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Frequent flyer miles becoming the new currency of choice

THE GUARDIAN , LONDON

The gold standard of sterling is long forgotten and now the supremacy of the greenback has been surpassed. The world has a new global currency -- airline frequent flyer miles, which have a greater total value than dollars, euros, pounds or yen.

Doled out by airlines to seasoned travellers, they are intended to be redeemed for tickets as a reward for loyalty. But since their invention in 1981, their popularity has spawned its own economy of trading schemes, charitable donations, enthusiasts and scams. By the end of 2004, almost 14 trillion frequent flyer miles had been accumulated worldwide, worth between ?0.01 and ?0.06 apiece.

According to a new analysis by The Economist magazine, the global stock is worth more than USUS$700 billion, more than all the US dollar bills in circulation.

Once used exclusively by jet-setting business travellers, miles have become a regular currency among holidaymakers and long-distance commuters. More than 130 airlines issue them, handing out more than 14 million free flights annually.

Canny collectors can swap their miles for hotel rooms, car rental, restaurant meals and even cruises. But arcane rules about privileges and redemption routinely cause confusion.

Alex McWhirter, consumer editor of Business Traveller magazine, said: "Frequent flyers often work unseasonal hours, spending a lot of time away from their family and friends. These are a compensation for that lifestyle."

He says the enormous stock of unredeemed miles is partly a result of a growing reluctance among regular travellers to spend their free time in the air.

"A lot of people find they've had enough of travelling and decide to save them for a rainy day," said Mr McWhirter. In some cases, corporate executives wait until retirement and then splash out on round-the-world trips for their families.

So many different types of frequent flyer mile are in circulation that consultancies have sprung up in Europe and the US devoted solely to helping people get the most of their portfolio.

To the uninitiated, redeeming miles can be frustrating. Often, airlines try to restrict their use to unpopular flights at the crack of dawn from out-of-town airports.

James Freemantle, of the Air Transport Users' Council, said a regular complaint from frustrated passengers was that even with a vast account of miles, flights are still not "free" because hefty taxes remain payable.

"We do get complaints from people who say they weren't expecting taxes," said Freemantle. "Although the frequent flyers who belong to these schemes are often valuable customers and they're looked after pretty well by the airlines."

A close look at the rules can expose unbeatable deals. A civil engineer from California, David Phillips, became known as the "pudding guy" after calculating that an offer of frequent flyer miles with food at his local supermarket yielded a remarkable return. He spent US$3,000 on 12,000 Healthy Choice chocolate desserts and earned US$25,000 worth of free flights, enough to pay for travel for the rest of his life.

In the 1990s, British Airways customers briefly benefited from a loophole which allowed them to book flights and earn miles, but then cancel their journeys without penalty. The carrier has since become wise to the tactic.

The UK consumer magazine Holiday Which? found that on a return flight to New York, the best bonuses could be earned by flying on American Airlines but accumulating points on a loyalty card from the Brazilian airline Tam, or by travelling with Virgin Atlantic as a member of Air Jamaica's "Seventh Heaven" flyers' club.

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