The Not-So-Obvious Risk of Award Tickets: Buying Miles, Award Tickets and AA Shutdowns

The Not-So-Obvious Risk of Award Tickets: Buying Miles, Award Tickets and AA Shutdowns

We recently wrote a post on why buying points and miles can make sense.  Our example involved buy Alaska miles for a business class flight on Emirates.  In this post we want to point out a risk when buying miles to book an award ticket. This risk was recently highlighted when American Airlines shut down a number of accounts and cancelled award tickets.

But first, a reminder of why buying airline miles can make sense.

When Buying Airline Miles Can Make Sense

Let’s say you want to fly business class on American Airlines from Los Angeles to London.  The cash price for the ticket is $4550.  If you book with award miles, the same flight is available for 115,000 American Airlines Advantage Miles.

From time to time, American Airlines will over a sale in which miles can be purchased for as little as 1.86 cents a mile.  The 115,000 miles needed for the London flight, can be purchased for $2139.

This results in two options

Option #1 – Give American Airlines $4550 for a cash ticket in business class.

Option #2 – Give American Airlines $2139 for the airline miles, and then use the airline miles to book the same business class flight.

It seems like option #2 is the way to go, a 50% savings!

Granted, this is a best-case example. American Airline miles are not always on sale, and 115,000 miles for business class from LAX to London represents American Airlines  “saver” availability, which is not always…  available.  But the point is that buying miles can sometimes make sense.

The point of this post is: Going forward, “Option 2” has highlighted risks.

AA Shutdowns Highlight a Risk

It turns out that tickets which are purchased with award miles, one some level, even though ticketed, don’t really belong to the customer.

American Airlines has been shutting down AA accounts (link), confiscating miles and cancelling existing award tickets which were purchased with AAdvantage miles.   They are citing abusive behavior, and that is a discussion in and of itself.  But watching this unfold highlights that airlines miles and the tickets purchased with them, can be taken away by the airline with relative ease.

American Airlines will sell American Airlines miles (and charge tax).  A customer can buy American Airlines miles.  But at the end of the day, the miles don’t belong to you.  People who are being shut down have received a letter that states:

“award tickets obtained through an “Exploitive Practice” are in violation  of the AA Conditions of Carriage and are not valid for travel.”

Using the above example, if they cancel your ticket to London, both the flight and the 115,000 miles disappear.  American Airlines keeps the $2139 you paid for those miles.

What About Other Airlines?

In our original post we discussed buying miles from Alaska Air.  Alaska Airlines has a line in their “Contract of Carriage” that allows them to cancel a ticket which falls under “abusive bookings” (Rule 7:D).  I’m guessing that other Airlines have similar language in their terms and conditions.

What Constitutes “Abusive” Behavior? Who Decides?

What if American Airlines determines that paying $2139 for the flight to London, is abusive, when in fact they could get $4550 if you had paid directly with cash?  In that case the customer is using an available avenue to save money but American Airlines considers it as fraudulently circumventing the system.

Does abusive behavior exist?  Yes.  But who gets to determine it?  If the answer is, the airline and the airline alone, then tickets purchased with miles are at risk for confiscation without easy recourse by the customer.

At this point, our focus is not on AA in particular, but the bigger issue of the fragility with which airlines points can be taken away. If an airline can decide that the customer has used the program in a way they did not intend, and as a result, confiscate miles and cancel tickets, that creates risk for those using the points and miles ecosystem.  This risk has always existed, but the recent AA shutdowns highlight the reality of it.

Conclusion

American Airlines is shutting down accounts and canceling tickets, and in some cases, it may be for good reason.  But this event highlights the fact that airlines miles, even if purchased by a customer, or earned by a customer, do not belong to the customer.  It also highlights a potential fragility for tickets booked with award miles.

We still think that buying airline miles can make sense in certain situations.  But going forward, we need to factor in this recently highlighted risk.

This Post Has 2 Comments

  1. What if in 99% of cases, the AA shutdowns are due to excessive mailer churning and/or brokering miles? The 1% would still have every right to appeal the decision and I’m guessing would eventually get the miles/account reinstated. Additionally, I find it highly unlikely that people were buying miles and also churning via mailers or were buying miles and brokering/selling those miles. The margin and logic just aren’t there. While I find your article to be pretty disingenuous, anyone that purchased miles, had the booking cancelled, would still be well within their right to file a claim with whichever bank they used to make the purchase.

  2. Brenton, thanks for sharing your thoughts. ⁣

    You make a good point by reminding us that in many cases, these shutdowns are likely warranted. I wouldn’t argue that. I also agree with your statement that the 1%, if adversely impacted, could have a good chance of getting their miles reinstated. ⁣

    The purpose of my post is to point out the element of risk. Even if 100% of the AA shutdowns are warranted, this serves as a good reminder that at the end of the day, AA, or likely any airline, ultimately owns and controls the airline miles. These shutdowns draw attention to the fine print that was always in the contract of carriage. When we book an award ticket, we are paying for that ticket with a currency that’s owned and operated by American Airlines.⁣

    The purpose of my post is to point out the element of risk. I’ll leave it up to readers to determine how big of a risk it is for them. For the “99%” who are churning and buying mailers, they may want to assign their risk level at 99% of experiencing adverse action. For the 1%, their risk may be close to zero. ⁣

    It’s a not-so-obvious risk, in that many casual flyers, may not know that the miles they earn, or in this case, the miles they buy, don’t really belong to them. We could argue that the 1%, don’t really need to worry about this topic, they having nothing to fear, the airline will treat them right. And the airline probably will treat them right. But what when push comes to shove, airlines control the miles and it should be taken into consideration as a risk. ⁣

    You make a good point that the 1% have recourse if an award ticket is cancelled. Your idea about filing a claim with a credit card company is also helpful. I join you in hoping that the 1% could “eventually” be made whole, but I would stand by comment that they do not have “easy” recourse. A process that involves disputes, inquires will not be easy. ⁣

    In any case, the shutdowns are a good reminder for me, that airline miles, and the award tickets purchased with the miles, belong to the airline company. Whether or not that should be a big factor or little factor, I’ll leave up the reader. ⁣

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