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Archive for Thursday, July 23, 2009

For some fliers, trading miles is the way to go

July 23, 2009

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How to trade frequent-flier miles

Web sites including Points.com and LoyaltyMatch .com let people trade frequent-flier miles from one airline for miles in another. The miles can also be traded for hotel-reward points, merchandise or cash.

How they work: On Points.com’s GPX exchange, users post trade offers including the airline and number of miles they wish to give up, and the airline and number of miles they want in return. They can also browse potential trades by airline, and click to accept a trade.

Cost: There is no charge for listing a trade, but Points.com charges both parties when a trade is completed. Fees vary with the airline from which miles are given up and the number of miles. For example, trading away 10,000 miles costs $130 on American or Delta and $100 on Continental.

Exchange rates: Chris Barnard, president of Points.com, says most trades are 1-for-1 — each side gets the same number of miles. But not always. This week there were several offers to exchange Delta miles for fewer American miles. Some looked like feeler offers, including a 30-for-1 swap that had not been accepted by any other user.

Not all airlines are covered. Ten airlines allow miles to be traded on Points.com: Aeroplan, AirTran, Alaska, American, Continental, Delta, Frontier, Icelandair, Midwest and TACA, plus the Intercontinental chain of hotels.

Your program: Check the terms and conditions to see whether your airline lets you trade or give your miles to someone else. Most airlines state that their miles cannot be purchased, sold or bartered outside approved channels.

— Scott Hintz needed more miles with American Airlines to book a free trip to Morocco this spring, and he had several thousand miles from another carrier that he thought might be just the ticket.

The San Francisco travel executive went online, found a willing trader for his Alaska Airlines miles and made a swap. In May he was roaming North Africa.

“I took miles out of some programs I don’t use and got some value out of them,” says Hintz, who calls himself “a miles junkie.”

Frequent flier programs have been around for nearly three decades and billions of miles go unused. Airlines used to prohibit swaps of frequent-flier miles — it’s still in the fine print of many loyalty programs. But now some are perfectly fine with exchanges like the one that Hintz made — they collect a fee on every trade.

Trading sites

Hintz used one of the little-known swap Web sites, Points.com, which operates like a crude stock exchange or commodities trading floor.

Users list what they’ve got — the number of miles and in which airline — and the number of miles they want in another airline. There is no charge for listing, but consumers on both ends of a completed swap pay a fee, most of which goes to the airlines.

Some trades are straight-up — 10,000 miles in one airline for 10,000 at another. But some traders put a higher value on some carriers, such as Delta and American, the two largest.

Another site, LoyaltyMatch.com, lets members sell miles or use them to buy merchandise.

Real benefits?

Travelers say mileage trades are a quick and convenient way to add miles in a snap.

But others say they’re a bad deal for consumers.

Tim Winship, publisher of frequentflier.com, a Web site dedicated to the use of airline miles, says at current fares travelers get less than 2 cents per mile when they redeem their collection for a flight.

“Keep that per-mile value in mind,” Winship says. If you’re paying a fee for the exchange, “then you’re kidding yourself. Usually when I look at these things, it ends up being a pretty questionable value for the consumer.”

Points.com says its trading forum, called Global Points Exchange or GPX, levies fees that match what the airlines charge to transfer or share miles within their own programs.

With American, for example, trading up to 5,000 miles costs $80, rising to $130 for 5,001 to 10,000 miles, and $180 for 10,001 to 15,000 miles. Trading Delta miles costs $30 plus a penny per mile; so exchanging 10,000 miles would cost $130.

Frequent-flier programs started in the early 1980s, when Braniff and American Airlines looked for a cheap way to reward loyal customers and keep them coming back.

From the beginning, airlines limited the transfer of miles. Executives at Points.com owner, Toronto-based Points International Ltd., which provides technology for many loyalty programs, told the airlines that allowing passengers to trade miles would make their programs more attractive and generate fees for the carriers.

Points International President Chris Barnard says the trades are a good value when compared to flying a lot, putting thousands of dollars on your credit card, or spending a few nights in partner hotels to earn miles.

Even critics of the trading programs see a few cases where they make sense: If you have leftover miles with an airline you rarely use; or if you are very close to earning a trip that you want to book right away.

In the latter case, they say, check with the airline — it might be cheaper to simply buy the needed miles or earn them another way.

Limited participation

One problem with the trading sites is limited participation. Points.com has signed up several big airlines, including American, Delta and Continental, but is still missing some big ones — including Southwest.

It is hard to tell just how much trading is taking place. Points International declined to give figures. Several industry experts think it is still tiny compared to the billions of miles in circulation — a valid conclusion based on the listings.

Barnard, the Points International executive, thinks trading miles will follow the course of swapping and selling other things online.

“As they get more used to doing this in other parts of the economy,” he says, “people will want to start doing this with their miles.”

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