Dividend Miles: Use 'em or lose 'em?

Continuing uncertainty about the future of US Airways has many readers up in the air. Several have written recently, wondering how their travel plans and Dividend Mile accounts will be affected if worse comes to worst and if financial collapse forces Pittsburgh's still-dominant carrier to cease operations entirely. Only Rip Van Winkle will be surprised to hear that the carrier is in deep trouble. In an effort to win concessions from its various unions, the company's latest management team is predicting dire consequences by as soon as mid-September, when payments on government loan guarantees come due. Unable to meet those obligations or to attract new financing, one scenario foresees a Chapter 7 bankruptcy, which would basically mean lights out, end of game. All US Airways flights would be grounded where they are, all travelers en route forced to find another way home and, eventually, all assets sold off in an attempt to satisfy creditors. While the likelihood of that possibility should not be ignored, it is by no means a certainty. In fact, even while predicting doom, US Airways is publishing schedules, making reservations, and taking money for flights well into the future. Recent promotions of a new hub in Fort Lauderdale to serve Caribbean and Central American destinations doesn't speak of a company getting ready to shut everything down. Just this week, they are promoting GoFares to Guatemala, Jamaica, Panama and El Salvador for $174 each way for dates in February 2005. Perhaps the unions will do what they have to do to keep getting a paycheck. Perhaps the federal government will extend the due date on the loan. Although there are plenty of competitors that would love to see US Airways dry up and blow away, it might make bad news in an election year. The possible demise of US Airways has made many headlines over the years. Despite all the dire predictions, I'm betting there's light at the end of this tunnel. Does this whole situation seem ambiguous and slightly surreal? No wonder some bettors are taking wagers on which entity goes bankrupt first, US Airways or the city of Pittsburgh. The truth is that no one knows what's going to happen. So what's a traveler to do? First, stay calm. If you are making plans for a trip, US Airways is still likely to be our airport's primary option to most destinations, even with the drastically reduced service schedule the carrier is introducing over the next few months. By November, there will be some 240 US Airways daily departures from Pittsburgh International, vs. fewer than 80 for all the other carriers combined -- unless it ceases all operations. So while three-quarters of the options will be US Airways, the safer option would be to book a routing on one of those other carriers. If that's your thinking, don't forget that United Airlines is operating in bankruptcy and Delta's management is admitting that may be possibility for them, too. If there is a meltdown, the good news is that since US Airways is still a participating member of the Airline Transportation Association, passengers holding paid tickets will not be stranded en route by a bankruptcy. Under Section 145 of the Airline and Transportation Security Act, domestic airlines are obliged to accept tickets of a defunct carrier to return passengers whose trips have been interrupted to their starting destination on a space available basis, although they may charge a fee of $25. That is not to say there won't be confusion, delay and inconvenience, but at least you'll get home eventually. This benefit applies to passengers with paid tickets and confirmed reservations. Providing proof may be more difficult for passengers traveling on e-tickets. That's why it's always wise to print out and carry a copy of your airline-issued reservation or itinerary whenever you travel. These days it's almost always possible to visit the airline's Web site and print out these documents on your computer the day before departure. Also note that these DOT protections do not apply to foreign airlines. The prospects of a US Airways meltdown will be more problematic for people who have bought tickets but haven't departed yet. Each paid airline ticket is essentially a mini-contract between the carrier and the passenger, but unfortunately, when a carrier goes belly-up, getting back any advance payments will probably entail joining a long list of low-priority creditors who may eventually see a much-diminished return on their money. Paying for tickets with a credit card does provide some protection and recourse under the U.S. Fair Credit Billing Act, but the specifics also vary with different cards and issuing banks. MasterCard and Visa are usually protected, but American Express cards don't provide any bankruptcy coverage. Ditto for transactions made on debit cards. You can buy insurance to protect against trip interruption and cancellation, but also be aware that coverage may limited if a travel supplier declares bankruptcy. TravelGuard, a large underwriter of travel insurance, publishes a list of companies whose finances it deems too precarious to insure against bankruptcy (www.travelguard.com). It's somewhat reassuring that US Airways does not appear on this roster, while United Airlines and Air Canada do. While that can always change (US Airways was on from August 2002 to April 2003), you'll have protection for policies issued before any changes take place. Frequent-flier miles are another issue all together. There are no guarantees that your accumulated miles will have any value at all if an airline is dissolved. In the past, the assumption was that other carriers would be glad to honor mileage credits of a defunct airline to win customers, but that principle has not been tested in recent memory. Several of the other major carriers are shaky themselves, and it's questionable how willing they'd be to accept a flood of non-revenue-producing passengers, especially since they are all carrying many millions of unredeemed miles from their own programs. So if you're sitting on a large cache of Dividend Miles, you'd be well advised to find a way to use them, or face the possibility of seeing them become valueless if US Airways calls it quits. Getting mileage upgrades and free tickets on-line is still easy and convenient, and perhaps having a ticketed reservation will be better than nothing. Obviously a rush of travelers requesting free tickets won't do any good to the struggling carriers' bottom line, but these accounts do represent past commitments it has made to its customers. Options other than using them for a US Airways ticket for yourself or an immediate family member include trading them in for tickets on another of the Star Alliance member airlines. You can use them to buy certain merchandise and other travel packages offered to Dividend Mile members. You could donate them to several organizations that use the flights for charitable purposes. Finally, you could file your last Dividend Mileage statement somewhere along with your US Airways stock certificates, as worthless mementos of a once-great company, relics of what Pittsburghers will probably remember as the Golden Age of air travel. Or maybe not.
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