This article was published in the November 1999 edition of Inside Flyer magazine.
  Milking The System
  Barterer Beware; Buyer Be Scared!
  Author Unknown
 
Scour the big-city Sunday newspaper classified sections and you will find plenty of opportunities to sell your miles. Chat to businessmen and businesswomen and somewhere along the line, the thought of selling their miles may have occurred to them; talk to them a little more and they may actually have bartered a ticket or two. Although it is pure speculation how big an issue this is, the fact that expiring miles are no longer a looming threat for most frequent flyers should have some impact on the business of bartering or selling miles.

Before you even begin to think about dabbling in the frequent flyer underworld, however, all airline program membership guides state emphatically that the selling of miles is prohibited. For instance, the Delta SkyMiles membership guide states:

"The sale, purchase, assignment or barter of Delta SkyMiles Award Travel Certificates and Tickets has been held to be illegal." Illegal may be a bit of a misnomer because this practice is against program rules, but not necessarily against the law.

On the other hand, mile upon mile is building up in member acounts and many frequent flyers have at least a quarter of million they could part without much ado.

"I think the programs are kind of stretching their regulations to the limits with that rule," says reader Matt Koltnow. "If I

choose to change in miles for a two-ticket award with the proviso that my travel companion is going to pay for our hotel room (or change in points for that) then that's my prerogative. Or even trade awards in my program for ones in his. I don't think that should be a problem."

Says another reader: "I have done favors for people, legitimate business, and taken a ticket in exchange. Since I am interested in professional counselor ethics, the notion of accepting tickets in lieu of nothing or something taxable has posed a deliemma for me. A free ticket is not taxed. The party parting with the miles needed for the ticket were not going to use them anyway and benefited by using dollars to pay me. The ethical rule is 'do no harm' and what is the harm in it? Also, I did this in the era of expiring miles which I always felt were unfair and discriminatory."

But bartering miles or points is not without risk. One reader we spoke with admired a television while at a trade show and made a verbal deal to buy two first-class tickets to Australia for the trade show exhibitor and his wife. In return he would get a 42-inch plasma flat screen television worth $15,000. The trade show exhibitor and his wife enjoyed their trip to Australia but the television wasn't delivered, though it eventually arrived.

"It wasn't a nice feeling. If you don't get paid you have no comeback," the reader told us. "Calculating at 2 cents per mile, I got a $15,000 wholesale $8,000 TV for $3,600 tax-free."

This frequent flyer understood the risk he'd taken, though: "With two-and-a-half million miles on account it would not have been that great a loss," he said.

The bartering doesn't end there. Rather, it has evolved into an elaborate enterprise involving a large group of people who barter for lift tickets for ski resorts, hotel rooms in Hawaii, software and all sorts of electronics, including VCRs and DVD players.


No Mercy Awaits

Although on the surface it appears programs turn a blind eye to such bartering as it is very difficult to prove, most programs have a system in place to catch barterers. What happens if you are caught? The larger airlines will show no mercy. United Airlines Mileage Plus had a recent case in which an award was bought by several siblings for their parent's 25th wedding anniversary. When the parents arrived at the check-in desk, staff were alerted to the flagged ticket and immediately confiscated it. "It was embarrassing for all parties involved," said Diane Zielinski, service center manager for United Mileage Plus.

If travelers are caught with "flagged" tickets in mid-journey, they are generally presented with a bill for their trip home. There are no deals cut for the more seasoned travelers, according to Zielinski. "We can be more candid with Premier members. Premier members should know better," she said. "We try to take the appropriate course of action."

It is a slightly different story with smaller programs. Perhaps a smaller program can't afford the luxury of being as harsh. Brian Johnson, service center Manager for Alaska Mileage Plan, told us, "We are not concerned with the people who buy the ticket but with the member who did it (the bartering), they know the rules; they have the program guide." Johnson said the program is not going to "blast someone who wasn't advised of the deal."


The FlyerTalk Take

Regular posters on FlyerTalk, the bulletin board of Inside Flyer's sister site, webflyer.com, are either program-abiding or reluctant to talk about bartering. Our post on the busiest FlyerTalk forum soliciting responses received only one reply from someone who asked: "You can't really expect people to publicly admit to it?...and lose all the miles we've so diligently gathered."

On another forum, the Coupon Connection, frequent flyers can swap or offer legitimate coupons. On a daily basis the flyers offer what they cannot manage to use before the expiration dates. Take TravelWeary's post looking for an Alaska Air Boardroom pass, as her travels took her off her beaten flight path. Two hours after her original post, an offer was made.


What constitutes bartering?

It can be difficult to determine exactly what bartering is. What is the difference, for instance, between giving two dometic tickets to your brother-in-law in exchange for his spending the weekend helping you put in a new garage door? Likewise, you and a complete stranger could swap out two domestic tickets.

As reader Koltnow points out: "Since qualification for elite levels in most programs requires a lot of paid travel, it's understandable that someone might want to give out awards for free travel to friends. If he gets something in exchange, it should not be against the rules. The carrier in question should be happy to get to introduce another potential customer to its product."

Says another reader: "I assume that the actual miles bartered, sold etc., are small potatoes and like bootleg CDs, enhance regular purchases by fanning the flames of travel addiction. I think the airlines have bigger problems than whether every award ticket is kosher."

We're not sure if the airline programs would agree on this one, but the changes in mileage expiration policies made by several programs recently could mean the practice of selling or bartering miles may lessen. Since expiring miles are out of the equation, members may not feel as pressured to use their miles. Before it was better to get $3,200 for 200,000 miles than to let even a portion expire.

Southwest Rapid Rewards is the only remaining airline to have such a tight expiration policy. Rapid Rewards award tickets are probably one of the easiest to sell in the industry because of their simplicity, They do not have to be purchased in advance, there are no overnight stay restrictions and they are valid for one year from the date issued to the frequent flyer. While Southwest's award tickets do not have the bounty first class transatlantic or transpacific flights command, the airline uses an internal fraud department to monitor newspaper classifieds and various Internet sites.

"We don't allow the sale of awards. Yes, we do have people who try to buy and sell, we think we have a lower incidence," said Southwest spokeswoman Linda Rutherford. "It is not as prevalent as the sale of miles-the only value in miles if you can't use them is to sell them as they are not transferable. We try to make it easier to transfer the ticket. If we made it more difficult, members may feel as if they have to sell to get the perceived value. Selling is a hassle and by advertising you can be caught for fraud."


Online Trade

Air Bank, SmartFlyer and Award Traveler are a few of the many agencies out there that will gladly buy your miles. You have zero comeback if anything goes wrong and it is not as if they give you a good rate. Award Traveler often pays between 1 and 1.6 cents per mile. For example, depending on the airline, Award Traveler may offer $520 for 40,000 miles or $3200 for 200,000 miles. Award Traveler will reimburse any ticketing fees and airport taxes that may be paid to the airline plus any courier charges. Award Traveler pays $240 return for Southwest Airlines Rapid Rewards Award Tickets with at least two months remaining before expiration.

Since the majority of awards redeemed are for domestic travel with the same family name, it is easier to spot anomalies. Brokers tend to hone in on the domestic short notice market rather than the heavily audited international market. Although the airlines may feel as though it is outright theft to sell or barter miles, brokers do not feel the same way. One broker we spoke with on the condition that he remain anonymous said: "I see it as the airline has created a program to get free tickets...All the customer is doing is giving it to someone else. I see it as the customer holding them to the promise. I feel perfectly justified."

Gone are the days when members could safely sell an award. Even though agencies abound on the Internet, programs have become masters at detecting unusual activity within a members account. With the vast majority of tickets redeemed for domestic travel and for the same family name as the account holder, it doesn't take too much to be alerted. There are members who give tickets to a nanny on a regular basis or to a mother-in-law who lives out of town to attend a wedding or family reunion. The true bounty is with the long-haul, first-class tickets. Few frequent flyers are altruistic enough to give away two first class tickets and the airlines are more aware of this than anyone.

One of the predicaments that programs find themselves in is that the flyers who barter are the very flyers the airlines cannot afford to lose. Despite this Catch-22, United's Zielinski assures: "We are very careful. We can't discriminate between a general member and a 1K member. If members violate the rules of the program we can't make any allowances."

Many members obviously never make it to the fine print as evidenced by calls fielded to our parent company, Frequent Flyer Services. Award Planner Nicki Vernier explained: "Most callers are shocked to hear that the airline can forfeit all your miles if you sell or barter a ticket."
 

 

 

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