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Politics // Coffee Break
Jerry Coffee

The Value Of A Frequent Flyer Mile?

“You know, I think I was just born to turn left,” my wife Susan said jokingly, as we settled into our cushy seats in the first class cabin of the United Boeing 747.

“Born to turn left” has become a family “in” joke for Susan and me, coined on our first Honolulu to mainland flight together nearly twenty years ago, Many readers will recall the old giant 747s which were the airplane of choice for most of the major airlines on mainland routes. From the main entry door the first class section was to the left and the coach section was to the right. And most who travelled to the “big, big Island” frequently, especially for business, knew the layout like their own living rooms.

Flying to and from Hawaii has it’s pluses and it’s minuses. The minus: the inevitably long, long, seemingly endless flights just to get home. The plus: the frequent flyer miles that every flyin’ Hawaiian racks up faster than travelers of any other state.

As a professional speaker for the past 30 years with most of my gigs on the Mainland and elsewhere (Europe, Africa, South America, Japan, Australia) I’ve clocked more than my share of frequent flyer miles. I’m a 2K flyer on both United and American (K=100,000 miles), and probably another K on other airlines combined, so I guess that would make me a Half -Million Miler! … a dubious distinction since that automatically means I haven’t been home as much as I would have preferred. All of which is to simply bring the conversation around to Frequent Flyer programs in general – a subject I dare say is dear to the hearts of most Hawaii residents.

Over the years there have been many changes to the programs, most of which have been in favor of the airlines. Not surprising, really, considering the past decade has seen fairly frequent bankruptcies and survival mergers. The number of miles required for free trips and upgrades has gradually increased. The number of associated coupons for free or reduced-fee companion travel and free upgrades have decreased or been eliminated. In the beginning, Hawaii residents were exempt from most airline policies requiring a premium of extra miles needed for free trips and upgrades to and from Hawaii. That has not been the case for several years now.

Most frequent flyers have survived the fear of losing a large accumulation of miles when their favorite airline declares bankruptcy, as this has actually happened in only a limited number of cases. Even through mergers such as the recent United/Continental merge, members of the two respective frequent flyer programs lost no miles.

Just to totally capitalize on the “loyalty” aspect of the programs, most are augmented by credit card companies associated with each airline. Every dollar charged on the card equates to one mile added to the mileage account. Frequent flyers with special status levels based upon total miles flown, can earn double or triple miles.

For business travelers who accrue large numbers of miles on trips actually paid for by their company, corporate policies vary. Some corporations require that all miles earned on such trips go into a corporate pool to be used by others on future business travel. Others, in deference to the hardships and family separations caused by business travel, allow travelers to maintain such miles in their personal accounts for future personal travel.

Guess which ones are voted highest on the list of “most desirable companies for which to work”?

Several years ago the Internal Revenue Service ruled that miles accrued – even though they could equate to cash when redeemed – were not taxable because the recipient really does not own them; they are simply accrued and held in an account administered by the airline. And by rules of most programs could be diluted, withheld, or even revoked by the airline. Not to mention the difficulty in determining the value of an accrued mile. Nevertheless, mileage program expert Christopher Elliot wrote in Newsweek magazine (March 19, 2012) “Citibank … offered between 25,000 and 40,000 ‘free’ American Airlines miles to new customers, then surprised account holders by reporting points to the IRS. Citi valued the bonus miles at about 2.5 cents each, which translated into roughly $350 in tax liability for some consumers.

“In recent statements, however, the agency has warmed to the idea of taxing airline miles from new bank accounts.”

Travel columnist Ed Perkins has posed the question, “is Citi’s evaluation of a mile fair? No, it isn’t.”

A recent survey by “NerdWallet” (!!!) suggests the current value of a travel mile is less than a cent. In fact, the fine print of your mileage program suggests the miles are totally worthless because they “do not constitute property” of the member.

As we might expect, this will all be settled soon as Citibank is now facing a lawsuit by customers who say the valuation of 2.5 cents per mile “is grossly unfair and deceptive.”

The outcome of this lawsuit could be a really big deal for Hawaii residents. I’d venture to guess there are more frequent flyer members per capita here than in any other state, and we need to stay conscious of issues effecting our mileage accounts, and the vagaries of the IRS toward them.

Regardless of the outcome of the aforementioned law suit, It sure doesn’t take a rocket scientist from PMRF Kauai, to figure out the cost per mile of a ticket to Las Vegas. And any time we can get there with miles instead of dollars, hey, it’s just more cash for jackpots, yeah?

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