What do the struggles of US Airways mean for future travelers and frequent fliers? We asked the experts.
US AIRWAYS MAY HAVE received the cash infusion it needed this week to continue flying through June, but that won't keep folks from worrying about their upcoming travel plans and precious frequent flier miles.
Nor should it, says Tim Winship, publisher of FrequentFlier.com. Fact is, despite the bail-out by the Air Transportation Stabilization Board (ATSB), the skies are anything but clear for the troubled airline.
A major dark cloud: Delta's new, cheaper fare structure. Delta's bold slashes to its fares (in some cases, fares have been cut by 50%) will cost US Airways millions of dollars in lost revenue, says Vaughn Cordle, chief analyst for AirlineForecasts, an industry consulting group in Washington, D.C. Making things worse are JetBlue Airways and Southwest Airlines, which have sped up the introduction of lower fares in US Airways' markets. And if the airline's mechanics, baggage handlers and cleaning crews turn down the new labor contract drafted by US Airways' bankruptcy court (voting ends January 21) and their union authorizes a strike, things will only get worse. "Any job actions at US Airways would put them in liquidation," Cordle says.
In the rest of the industry, skies aren't so blue either. United Airlines and ATA continue to operate under Chapter 11 bankruptcy, and Cordle predicts that the recent price cuts at Delta may cause a whole new line-up of carriers to join the group, including Delta, Continental, America West and Independence Air. It's important to note, however, that none of these airlines are likely to liquidate.
US Airways is reassuring its customers that they can book its flights with confidence, but industry experts warn travelers to be cautious. "We're not going to be told in advance if US Airways will liquidate," says Winship. "They will swear to the last second that everything is fine and then the next minute they're out of business."
So what does this mean for consumers? Here's some advice for future travelers and members of the US Airways frequent flier program.
Cash In Those Frequent Flier Miles Now
The US Airways Dividend Miles frequent flier program has 25 million members, according to the airline. Winship's advice to all of them is to redeem their miles as soon as possible. "Those miles are simply at too much risk of disappearing outright," he says.
In the past, what happened with an airline's demise was that another airline took over its frequent flier program. But now, as other major airlines struggle with their own financial problems, no one could afford to take over US Airways' frequent flier program, Winship explains. "I put the chance of another airline acquiring the miles at this time at 5%," he says.
The good news is, redeeming those miles appears to be easy these days. With the help of FrequentFlier.com, we polled 150,000 fliers about their recent experience with the US Airways miles program: Almost all of the responses we got were positive. Renae Savicki, a 53-year-old nurse auditor in Las Vegas, for example, wrote that for the first time in 10 years she was able to book a free return ticket to Lehigh Valley, Pa., from Las Vegas without any problems. "I have never had such an easy time getting a free ticket out of (US Airways)," she raved.
But what if you don't need to fly anywhere right now? Randy Peterson, publisher of the frequent flier Web sites WebFlyer.com and InsideFlyer.com, suggests using your US Airways miles to book flights on one of its partner airlines. US Airways is a member of the Star Alliance, which means its Dividend Miles members can redeem their awards on other airlines including United, Canada Air and Lufthansa. That way, "if US Airways were to liquidate, now you have some rewards you can still use," he says. And since you can book as far as nine months ahead, he adds, "if US Airways does recover, you can redeposit your rewards back into your US Airways account. It's kind of like cheap insurance."
If you don't have enough miles for a free ticket, consider redeeming for magazine subscriptions, which start at only 400 miles. That might not sound terribly rewarding if you have 15,000 miles, but at least it's a good value for your miles, according to Winship. Alternatively, you can consider donating your miles to a charity. But don't expect a tax deduction.
As a last resort, you can exchange your US Airways miles for points with another loyalty program, although this will cause you to lose approximately 80% of your points, according to Peterson. Use the free mileage converter at WebFlyer.com to see what your available options are. Stay away from Web sites like Points.com, which convert your points at an 85% to 95% loss and charge a fee for the exchange to boot, says Winship.
Easing Flying Fears
If you've already purchased a ticket on an airline that stops flying, you do have options. Section 145 of the Aviation & Transportation Security Act (ATSA), which Congress passed in the wake of September 11, 2001, specifically requires airlines to honor the tickets of a failed airline on a space-available basis. This means that -- space permitting -- you should be able to get on another airline's flight to your destination. The bill further specifies that in cases like that, the new carrier is not allowed to charge you more than a $25 fee in each direction.
If there aren't any alternative flights available and the ticket was bought with a credit card, you're protected by the Fair Credit Billing Act, which says consumers can refuse to pay for services they haven't received. You'll have to dispute the payment with your creditor within 60 days. Those who've bought their tickets with cash will need to file a claim for a refund with bankruptcy court.
Keep in mind, though, that all these consumer protections do not apply for tickets purchased with frequent flier miles. Still, Winship says, chances are that other airlines will honor your ticket if they have available seats. "It's an opportunity to showcase their services to new customers," he says. "It's a marketing exercise."
Given these consumer protections, some folks may still feel comfortable booking travel -- even far off travel -- with US Airways. But if you're headed to an important event -- say, a wedding or college graduation -- Kathy Sudeikis, president of the American Society of Travel Agents, recommends that you consider booking on another airline, even if it's more expensive. After all, if US Airways does liquidate, and "you go the space-available route and they don't have seats, you're going to be incredibly stressed out," she says.
And for most folks, flying is already stressful enough without this added hassle.