Not Using Your Frequent Flyers Miles Is Like Giving Airlines Free Money

More than a year ago I wrote about the massive number of unused frequent flyer miles by travelers and the financial value to airlines when I wrote this – Frequent Flyer Miles Have Value : Use Them Or Lose Them

At the end of 2007, the last full audit I know of global airline frequent flyer miles, there were an estimated 17,000,000,000,000 frequent flyer miles in circulation, with an estimated cash value of between US$480,000,000 and US$700,000,000. Of these 17-trillion frequent flyer miles in circulation an estimated 39-billion miles expire annually.

How are airlines leveraging these frequent flyer miles to boost their cash liquidity? Well lets look at United Airlines financial fillings for its 2010 first quarter revenue … United Airlines is reporting in revenue of US$64,000,000 from frequent flyer miles that have gone unused for 18 months, causing the miles to expire. The expiration of these miles by frequent flyers puts US$64-million in the bank for United Airlines.

By the end of 2010 United Airlines will earn an estimated US$256-million from miles that expire from members of their frequent flyer program.

How do airlines calculate this revenue from expired frequent flyer miles? When a frequent flyer books a flight the airlines defer part of the revenue from that booking for future usage by the frequent flyer. This deferred revenue, which is generally viewed as a financial liability by most airlines, is transferred back into the revenue stream once the miles expire…thus the money that was set aside not to be touched is now available for the airline to access … and for United Airlines the amount of unused expiring frequent flyer miles for the first financial quarter of 2010 came to the sum total of US$64,000,000.

You can keep your frequent flyer miles active by simply hooking a debit or credit card up to your frequent flyer account and dining out to earn miles with many airlines. Using your miles keeps them active.

If you have miles expiring consider donating them through websites such as MileDonor.com. I have donated unused miles in the past and strong suggest infrequent and frequent flyers do the same, which I have written about here – Donate Your Frequent Flyer Miles To Charity : Help Others Gain Good Karma!

Happy Flying!

Comments

  1. Thanks for writing out the whole numbers. Especially when you’re talking about millions, billions, and trillions in the same story, it can be hard to appreciate the differences of scale among them.

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