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SPECIAL REPORT: FFPs challenged by airline uncertainty

2 Jul 2008 by Mark Caswell

In the light of soaring costs, airline cutbacks present a
new challenge for frequent flyer programme members.

In the past, one of the chief complaints from readers of Business Traveller centered on the lack
of award-seat availability when they needed to travel, but new challenges are
emerging. How can members be sure that the airline or route they wish to take
will even be operating? If airlines carry fewer fare-paying passengers will
they then allocate more award seats to FFP members? On top of all this, there
is concern about the rising cost of so-called “free” award tickets.

Go back a few weeks, and who could have predicted that Delta
would be axing its Gatwick-New York service (a link for which Delta paid United
millions of dollars for the route-rights before “Open Skies” was announced), that American Airlines would ditch Stansted-New York (even though it spent a
small fortune on a business class lounge at the Essex airport) or that United
would decide to scrap Heathrow-Denver, a route launched amid much publicity
only three months ago?

At least passengers living and working within easy reach of
the UK
capital can find alternatives of one sort or another. But those really at the
losing end will be those wishing to book routes where there are few, if any,
options. Pity any FFP members who expect to fly with Malaysia Airlines between
Kuala Lumpur and Cape Town during July and August (when numerous services are
being cancelled owing to poor demand) or who had booked to take Emirates to
Durban (a route which was recently cancelled) this coming December.

Ravindra Bhagwanani, managing director of FFP consultancy
Global Flight, says: “It’s essential to ‘burn’ FFP miles on a regular basis. If
you don’t, you will end up with your miles being devalued. Some of our clients
tell me they’re saving up for a trip to New York ten years ahead, but who knows
what the award levels will be at that time, let alone the carriers who will be
plying the route?”

Other challenges

FFP members must also take a carrier’s financial viability
into account. The issue surrounding Italy’s loss-making flag-carrier
Alitalia is a case in point. Bhagwanani says: “Alitalia relaunched its FFP on
January 1. It’s one of the most generous but it comes at a risk.”

When an airline fails completely, FFP members lose all their
miles and points and so on. On the other hand, if that carrier gets taken over
by another, your FFP awards will be protected but the award-status may change.
So the best-case scenario for Alitalia FFP members would be if Air France were to merge with Italy’s
national carrier, because then both airlines’ schemes would be merged. But if
private Italian carrier Air One were to take over Alitalia, it’s not clear what
would happen, because the former doesn’t have its own FFP. (Air One is purely a
partner in Lufthansa’s Miles and More scheme.)

Another myth that needs shattering is that some readers
believe emptier planes mean easier access to award seats. In fact, the reverse
could be true. Bhagwanani says: “In the 1980s [because of higher fares and less
competition] the airlines were happy with load factors in the 70s. Today, loads
in the 80s and 90s have become the norm, and still the carriers are losing
money.” So if and when flights are cut, they will still be running as full as
today.

Another reader-concern focuses on the rising cost of extras,
which airlines are imposing on their so-called “free” award tickets. Not
content with levying the standard taxes and charges, most airlines are applying
oil surcharges. It means British Airways’ extras for a return business class
London-Sydney award ticket now exceed £450.

Bhagwanani says: “Adding oil surcharges is a
customer-unfriendly way of doing business which is devaluing FFPs as a
whole.”  Indeed, there are discrepancies
with these fees even within the same alliance. Bhagwanani says: “If I redeem
points to fly transatlantic with United, I don’t pay the oil surcharge, but if
I redeem with fellow Star-member Lufthansa [which has a different policy] then
I have to pay US$300 more [for the same award ticket].”

Report by Alex McWhirter

Have recent events changed your views on frequent flier programmes?
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