ETHICS OF A MILE

ETHICS OF A MILE

“So far, about morals, I know only that what is moral is what you feel good after and what is immoral is what you feel
bad after.”
– Ernest Hemingway

ethics: an area of study that deals with ideas about what is good and bad behavior : a branch of philosophy dealing with what is morally right or wrong

Any conversation about what is “right” and what is “wrong” is a slippery slope toward confusion. One man’s “right” is inevitably another man’s “wrong”. And who establishes the rules of what’s right and wrong? When it comes to frequent flyer programs, the programs write the rules. But are the rules the programs set down for their members “right”?

Do you own your frequent flyer miles, or does the airline own the miles in your account? If you earn the miles, do you have the right to dispose of them as you see fit?

Almost all frequent flyer programs allow members to book flights for anyone the member chooses, but they also spell out rules about members not selling their miles/awards or using their miles/awards for “other consideration”.

We’ll take a look at the ethics of the frequent flyer mile. But let’s be clear from the start, we are not condoning members selling their frequent flyer miles, which is against the rules of the frequent flyer programs.

The Rules
All frequent flyer programs set down rules for their members. These rules are usually found on the program’s website listed under Terms and Conditions, Rules and Regulations or FAQs.

American Airlines, for example, notes in their Terms and Conditions: “At no time may AAdvantage mileage credit or award tickets be purchased, sold or bartered (including but not limited to transferring, gifting or promising mileage credit or award tickets in exchange for support of a certain business, product or charity and/or participation in an auction, sweepstakes, raffle or contest).” The rules state that any such miles or tickets transferred for cash or other consideration are void and, “violators (including any passenger who uses a purchased or bartered award ticket) may be liable for damages and litigation costs, including American Airlines attorney’s fees incurred in enforcing this rule.”

Threatening attorney’s fees is certainly a serious statement and should not be taken lightly by AAdvantage members. Something else not to be taken lightly is the threat of a full-fare ticket: “Use of award tickets that have been acquired by purchase or for any other consideration may result in the tickets being confiscated or the passenger being denied boarding. If a trip has been started, any continued travel will be at the passenger’s expense on a full-fare basis. The passenger and member may also be liable to American Airlines for the cost of a full-fare ticket for any segments flown on a sold or bartered ticket.”

If a member is found breaking the rules, they face losing all of their acquired miles, the cancellation of their account and even any future participation in the American AAdvantage program. And those who buy the miles may find themselves at an airport with a confiscated ticket and no way to get where they wish to go.

The rules restricting the selling of miles have evolved and refined over time. For example, as early as 1988 and for many years, the rules stated, “AAdvantage awards and mileage cannot be purchased, sold or bartered.” The parenthesized information, “(including but not limited to transferring, gifting or promising mileage credit or award tickets in exchange for support of a certain business, product or charity and/or participation in an auction, sweepstakes, raffle or contest)” was added years later.

And even as far back as 1988, the fine print read, “Violators may be liable for damages, litigation and transaction costs. Fraud or abuse concerning AAdvantage mileage credit or award usage is subject to appropriate administrative and/or legal action by American including, without limitation, the forfeiture of all award certificates, tickets issued against award certificates and any accrued mileage in a member’s account, as well as cancellation of the account.” The program also noted that “Use of award tickets that have been acquired by purchase or for any other consideration may result in the tickets being confiscated. If a trip has been started, any continued travel will be at the passenger’s expense on a full-fare basis.”

Delta’s current fine print isn’t as extensive as American’s but is similar: “The sale or barter of mileage credit, vouchers, Award Tickets, Medallion status, Pay with Miles tickets or any other benefit by SkyMiles members is prohibited. Delta will terminate or deduct mileage from the account of any member who violates this rule. Award Certificates or Tickets obtained through prohibited sale or barter transactions are VOID, invalid for travel, and will be confiscated. Persons trying to use such tickets will not be permitted to travel unless they purchase a ticket from Delta at the applicable fare.” Delta’s rules include, “Members whose accounts have been terminated for any reason may not reopen new accounts.”

We have heard that at least one member of Delta SkyMiles was barred from ever flying Delta again because of being caught selling his miles. (Whether or not this is a fact, we don’t know. Most people are not forthcoming about selling their miles and the consequences, so most of what we hear is secondhand.) Elite membership can certainly be rescinded if you’re suspected of selling your miles.

If you look at the terms and conditions for all frequent flyer programs in the world, you will find similar “no selling of your frequent flyer miles” wording. But what can be a bit confusing are the rules from most programs that members are allowed to give an award flight to anyone they choose. In the past, the rules simply stated that a member can redeem an award in anyone’s name. Now, the rules of American AAdvantage are more exact and state, “Subject to the rules prohibiting purchase, sale and barter of AAdvantage mileage and travel awards as well as the rules pertaining to any special AAdvantage offers, AAdvantage award tickets may be issued in any name designated by the AAdvantage member, however the recipient of the mileage credit or award ticket must be identified at the time of transfer and cannot be identified at a later point in time, such as a charity to be named later, or conditioned upon the outcome of a future event, such as the winner of a contest.”

We don’t know how anyone could redeem a ticket without knowing the exact name of the recipient so we’re not sure why it’s stipulated that you cannot identify the person using the award flight at a later time. If an award flight is issued in one person’s name and will not be used, the only recourse is to cancel the flight and redeposit the miles back into the original member’s account.

Like all other frequent flyer programs, Southwest Rapid Rewards does not want members to sell their points: “Rapid Rewards Points, Credits, Promotional Awards and Drink Coupons may not be sold, purchased, brokered or bartered. The Rapid Rewards Points, Credits, Promotional Awards and Drink Coupons have no cash value and are void if sold, purchased, brokered or bartered.” And like all programs, Rapid Rewards will cancel members’ accounts if “misuse or violation of Rapid Rewards rules is suspected.” And, “It is against Rapid Rewards rules and regulations to offer to buy or sell Rapid Rewards Points or Promotional Awards via Internet auction sites or classified advertisements. Such actions may result in the termination of the Member’s account, regardless of whether or not the transaction is completed.” What we find interesting in these rules from Rapid Rewards is the use of the words, “suspected”–as in, you can lose all your points if they suspect that you’ve broken the rules–and “regardless of whether or not the transaction is completed”–as in, even if you try but are unsuccessful in selling your points, you can lose your membership privileges. This is true of other frequent flyer programs as well. You do not have to actually succeed in selling some miles for all of the miles in your account to be deleted by the program.

Along with the wording forbidding members to sell their miles, American AAdvantage states, “Accrued mileage credit and award tickets do not constitute property of the member.” In other words, you do not own the miles in your account–the airline does.

Auditing
The airlines audit members’ accounts looking for those who are breaking the program’s rules and monitor sites online where members may try to sell their miles. American states, “American Airlines reserves the right to audit any and all accounts at any time and without notice to the member to ensure compliance with AAdvantage program rules … In the event that an audit reveals discrepancies or violations, the processing of AAdvantage awards, mileage accrual and summaries may be delayed until the discrepancies or violations are resolved satisfactorily to American Airlines. Pending such resolution, members may be prohibited from redeeming mileage credits for an AAdvantage award or ticket as determined in American’s sole discretion.” American Airlines is known to be particularly aggressive in finding those members who break the rules but they are not the only airline to keep watch.

Delta has similar wording, “Delta reserves the right to audit members’ accounts at any time and without notice to ensure compliance with the SkyMiles program rules, Delta’s contract of carriage, Delta’s fare rules, and all other applicable Delta rules and regulations.”

We got in touch with all of the major frequent flyer programs in the U.S. and Canada, asking about their auditing systems. As you might imagine, this is information that the programs do not like to divulge. Delta sent the following statement, “We are aware that Award brokering exists, and it is a violation of our SkyMiles program terms and conditions. Delta has measures in place to monitor activity, and historically we have taken action, including closing accounts, in response to rule violations.”

We know that all airlines have teams to audit members’ accounts looking for those who might be breaking the rules and must also audit all the ways in which a member might try to sell their miles. The airlines, however, did not wish to share how many people work auditing the accounts, nor how many of their members are caught breaking the program’s rules, how many miles from members’ accounts have been deleted and what rules are broken most often.

While the programs are not willing to speak to us about their auditing practices, we occasionally hear from members who have had their accounts audited. Recently, an American AAdvantage member reached out to us asking if he has any legal standing to get his miles back when American Airlines took away more than two million miles from his and his daughter’s AAdvantage accounts, “… alleging we were going to sell our miles.” Randy Petersen, InsideFlyer Editor, responded to the question saying that the AAdvantage member might not have legal standing to get his miles back (citing the rules of the program and, “He who makes the gold makes the rules.”). When we reached out to the AAdvantage member asking how he thinks American found out about him attempting to sell his miles, he did not answer the question, but instead mentioned, “The real question is why did we accumulate 2,000,000 miles? … and the answer is because we could not use them.” He continued, “I tried as much as 12 months in advance to book a flight in any class of service to Iran and nothing was available. I gave up after four years of trying.” He has been in litigation to get his miles back and says he has thus far spent about $10,000 with thousands more expected to be spent before he has a resolution.

Another traveler told us that he tried to sell his Southwest Rapid Rewards points on eBay and, “… got a nasty letter from WN, not to do it anymore … eBay is bad about passing your selling and buying [to the] airlines.”

We have often heard from those who sell their miles that one reason they wish to sell is that they cannot spend the miles the way they wish. Other reasons members sell their miles often include statements like, “the airlines make enough money, why can’t I sell my miles for profit?” One frequent flyer who regularly sells his miles through a mileage broker said in an online forum, “I spend my life on an airplane, my job demands it, so I always end with a ridiculously high number of miles that I can never use, because I travel so much for work, I tend to stay home for my vacation. Let me just say that my company always flies me first class and pays a fortune for these tickets, so the airlines make a lot of money already. In return I earn miles, and not only do airlines make it nearly impossible to book the dates one wants for a decent amount of miles, but they also impose this absurd rule that states that we cannot dispose of the miles we OWN in whatever way we choose. Sure we can give them away, but God forbid should we ever make money by selling them, they will punish us.” He continued, “And we all accept our fate. Am I the only one who sees something wrong here? Who the hell are they to tell us what to do with something we own? Don’t they make enough money as it is?” Clearly, this is one frequent flyer who does not believe that the airlines own the miles.

“Other Consideration” or, Giving to Charity
We also asked the programs to clarify if giving an award flight to a charity is allowed under their rules. You would think that it would be allowed since the rules state that you can claim an award flight under anyone’s name. And giving to charity like this has been going on for decades now, but the rules from American state that the AAdvantage program does not allow this: “At no time may AAdvantage mileage credit or award tickets be purchased, sold or bartered (including but not limited to transferring, gifting or promising mileage credit or award tickets in exchange for support of a certain business, product or charity and/or participation in an auction, sweepstakes, raffle or contest).”

When asked, “According to the rules of your program, would it be allowable for a member to donate an award flight to be auctioned off for a charity?” Karen May, Public Relations Manager at United Airlines, responded, “No, but you can transfer miles into another member’s account, donate miles to one of several charities on our website (see https://secure.unitedmileageplus.com/CharityMilesSSO.jsp) or give miles as a gift.” Note that the ways in which United suggests MileagePlus members to give miles to charities includes a cost for the member to either transfer or gift miles.

Christa Poole of Aeroplan responded, “Yes, but the flight would be redeemed with miles so we always encourage our groups or accounts through Aeroplan’s Beyond Miles program to auction miles, not flights, to help raise awareness for their cause/charity.”

Our contact at Southwest Rapid Rewards stated that she was not able to answer our question; however, we did not see anything in the Rapid Rewards terms and conditions to think that the program would specifically state that members cannot give award flights to a charity. The rules state, “Member can use his or her points to purchase seats for themselves or others; however, the Member is solely responsible for making any changes to the itinerary after booking.”

Our survey of frequent flyers found that 15.15 percent of those responded have given miles or an award trip to a nonprofit organization.

Miles Brokers
While researching for this article, we asked frequent flyers several questions pertaining to selling their miles. An overwhelming 94.95 percent said they have not sold any of their miles. Of the few who have sold their miles, less than two percent sold their miles through a mileage broker while just over four percent sold miles to someone they know. Over 16 percent admitted that they have thought about selling some of their miles but were afraid of being found out by their frequent flyer program. Over 24 percent said they would never sell their miles because it’s against program rules.

-One person responded, “I know someone who consistently goes through a mileage broker and has been quite happy. I’ve never been in a position where I felt I needed the miles that badly, as I earn enough for my family’s needs on my own. But I understand the temptation…” While another stated, “I’d sell them if I could.”

If you google “miles brokers” you’ll get 30,200,000 results and will quickly see several websites dedicated to helping frequent flyer program members sell their miles in direct violation of frequent flyer program rules. Generally, members can get up to two cents per mile. And under the FAQ, you’ll typically see a question like, “Is this legal?” with an answer like, “While airlines prefer that customers use the miles they earn, there is no law restricting the sale.”

Why Sell? And What to Do If You Don’t Sell
There are a few reasons why a frequent flyer program member would wish to sell their miles. One reason, and probably the most popular, is that they have racked up more miles than they care to use and simply think having cash to spend as they see fit would be a better option. Another reason might be that the flyer has orphan miles in a program they don’t use as often–miles that fall short of an award redemption and they would like to realize some value from them before they are lost through non-activity in the frequent flyer program. And yet another reason is that the members become frustrated when trying to redeem award flights and simply want to give up the hunt and get what value they can from the miles.

If you find yourself in the first position of having more miles than you wish to spend and no desire to get back on a plane, you can take advantage of the various non-flight offers of the airlines, including auctions for once-in-a-lifetime events. And really, do you not have a friend or family member who could enjoy a free flight? (Think along the lines of, “be nice to your children because they will choose your nursing home.”) And if you wish to give to charity, most airlines have a program where you can donate miles to nonprofit organizations.

Another option is trading your miles (“legally” according to the airlines because they are collecting fees) through Points.com where you can either trade for other frequent flyer currency or you can redeem your miles into your PayPal account or for gift cards like amazon.com or Best Buy and others.

What do members think of the rules set down by the programs that members are not allowed to sell or barter their miles? We asked our readers, and a majority at more than 53 percent answered, “… the programs have every right to impose this rule,” followed by 34 percent who said, the programs, “should allow members to sell their miles,” with around 12 percent saying they don’t have an opinion about selling their miles. One frequent flyer wrote, “I have mixed views on this.
Aggregated miles impose a much stronger liability to the companies than non-aggregated or separated miles. The airline companies need to be able to earn revenues! Yet the ability to sell miles would be wonderful for consumers. Perhaps the companies could authorize the selling and take a cut themselves. And/or they could allow the selling of miles, but only up to a certain limit per year.” Another person responding said, “I think a secondary market in miles would make the miles of other members worth less.”

And finally, our survey asked, “Do you or your frequent flyer program own the miles in your account?” A majority of around 37 percent said, “I own the miles” while around 29 percent said, “My frequent flyer program owns the miles” and around 34 percent said they aren’t sure who owns the miles. One traveler said, “I’m sure in some small print, the airline will always find a way to remove our rights and own the miles,” while another said, “Good question. I think I do, at least as long as I don’t violate any of the program rules.” “I believe that technically, according to the legal fine print, they own the miles. However, I accumulate them according to their rules, so I certainly have rights and privileges of usage with respect to ‘my’ miles according to the rules that I have been set up,” another flyer said and another commented, “I understand that they own the miles per the rules, though I certainly don’t agree with this structure.”

Why Not Sell?
Why are the programs so against their members selling the miles they’ve earned? We contacted frequent flyer expert and blogger Gary Leff from View from the Wing, asking, “Why do frequent flyer programs have rules against their members selling miles?” He responded: There are really three things that forbidding the sale of miles accomplishes for a frequent flyer program.

1) Frequent flyer programs balance their revenue and costs. If members sell their miles, that’s likely unused miles that get used, sooner, and for more expensive awards. That means higher costs. And it means the program is spending money on someone that they don’t have a loyalty relationship with.

2) If miles have a market value–rather than remaining the property of the program, a mere rebate for travel spending, and a reward for loyalty–then there’s a great risk of taxation.

3) And frequent flyer programs want to set the price of their miles themselves–to the general public and to partners. A secondary market for miles undercuts their pricing power and business relationships.

It’s ironic that frequent flyer programs began wanting to reward a loyalty relationship with a customer, and so frowned on commoditizing that relationship–but United and Delta are now moving in the other direction rewarding purely economic transactions through revenue-based programs.

In the Courts
Through the years, there have been many court cases regarding the selling of frequent flyer miles; one such case was American Airlines vs. FrequentFlyerDepot.com (FFD) and Luxury Travel Source (LTS), which was decided in 2009 after years in court. As part of its case against LTS, American documented that the “LTS websites misrepresent the propriety of selling mileage credit and award tickets.” Specifically, according to SellYourPoints.com (LTS owned several websites), “There is no federal or state law restricting the sale, bartering or transfer of miles in 49 of 50 states (Utah being the exception).” And a disclaimer on MileageLink.com states, “It is totally legal to transfer miles to a third party. While the airline frowns upon the ‘selling’ of miles and certificates, it is currently being done around the world.”

Beyond the defense that these rules against buying and selling AAdvantage awards are being ignored by the enterprises in question is the argument that buyers of these awards. “… likely would have purchased tickets from American had they not obtained the void award tickets from FFD. Furthermore, they likely displaced legitimate AAdvantage members or American customers who would have purchased tickets had the seats occupied by travelers with void award tickets been available.”

Between May 21, 2005 and May 22, 2007, FFD bought 600,000 mileage credits from one AAdvantage member redeemable for six award tickets valued at almost $42,000, including four tickets routed through DFW International Airport. In another instance, they bought 860,000 AAdvantage mileage credits from another member and exchanged that for at least nine award tickets valued at almost $70,000.

And on yet another occasion, American charges that FFD purchased 440,000 miles, which were exchanged for four award tickets that American did not honor for travel because its investigation determined that the tickets had been sold and thus were void.

In an interesting twist to the case, American asserted the two principals of LTS sold their own miles (6,685,000 miles) between 2005 and 2007, which were redeemed for 62 tickets valued at over $500,000.

So, it’s easy to see with just these few examples, the dollar amounts that the airlines see when looking at cases like this. Regarding this particular suit, FFD is still in business and the website states, “Although airline policy states you cannot buy, sell or barter airline miles (that is, buying and selling miles is against airline policy), it is NOT against the law for you to buy or sell frequent flyer awards. We will be happy to address any questions or concerns you may have.”

Bottom Line
When you join a frequent flyer program, you are agreeing to that program’s terms and conditions, whether you read them or not, and the program expects you to abide by their rules. In the case of selling your miles, many members have done so without being caught. Many others have been caught and lost their hard-earned miles. It’s up to you to decide if the risk is worth the possible negative consequences. Only you will know if you’ll feel good or bad after you’ve sold your miles.

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