiration in Europe raises interesting arguments about fairness and frequent flyer programs.
Expiring miles remove liabilities from a balance sheet, letting an airline recognize revenue while confiscating what is often seen morally (if not legally) as an asset.
Program policies have varied tremendously over time — sometimes a loyalty program doesn’t want to lose a customer, other times they value revenue recognition, and we’ve seen a see-saw across programs over time and different approaches around the world.
Mileage Expiration in the US Varies from Program to Program, and Changes from Time to Time
In the U.S. we’ve seen a variety of policies, from miles that expired after a certain amount of time, to miles that never expired, to miles that would expire unless a member had activity in their account within a certain period of time.
Delta once advertised during the Superbowl that their miles would never expire, before introducing expiration. When they ended the Delta Frequent Flyer program and launched SkyMiles, with expiring miles, they promised that miles earned under the old program would never expire. But then they decided that old miles would be merged into SkyMiles, and those old miles would therefore.. expire.
Delta had also committed that any elite member who continued to maintain their status could always redeem their old Frequent Flyer miles under the original program’s award chart, that promise went poof as well. Delta’s explanation? The terms and conditions of the program said they could change the rules.
Delta took the lead in aggressively expiring miles a decade ago. In 2007 the then-head of SkyMiles Jeff Robertson said “anyone who hasn’t had activity with Delta in anyway in the last two years, is not all that valuable to us.”
that expiring miles was the biggest complaint that they received, more so than even award availability. That they were spending millions just to notify members about expiring miles, the revenue from re-activation wasn’t especially great, and so they believed it was in their long-term interest to no longer antagonize members who would otherwise need to earn perhaps 20 miles to extend an account’s lifetime (not very profitable to the airline) or who would just redeem their miles in anger and walk away from the airline (creating a redemption cost and a lost customer).
In South Korea, the Government Doesn’t Simply Allow Unfavorable Program Changes
Korean Air announced in 2007 that effective July 1, 2008 SkyPass miles would expire after 5 years. This was challenged by the South Korean government, and in 2010 it was agreed that SkyPass miles would expire after 10 years.
In Italy the Law Requires It
Under Italian law Alitalia’s program expires.
Although Alitalia now believes that ending a program doesn’t require expiring all of the miles in that program.
Air France KLM Flying Blue’s Mileage Expiration is Challenged in Court
Air France KLM’s Flying Blue has one of the stranger expiration policies. Miles expire after 20 months without a flight credited to the account. Crediting a Delta flight works — but it must be a flight. Apparently a court in Austria has ruled against this policy.
The Oberster Gerichtshof — which is the Supreme Court of Justice in Austria — upheld a decision from a different court in May of 2016 and ruled in favor of all aspects of a lawsuit which opposed the practice of miles being no longer valid for use after a period of 20 months if a member of a frequent flier loyalty program does not engage in an activity which extends the expiration date.
It’s not clear whether this decision will have a binding affect, or how broad that affect will be. But European courts are much more given than US ones to determine whether a policy is ‘fair’ to consumers.
You Really Can’t Sue in the U.S.
In the US fairness isn’t even a consideration, as that would be reading state-level contract claims into an agreement with an airline — and this is deemed state regulation of an airline, which is pre-empted by the federal Airline Deregulation Act. A consumer’s only avenue of redress is the Department of Transportation which has improperly ignored complaints about frequent flyer programs.
The only grounds for suit under Northwest v. Ginsberg is actual violation of a program’s terms and conditions, which are written with so much discretion that it’s almost impossible a program could run afoul of their own rules.