Do frequent flyer miles survive airline bankruptcies? It depends

Mar 25, 2020

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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 passes.

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.

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

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 crisis

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 Airways.

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.

More: 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 Berlin 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 or American Express Membership Rewards points — until the dust settles.

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

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 said.

“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.

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