Opening Remarks – May, 30 2003

Opening Remarks – May, 30 2003

When reviewing the award redemption statistics for 2002, I was reminded of the enormous impact these programs have on travelers. Do you realize that nearly 8 percent of all people flying on U.S. airlines are traveling on free awards? That’s a very dramatic statistic and the sole reason for these opening remarks is my consequent worry that the government of the United States seems to be oblivious to the impact and rights of these members.

When the government extended the Aviation and Transportation Security Act to protect passengers who had tickets on a failed airline (this consumer protection idea was introduced following the events of 9/11) until February 19, 2004, there remained no answer as to whether or not this provision covered passengers ticketed on frequent flyer awards. I’ve contacted several officials within our government regarding this issue and have received a variety of answers — none of which give me any satisfaction that frequent flyers have something they can rely on.

How can a segment of the industry that numbers over 80 million members in the U.S., accounts for billions of dollars in unique revenue, including hundreds of millions paid directly to the government, and last year was awarded nearly 20 million free airline tickets have no consumer protection?

Here’s my mission — to petition, visit and converse with government officials until I get an answer to this question. If it is not the answer I think members of these programs deserve, then I will lobby for inclusion. The issue is this: If any airline in the U.S. fails, will you or will you not be able to have some piece of mind that your planned award trip can still happen just as if you had purchased the travel with cold hard cash? Below is my first salvo:

Mr. Dayton Lehman
Deputy Assistant General Counsel
Office of Aviation Enforcement and Proceedings
400 7th St., S.W.,
Washington, D.C. 20590.

Dear Mr. Lehman,
As the editor and publisher of Inside Flyer magazine for the past 17 years, I represent the interests of an estimated 80 million plus members of frequent flyer programs in the United States. When our government recently extended the Aviation and Transportation Security Act, P.L. 107-71, 115 Stat. 645 (November 19, 2001), and the protections afforded by Section 145 of the Act for travelers holding tickets on an airline that suspends, interrupts, or discontinues service due to insolvency or bankruptcy, I was elated that the current doom and gloom of the travel industry had been given a positive shot in the arm.

This has dissolved into a real concern, as I have been unable to ascertain if this policy includes members of frequent flyer programs, who are ticketed in the very same manner as others with travel dates and who would be subject to the same hardships in the event of an airline insolvency. I have spoken to several government representatives and have received answers ranging from “yes” to “no” to “it hasn’t yet been determined.”

For any policy to be effective, whether in the private sector or government, I’m sure you would agree that all matters need to be addressed and definitive answers be available. Your name has been given to me as one that is actively involved in the matter of the Aviation and Transportation Security Act and to you I turn to plead the case of the frequent flyer.

First of all, it needs to be made clear that this form of ticketed travel is not “free.” Depending on the specific program, upwards of 60 percent of the miles earned for award travel is actually earned from non-travel sources. Many are not aware that these programs have changed so dramatically over the years that they are now a popular variation of pre-paid travel. I bring to your attention that the government has already been pre-paid to the tune of $751 million for the purpose of including these awards under protection afforded others with the Aviation and Transportation Security Act. As noted by the name of the Act, this is about transportation. That $751 million is the sum that the U.S. Treasury Department is reporting as received from the implementation of the 7.5 percent tax on frequent flyer miles sold to partners of frequent flyer programs beginning in 1998. In the year 2002 alone, that total was $152 million.

In addition, there are at least two other ways in which members of these programs have provided revenues to the government for this type of travel. Since 9/11 a federal security fee has also been imposed on “free” awards. As I’m sure you know, these fees are paid in advance of travel. In addition, select airports collect Passenger Facility Fees (PFCs) for award use.

As you can clearly see, members of these programs have earned the right to equal protection under the Aviation and Transportation Security Act. And, as a group, we deserve to know for a fact that our travel plans can be free of the worries of which the Aviation and Transportation Security Act was intended to provide.

I look forward to bringing their views to Capitol Hill. My goal is to educate members of Congress and the policy/decision makers of this Act, and to increase public awareness about issues of critical importance to the members of frequent flyer programs. With the support of our government, we can all return to supporting the value of travel to this nation’s economy.

Thank you,
Randy Petersen
Editor/Publisher
Inside Flyer Magazine

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