Air miles are becoming very valuable as flight prices and availability become uncertain due to a number of factors. A new report suggested that frequent flyers are now increasingly using their miles to protect themselves from travel disruptions by booking multiple flight options for the same trip.
Since these award tickets usually have low or no cancellation fees, travellers are able to cancel extra bookings at the last minute without much loss, according to Bloomberg. Before the Feb. 28 war between the United States and Iran, smart travellers were usually saving their miles to upgrade to premium economy, business or first class. Now, they are using miles just to secure economy seats.
However, this is causing problems for airlines, pushing them to re-evaluate the worth of these offerings. Due to the looming uncertainty, seats reserved for mile redemptions are filling up quickly, making it harder for other passengers to book flights. Experts, who flagged this practice as “ghost bookings”, noted that the trend is likely to continue while geopolitical conditions remain unstable and airfares stay high.
The continuous strikes in the Middle East has resulted in widespread disruption to flights. Pressure has increased further as the critical shipping route, the Strait of Hormuz, responsible for about 20% of global oil flows, remains blocked amid the conflict. These factors have resulted in less number of reward seats available, coupled with high air-fares.
“Volatility is the new norm and risk mitigation is key,” Leigh Rowan, founder of Savanti Travel, a high-end travel agency, told Bloomberg. “We consider miles an asset class.”
According to Bloomberg, Rowan is advising his clients to use their air miles to book multiple flights to the same destination. This helps them protect against rising airfares and possible cancellations. It also increases their chances of reaching their destination on time.
“Using miles at a time like now is like low-risk insurance,” said Rob Burgess, founder of travel loyalty site Head for Points. “They give you flexibility, and right now that flexibility is extremely valuable.”
This is evident as businesses such as HeyMax, a travel rewards app, reported that transfers into Cathay Pacific's Asia Miles rose 130% after the conflict began on Feb. 28. This followed as the airline expanded services to fill gaps left by Gulf carriers. Transfers into United Airlines Inc's program surged 800%, made possible due to the facility of free cancellations and easy mileage redeposits during the same period, the report added.
How Airlines Are Dealing With This?
To deal with this issue, some airlines have already started limiting speculative bookings. Etihad Airways already tightened its award rules last year by adding a 72-hour cancellation cutoff, fees and a 25% mileage penalty for some changes. Just before the Iran conflict, United Airlines also updated its terms to ban multiple tickets used to bypass pricing and inventory controls. Qantas Airways also uses automated systems to detect duplicate bookings, Bloomberg report added.
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At the same time, airlines and credit card companies are lowering the value of air miles. American Express recently reduced conversion rates to some airline partners, including those of Cathay and Emirates Airline. Cathay Pacific is also raising award prices again in May, its third increase in under three years, the report said.
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