Are you sitting on a pile of airline miles award points? You may want to use them before they lose value, as liabilities related to airline loyalty programs in the US increased during the pandemic, making a devaluation likely in 2021.
The pandemic has created a flood of unused airline miles
Current analysis by LendingTree shows that five of America’s largest airlines (Delta, American Airlines, United Airlines, Southwest, and JetBlue) together owe frequent flyers $ 27.5 billion in free air travel, nearly 12% more than last year. This is all understandable: Consumers continued to accumulate points during the pandemic even though they were unable to use them for travel.
These unused airline miles are an obligation to the airlines
It turns out that loyalty programs use airline credit cards even more profitable as the core business of flight sales. However, since flight revenue plummeted last year, the losses are in the American aviation industry a total of $ 35 billion. As a result, airlines have borrowed to cover costs and used their loyalty programs as collateral.
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In order to pay off this over-indebtedness quickly, the airlines would have to cut costs in the next step, which is difficult since the airlines already have high operating costs. That makes loyalty programs a juicy goal – how Bloomberg points this out, airlines looking to bolster their balance sheets could reduce the value of those awards or reintroduce policies that expire miles or points. As Jay Sorensen, president of airline consulting firm IdeaWorksCompany, write it in the Wall Street Journal, “You have return trips, catching up to do and an oversupply of miles. We are prepared for a devaluation. “
The value of airline miles tends to decrease over time
Over the years, the value of air miles has decreased as airlines have steadily increased the number of points or miles required for a free flight. As Forbes’ Dan Reed argues, argue:
In fact, airlines have been gradually devaluing their frequent flyer miles for many years. They did so before the pandemic hit, then United devalued its MileagePlus program miles in April 2020 and did it again last October. Delta did it in October and then again in February of that year. In April of this year, Southwest devalued its Rapid Reward miles by 6.5%. And there are now many experts warning that further such steps are likely, perhaps even inevitable, sometime between now and the end of the year, provided there is no further spike in the number of Covid-19 cases and deaths in the United States United States
That’s not to say that all airlines will drastically downgrade their loyalty programs. Airlines shy away from alienating customers (which is actually loyalty), so they might instead limit when and where you can book flights. In any case, it will still hinder you from finding good deals.
Use your points when you can
In general, if you want to get the full value of your airline miles, the earlier you book, the better. Otherwise, in order to maximize your value, you should be flexible about flight dates and your destination as the good deals may be a little harder to find.
