10-year practice subject of survey


November 02, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- Are frequent flier miles ethical?

"The word is embezzlement. Period," said Richard A. Golden of Golden & Golden P.C. of Fairfax, Va.

"I do not consider it an ethical question at all," said Steve Pert, also of Fairfax. "I firmly believe the mileage and rewards should be enjoyed by the person who does the flying."

Confused? Peter Sharfman, a Chevy Chase resident, attempted to be judicious. "I believe a fairly clear line can be drawn between 'proper' and 'ethically dubious' frequent travel benefits," he said. A benefit consumed at the time it is provided (like a better seat) is not a bribe or kickback; a benefit consumed at a later date is "ethically dubious".

On the 10-year anniversary of American Airlines' 1981 innovation of frequent flier miles, a New York trade publication, Frequent Flyer Magazine (300,000 readers, each averaging 30 annual round trips a year) asked its subscribers whether the practice was ethical. About 200 people responded, including those mentioned above. Interestingly, more than a third gave an emphatic "no" (though all admitted using them).

The issue is hardly a matter of minor moral turbulence. Frequent flier mileage has become an astronomical business. According to statistics compiled by the trade magazine, there are 630 billion miles outstanding -- enough for 3 million one-way trips to the moon.

Those miles may be redeemed for more than 10 million "free" awards, though how many more is obscured by the airlines' Byzantine methods of granting trips. The controversy over frequent flier awards centers on those used for personal travel by people who got them while flying on company business. Theoretically, such awards should be considered compensation and taxed accordingly.

"Seven years ago the IRS announced they were taxable but then was never able to figure out a way to tax them," said Joe Brancatelli, executive editor of Frequent Flyer. "The IRS has basically thrown up its hands. That's how crazy this thing is."

Assigning a value to a frequent flier award may, indeed, be

impossible, given that the airlines have an almost infinite number of prices for a seat. Nevertheless, there is certainly some value being transferred, and travelers, perhaps during flight delays, are apparently giving the issue some hard thought.

The written responses to Frequent Flyer's query were "lucid, cerebral, impassioned and often quite lengthy," wrote Martin B. Deutsch, the magazine's editor and publisher.

About 35 percent of the respondents said that the miles were unethical; the same number said that they were just compensation for the grueling process of business travel. Most of the rest said they'd gladly swap points for better service and lower fares.

Those criticizing the practice tended to be short and brutal: "Like folding a $20 bill inside your driver's license when the cop asks for it," wrote one respondent.

On the other side, people tended to resort to sentiment or indignation. "They are small tokens to keep loyal traveling employees' spirits up when they are painfully aware that they are missing their children's developing years," whined one.

Perhaps the real problem with frequent flier miles has not been considered: They are not prevalent enough. Wrote Adriann Berger of La Habra, Calif., "In 20 years of secretarial service, I've yet to have a boss say to me: 'You've done such a fine job, here are some free airline tickets that I've managed to earn from your setting up my travel arrangements.' "

Free tickets awarded in 1990

United 1,200,000

Air 1,035,000

American 975,000

Pan Am 402,000

TWA 311,000

Continental 200,000

Southwest 168,000

America West 125,000

Alaska 87,000

Midway 50,000

Percentage of fliers on travel awards

USAir 5.8%

Pan Am 5.7%

United 5.6%

American 4.6%

TWA 4.6%

Alaska 4.0%

America West 3.7%

Continental 2.9%

Southwest 1.7%

Midway 1.2%

(As a percentage of the airline's total passenger miles)

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