ON BOARD WITH RANDY PETERSEN

Randy Petersen EQUAL PROTECTION FOR "FREE" TICKETS
July 2003
by Randy Petersen

Do you realize that nearly eight percent of all people flying on U.S. airlines are traveling on free awards? When the government extended the Aviation and Transportation Security Act to protect passengers ticketed on failed airlines (a consumer protection idea introduced following the events of 9/11) until February 19, 2004, a looming question remained: Would this protection extend to award travelers?

Government officials have given a variety of answers to that question-none of which is entirely satisfactory. How can an industry with over 80 million U.S. members, that accounts for billions of dollars in unique revenue (including hundreds of millions paid directly to the government) and that last year awarded nearly 20 million free airline tickets have no consumer protection?

The issue is plain: If a U.S. airline fails, will you or will you not be able to take a planned award trip?

When the Aviation and Transportation Security Act extended its protections to travelers holding tickets on an airline that suspends, interrupts, or discontinues service due to insolvency or bankruptcy, the travel industry got a positive shot in the arm. In an era of doom and gloom, travelers needed all the confidence they could find. By promising passengers that they'd be safe from the vagaries of the airline industry, congress provided some of that confidence.

But for any policy to work and be effective (in the private or public sector), all matters need to be addressed and definitive answers need to be available. We need to know, once and for all, if award travel is protected.

Those who would argue that "free" travel should not be afforded the same protection as paid travel need to understand that ticketed award travel is anything but "free." Depending on the program, upward of 60 percent of the miles earned today comes from non-travel sources. Frequent flyers "pay" for their miles every day through credit card purchases-it's not just about sitting on a plane anymore. Frequent flyer programs have changed so dramatically over the years, in fact, that they are now essentially a popular variation of pre-paid travel.

And there are millions of other reasons-751 million, to be precise. That's what the U.S. Treasury Department has collected from the implementation of the 7.5 percent tax on frequent flyer miles sold to partners of programs beginning in 1998. In 2002 alone, that total was $152 million. "Free" travel? Not quite.

And there are at least two other ways in which members of these programs have provided revenues to the government. Awards have also been saddled with security fees since 9/11. These fees are paid in advance of travel. In addition, select airports collect "Passenger Facility Fees" for award use.

There really can be no argument that members of these programs have not earned the right to equal protection under the Aviation and Transportation Security Act. Washington needs to recognize the very real financial contributions of award travelers, and extend to them the same peace of mind that revenue-ticket holders enjoy.

You can contact Randy Petersen at randy@insideflyer.com.

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