This article was published on the Internet by CNNfn May 27, 1999.
  Selling frequent flier miles
  If you want to sell your frequent flier miles, be prepared to pay the price May 27, 1999: 10:56 a.m. ET
  Author Unknown
NEW YORK (CNNfn) - The gray market for buying and selling frequent flier miles is getting a boost from the Internet, but if you enter it, be prepared from some turbulence from the airlines.

The late 1980s and early 1990s were the high altitude mark for coupon brokers, middlemen who operate in the currency of frequent flier miles.

"It made millionaires," said Randy Petersen, head of WebFlyer, a site devoted to frequent flier miles. "I know people who are still driving Rolls Royces because of what they did during that time."

Soon, more sophisticated airline ticketing procedures and other enforcement methods helped put the largest coupon brokers out of business.

However, the market never quite went away and now is seeing a surge again, chiefly among smaller operators.

"The Internet has brought a rise back in the business again," Petersen said.

Indeed, sites like Award Traveler offer surfers the opportunity to buy miles for a variety of domestic and international locations.

Breaking the rules

When you sign up for frequent flier miles with any airline, the fine print states you can't buy, sell or barter your miles, regardless of the circumstances.

The idea behind this is simple. The airlines use their frequent flier programs to reward user loyalty. They feel if you can start moving your miles around to other people and other airlines, you'd be defeating the purpose.

Airlines do provide other ways for others to enjoy the benefit of the miles you've racked up, according to Todd Clay, spokesman for Delta Air Lines.

You can use the miles you have accumulated and cash them in -- get an award, in airline parlance -- for someone else, he said.

"You can get an award and make sure it's in the name of the family member or friend or boss or whoever," Clay said.

However, the miles can't be given to another person and combined with that traveler's miles to receive a free flight. Instead, you have to hold enough to get one all on your own, he said.

Delta, Clay said, is keenly aware of the problem of buying and selling frequent flier miles and has an "ongoing process" in place to crack down on such activity.

Airlines have been aided by sophisticated ticketing computers that can track how people are using their miles.

They look for patterns that don't quite seem to match up. If you live in Houston and someone is using an award from you to fly from San Diego, it may trigger a red flag and the airlines may monitor your account more closely.

Airlines also use less modern methods as well, according to Tom Parsons, president of Best Fares Inc.

"They put a bounty out there," Parsons said.

"They'll tell their agents to keep an eye out for someone who may have gotten a trip by buying miles. Next thing you know, you're buying a one-way ticket home and the agent is getting a $50 or $100 reward."

If the airline suspects that you've gotten your miles in such a way, it often will have the ticket agent or security personnel query you at the gate.

Coupon brokers usually will buy your miles and shop them around for anyone who is looking for something similar. Therefore, you probably will never know who gets your miles if you sell them.

Airlines use this against you if they think you bought your miles. Since you are allowed only to give away your miles, it stands to reason that you would know the person you gave them to -- you wouldn't give them to a stranger.

Airline personnel may ask you about the ticket, who you got it from, and so on. If you can't tell them who gave it to you, their suspicions may increase and you'll find yourself facing a lot more questions.

Paying the price

If you buy or sell miles, you are taking a risk. The airlines have a number of options in penalizing you.

Most will freeze your miles account immediately, meaning you can't accumulate any more miles.

In addition, they can take away miles from your account as a penalty, often more than you may have spent on this one trip.

Airlines, however, don't necessarily view all buyers and sellers the same, according to Petersen.

The people who sell miles are, logically, the ones who often have the most to sell. These are people who fly often, exactly the type of customer airlines like to keep around.

These customers, in addition to corporate accounts which also generate larger amounts of ticket sales, may receive more lenient treatment than a leisure traveler with only 100,000 miles in an account, said Petersen.

The brokers may have the most to lose, but don't think they're the only ones who may get in trouble when they're approached by the airlines.

Often, the airlines will try to get the broker's customer list. If they find your name on it, you may face greater scrutiny from your frequent flier airline.

There are acceptable alternatives to bluffing your way past the ticket agent, however.

If you're within striking distance of getting an award, the carrier often will allow you to buy frequent flier miles from the airline itself. These are known as "buy-ups."

Generally, you can purchase up to 20 percent of an award in this fashion. For example, if a flight will cost you 100,000 miles, you can buy up to 20,000 miles toward it.

Most airlines charge about 2 to 3 cents per mile for these buy-ups.

The typical coupon broker price may be in the 1 to 2 cent range, although comparisons are difficult since the broker market is more of a supply and demand market, with the most popular awards priced higher.

The legitimate alternatives sometimes hold little appeal for the frequent flier, though.

"If someone's got 400,000 miles due to expire and it's a choice between $4,000 and the possibility of losing them, the person might take the money," Petersen said. "If he gets caught, he was going to lose the miles anyway."

-- by staff writer Randall J. Schultz Copyright 1999 CNN America, Inc. ALL RIGHTS RESERVED.



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