As a basic rule: if you pursue preserving the full value of your air miles, the sooner you book, the better.
If you belong to those keen on hoarding their air miles, it's worth considering spending them now before they decrease in value, because the liabilities attached to frequent flier programs in the United States have rocketed during the lockdown period. Thus, the potential risk of devaluation remains high in 2021.
The pandemic resulted in a plentitude of unused reward miles
Recent LendingTree report reveals that U.S. airline giants – namely, United Airlines, Delta, American Airlines, Southwest, and JetBlue owe their customers a whopping number of air miles in the amount of $27.5 billion, that is 12% higher than the previous year. Such a significant jump is totally explainable by COVID-19 reality, as clients kept on accumulating and buy airline miles without being able to travel.
Unused air miles pose a liability for airline companies
As surprising as this may sound, credit card loyalty programs tend to yield more profit to the airlines than selling flights. Nevertheless, a considerable last year plunge in flights revenue led to $35 billion in losses in the whole American airline industry. Subsequently, in order to cope with the financial crisis, airlines have taken on loans, using their loyalty schemes as collateral.
Cutting costs wouldn't be an appropriate option for the airlines to pay that debt quickly since airline operating expenses have always been high. Consequently, loyalty programs become a ripe target. According to Bloomberg, airlines are likely to reduce the value of air mile points or reestablish miles expiration policy in an effort to strengthen their balance sheets. According to Jay Sorensen, president of airline consulting firm IdeaWorksCompany, devaluation is inevitable in light of current circumstances, particularly travel returning, suppressed demand, and a glut of miles.
Air miles tend to reduce in value over time
Over the years we witnessed the value of air miles shrink due to the steady increase in the number of points or miles it takes to claim a free flight. Dan Reed points out that, in fact, airline companies have been reducing the value of their air miles and points for many years now. It was a common practice before the arrival of pandemic. And then United devalued its miles in April 2020, proceeding with further devaluation last October. Delta implemented the same strategy last October and in February 2021. Southwest decreased the value of its miles by 6.5% in April 2021. Dan Reed also mentions there are a lot of experts predicting more similar moves to come. Furthermore, they may even be unavoidable and are likely to occur until the end of the year if there’s not another major outbreak of COVID-19 in the USA.
Nevertheless, that’s not to say that all carriers will dramatically devalue their loyalty programs. Obviously, airlines are unwilling to discourage customers (what is the concept of loyalty, really), that’s why they will presumably put limits on when and where you can book flights, instead. One way or another, it will impede your ability to find good deals.
Use your points at every opportunity
As a basic rule: if you pursue preserving the full value of your air miles, the sooner you book, the better. Otherwise, you should consider being flexible in terms of flight dates and your destinations in order to maximize your value, because it may become a bit challenging to find good deals.
