Ask Randy: What happens to miles if airline goes out of business?
— -- These are tumultuous times for frequent fliers, as struggling airlines continue to add new fees and restrictions to their loyalty programs. So we've invited frequent-flier expert Randy Petersen to take your queries and offer advice on how to make the most of your miles. Here are some recent queries; join him in his ongoing forum to post one of your own or help answer a question from a fellow reader.
Reader texasex95: Randy, I have almost 400,000 miles on United but with the craziness of the airline biz these days, I'm a little worried that even a monster like United could go out of business...especially with all of their nickel and diming. What would happen to my miles? Are they gone? Is there mileage insurance? How much are 400,000 miles worth?
Randy Petersen: Good question and it certainly seems that it is timely as once again United "makes the news." Could they go out of business? Yes. A partner of their from the Star Alliance folded its doors a few years ago — Ansett Airlines — in Australia and it was the leading domestic carrier there at the time. Virtually anything could happen as we were so reminded over the past 18 months losing 6 (soon 7 with Express Jet (XE) scheduled to exit commercial service on Sept. 1).
As for United, despite their apparent continued struggles to find themselves and to find some of their passengers heading for the exit doors — hungry at that — I have little worry about the security of your United Mileage Plus miles.
400,000 of them is nothing to sneeze at and congrats on that nest egg. But United has such deep assets, that it is easy to overlook how they could conceivably spend down for quite a few years. Now, some of those assets are leveraged to get them through bankruptcy, but they have a single asset that is larger than the airline and that's the one where you bank your frequent flyer miles. United Mileage Plus, even in a downturned and sloppy market is worth a few times more than all of UAL, meaning that even when choking on themselves, there is an oxygen mask nearby, something that most other airline don't have ready for that market. Of any U.S. carrier, they have the leadership in the mileage department to do that transaction, though not endorsing it for timing right now. Heck, if the airline doesn't work well, then all the miles in the world aren't going to help you much.
Now, should you burn those miles down as some frequent flyers seem to say they are doing? All depends on your outlook in life and your appetite for risk. I live on Colorado and while for what I do, I'm as non-denominational as they come, BUT, and that's a big BUT, I have over a million miles on your same carrier (are you sure we haven't met in flight somewhere?!!!) and trust me, I'm will not risk losing any of those miles and from my own actions, I'm fine with United's future right now. We may have to whip them a bit in shape with their apparent meltdown of this Buy-On-Board stuff (a great read is Ben's excellent and constant coverage), but with some pressure from both pilots and passengers, they will prevail.
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