Fliers Fear Losing SkyMiles amid Delta's Troubles

Chris Quarnberg is the sort of person for whom frequent-flier programs were invented 25 years ago.

The Pleasant Grove project manager for a technology company travels on business every other week. Because his employer allows him to keep the frequent-flier points he earns, Quarnberg has accrued 500,000 miles in his Delta Air Lines SkyMiles account.

That's enough for as many as 20 free economy round-trip tickets to U.S. destinations or 10 international locations. But Quarnberg doesn't use his miles for himself. He redeems them for members of his extended family, who fly to Utah to visit.

"I like it. I get free tickets for just doing my business," Quarnberg said of the Delta's SkyMiles program recently after flying to Salt Lake International Airport from Philadelphia.

Delta began its SkyMiles program in 1981, the same year American Airlines rolled out AAdvantage, the industry's first frequent-flier program, to keep profitable business travelers flying the same airline.

"For a vast majority of programs around the globe, frequent-flier programs are profitable. It's likely the best thing the industry has invented for itself in the past 25 years," said Randy Petersen, editor of Inside Flyer, which tracks frequent-flier programs.

Yet, as jet-fuel prices soar and Delta battles to lift itself from bankruptcy protection, members who cherish their SkyMiles have a lot of worries. Despite assurances that SkyMiles is secure, nervous travelers have stepped up redemptions. Fearing their miles might become worthless, they exchanged 9 percent more of their miles for free tickets last year than in 2004.

"People are a little nervous," conceded Jeff Robertson, managing director of the SkyMiles program, who said there is some concern in the marketplace that the program would be ended or curtailed. "But, given the profitability of the program, there's no way in heck that we would do that."

There also are concerns among some travelers that it is getting tougher to redeem SkyMiles, which might be related to the fact that Delta has reduced the number of seats it is flying as it cuts costs while trying to emerge from bankruptcy protection.

Those issues aside, SkyMiles remains hugely profitable. Petersen says it probably creates $75 million for the company by Delta selling miles to credit card companies, hotels, car-rental firms and hundreds of other businesses that give them to their customers. The program also bonds frequent travelers to the airline.

Robertson acknowledges SkyMiles is a money-maker. He won't say what the program contributes to Delta's bottom line but insists it is more than Petersen's estimate.

"It's worth a lot more to Delta than that. If you look at the actual revenue that the program brings in, and the cost of the program . . . the profit is better than $75 million," Robertson said.

With 38 million members, SkyMiles is one of the biggest frequent-flier plans offered by major airlines. Only American's AAdvantage and United Airlines' Mileage Plus have more members, according to WebFlyer.com, a Petersen-affiliated Web site. Southwest Airlines does not report figures for its Rapid Rewards program.

Atlanta-based Delta carried more frequent-flier-reward travelers last year than in 2004. SkyMiles members redeemed 3.3 million round-trip tickets last year, according to a study by IdeaWorks Co., a Wisconsin airline-consulting firm. The tickets represented 9 percent of all passengers carried by Delta. It does not include customers who use their SkyMiles on other airlines that have reciprocal arrangements with Delta.

Delta's program also leads the other airlines in the number of reward tickets provided to its program members. No. 2 American's AAdvantage plan handed out 2.6 million tickets last year, half a million fewer than Delta.

Last year was the third year in a row Delta led other carriers. What's more, the gap between SkyMiles and other programs seems to have increased during 2005, according to IdeaWorks. Robertson says that's because Delta has expanded into new domestic and international markets. It's the only airline serving all 50 states, and it has expanded aggressively into Europe and Latin America.

With so many people flying on rewards tickets and literally dozens of ways for customers to rack up miles far faster than they can redeem them, concerns are growing that it's getting harder use SkyMiles. But Petersen doesn't think Delta, which filed for bankruptcy in September, is doing anything to limit frequent-flier seats.

"I absolutely don't believe there's any proof . . . that they've cut back on the availability of awards," Petersen said.

Instead, the frustrations of travelers result from full flights, fueled by strong demand at the same time Delta is reducing its fleet size. To become profitable, the airline has cut the seats in and out of Salt Lake City International Airport by 10 percent since last summer, according to Back Aviation Solutions, an industry research firm in Virginia. Delta has taken almost 8 million seats out of its domestic network during the same time, a 25 percent decline.

Add in consumer demand that hasn't slacked off, even though airlines have boosted fares; Delta's decision to ax its Dallas hub last year and route more flights through Salt Lake; credit card programs that make it easy to rack up miles without flying; and partnerships with Alaska, Continental and Northwest that permit their customers to use their frequent-flier redemptions on Delta, and it's not surprising some SkyMiles members are grumbling.

Unused miles continue to flow onto Delta's books. In 2005, the airline's "reward liability" -- the value of unredeemed miles -- reached $291 million, according to the IdeaWorks study. The 38 percent increase from the previous year, greater than any other airline except US Airways, underscores perceptions that SkyMiles are hard to redeem.

Even so, Quarnberg doesn't believe it's harder to use his SkyMiles today than in the past.

"You don't always get exactly what you want. But if you're willing to be flexible, they'll work with you," Quarnberg said. "I think it's great."

Bruce Bingham, a Salt Lake City real estate developer who redeems his SkyMiles for vacation and family trips, also has no problems with the program.

"It doesn't strike me as difficult to use at all. I belong to several [frequent-flier] programs, and theirs is as clear and understandable as any I've used," he said. "I haven't felt I've been baited and switched by not having enough seats available on any particular flights."

Major airlines provided a record 15.6 million frequent-flier tickets to members in 2005, a 6.8 percent increase over 2004. Three percent of passengers carried on the airlines flew free. Here are tips to get the most out of frequent-flier programs:

--Consolidate your frequent-flier programs into one account.

--Join the program of the airline that flies most often to the destinations you visit.

--Research different programs. Profiles of most major airline programs are at FrequentFlier.com.

--Consult surveys that rank programs. InsideFlyer.com is one place to check.

--For popular destinations at peak times, consider using more points. Carriers such as Delta offer unrestricted tickets if you use double the mileage of limited-seat awards. In other words, redeeming 25,000 miles may not get you a ticket, but 50,000 will.

--Travel during the offseason.

--To secure an unrestricted frequent-flier seat, book at least 331 days in advance.

--Switch to a credit card that earns miles in a bank program instead of an airline program. When you redeem your miles, the bank buys your ticket. Such programs usually are not restricted by airline limits on frequent-flier seats.

--Redeem miles for trips that would otherwise be expensive or for upgrades, rather than buying first-class tickets.

--Mileage expiration policies vary among airlines. Delta SkyMiles don't expire if a member receives credit for at least one flight every 36 months.

--Publications such as OAG Frequent Flyer, InsideFlyer magazine and WebFlyer publish customer feedback.

--The federal government does not regulate frequent-flier programs. Contact the airline to discuss complaints.



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