Fliers Fear Losing SkyMiles amid Delta's Troubles

As jet-fuel prices soar and Delta battles to lift itself from bankruptcy protection, members who cherish their SkyMiles have a lot of worries.


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.

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