Opening Remarks – August, 05 2002

Opening Remarks – August, 05 2002

The first 50 inquiries about the safety of US Airways Dividend Miles members’ frequent flyer miles were equally divided between reporters and frequent flyers. The next 500 were all from frequent flyers.

I absolutely do not see any danger to the miles, award availability or benefits for Dividend Miles members over the next six months. I know, things don’t look real good for the program or airline right now and between the federal loan application and looming threat of Chapter 11 bankruptcy, I seem to be the only one holding out. But remember, I have as many miles, if not more, than most of those who are worried about their miles and I am no fool when it comes to protecting my own hoard.

A few facts: US Airways has blundered along the way and, while they may not deserve our sympathy, they have nonetheless carved out a decent frequent flyer program. Their high elite level is as good as any other, despite the fact that their RJ fleet doesn’t offer upgrades to mitigate the wear and tear of flying this short-haul airline. Their biggest problem to date was being betrayed by United. That misguided effort caused them to part ways with the American AAdvantage program, which today might have booked more free awards from US Airways members than all of their own members even though AAdvantage is twice as big a frequent flyer program.

But enough thinking about the way things might have been, let’s look at reality. Even if you wanted to run for cover — you really don’t have any great choices. You could burn all your miles on awards to Asia with partner Northwest Airlines, burn your miles on awards to Rome on partner Alitalia (I really advise against this) or burn all your miles to Latin America on partner LatinPass. Since US Airways does not participate in any major exchanges (Hilton HHonors Reward Exchange or, you’re only going to be able to convert your miles into money to go shopping on the Internet with partner That or you could take six weeks off from work to fly around to nowhere in particular while you try and use up all your miles.

Me? I’m just leaving things as they are. I am so sure that my Dividend Miles are safe over the next six months that I’m not even considering protecting them with the AwardGuard program. Some of you won’t agree with me on this, but when things work out later on, you’ll be upset that you don’t have the miles to enjoy anymore. Like anything else, I may be wrong on this. But, I’ve been closely watching these frequent flyer programs for 16 years now and haven’t lost a mile or point yet — and I don’t even have an ulcer from worry. Bottom line: Dividend Miles are completely safe over the next six months at which time I’ll look over the situation again and will offer additional advice.

When I picked up a voice message the other day from Congressman Meeks’ office, I knew that somehow my words last month regarding “Possibly The Dumbest Piece of Legislation Ever” had leaked out to the far reaches of our nations capital. (the person on the other end of the phone subsequently told me that a “competing publisher” had sent my remarks to them. Tattletale). Two phrases from the original phone message particularly stood out — “We understand you have strong opinions on our proposed legislation” and “…your disparaging remarks” Oh boy here I go, messing with Congress. So, after playing phone tag for a few weeks, my showdown with the legislators who have sponsored this so-called “Frequent Flyer Tax-Free Liability Act of 2002” appears below. But before you read what I have to say on this issue, please do me a favor: don’t be the next tattletale. I am entitled to my opinion.

To bring you current, there is a new bill being proposed in the House of Representatives (HR 4374) which seeks to forbid the IRS from legally taxing your frequent flyer miles. I’ve taken issue with the proposal, and with the Congressmen who are sponsoring it, because I can’t find any proof that the IRS has any intent to tax our miles and am suspect as to why those involved are not interested in other, more important, issues affecting frequent flyers.

I asked Mike McKay, Senior Policy Advisor for Congressman Gregory Meeks of New York — a sponsor of the bill, where those behind this bill were last year and the year before that when we travelers were asking for selective rights with regard to the government directed CustomersFirst initiative. His response: “We in Congress don’t believe we should be involved in legislating customer service. Consumers have the best right and that is to move their business wherever they want if the service is not agreeable.” Gag me with an e-ticket.

I actually enjoyed my 45-minute conversation with Mr. McKay regarding this issue, despite the fact that he approached our discussion with some less-than-flattering preconceptions (he admits that a “competing publisher” warned him that I was “arrogant”). Still, I came away convinced that these guys know nothing about the real issues surrounding frequent flyer programs. They trumpet themselves as saviors who are finally going to do something for us.

Well, guess what gentlemen, you aren’t really the first to take up this mantle.

Back in 1996, Barbara Kennelly introduced this very same bill. It was HR 3111 and titled “A bill to amend the Internal Revenue Code of 1986 to clarify the treatment of frequent flyer mileage awards.” The bill had more than 15 sponsors, including the (formerly?) influential Congressman Kennedy of Massachusetts. The bill was passed along to the House Committee on Ways and Means and subsequently died for lack of interest. The real reason for its death might have been that there was ample proof that the IRS does not really want to tax our miles.

During our discussion, Mr. McKay seemed unaware of past efforts or the history of these actions. When pushed to do some real politicking for frequent flyers and look into the growing problem of consumers indirectly paying the 7.5% Federal Excise Tax imposed on the sale of miles by airlines, Mr. McKay constantly referred to that issue as a valid tax if you want to go out and sell your miles. Hello? It’s not about members selling their miles, which again leads me to believe that this group does not fully understand all the issues we need help with as frequent flyers. I’m very convinced this is a made up issue and even contacted the IRS myself. Spokesman Bruce Friedland very specifically says that the IRS has always regarded personal use of awards (not related to business travel) as a form of rebate, similar to coupon clipping, and has never even considered any action on taxation there. Now or ever.

All I’d ask is that any legislation is well thought out and applicable to the world of frequent flyers today. Please don’t insult my intelligence with made up threats of taxation, especially when it’s getting close to re-election time. By the way, Congressman Meeks was a huge proponent of the United-US Airways deal since he admits that aviation is very important to his district, which contains JFK Airport in New York City.

Bottom line: How many miles can fit into a pork barrel?