I don't know how most people define "frequent", but I fly a few times per year and don't belong to any frequent flyer programs... am I missing out on something big? I've heard, somewhere, that frequent flyer miles are the second most in-use currency in the world, second only to the US dollar, but I've never come across a plan that really sounds like it would be worth the effort to join. Are my flights just not frequent enough?
Gary at Marginal Revolution has a piece about the true value of frequent flyer programs and gives several examples of major airlines being saved from or financed through bankruptcy purely to preserve the value of their frequent flyer programs for the credit cards they're tied to.
# When United entered bankruptcy, BankOne (since acquired by JP Morgan Chase) provided $500 million in debtor-in-possession financing. The bank needed the airline to survive because their most profitable credit card product is the United Visa. JP Morgan has now stepped up as a major provider of United’s bankruptcy exit financing.# American Express pre-paid the purchase of $500 million worth of Skymiles to try to keep Delta out of bankruptcy. Again, an airline was kept afloat because it was needed to sustain a credit card business.
# American Express required that Delta make its first action in bankruptcy a request to the Court to reaffirm its frequent flyer obligations, just as United had done in its first bankruptcy action.
What's more, when spun off as an independent corporation, a frequent flyer program can make more money than the airline it's tied to. There's something strange going on here; hopefully someone can figure it out.
Update:
For you real frequent flyers, here's a cool Yahoo tool that lets you find the cheapest places you can fly from where you are. Change the airport code it find cheap fares from anywhere to everywhere.
Southwest's program requires eight round-trip flights per year, IIRC. The people who really cash in on those are business travelers.
Perhaps one advantage to these programs involves taxes. For a business traveler, frequent-flier points amount to under-the-table compensation: The business deducts the full cost of the plane ticket, but the employee walks away with a valuable personal right to free air fare on which he doesn't pay tax.
Maybe some day the IRS will crack down on this. And when they do, they're sure to win. It's fundamental tax law that as a general rule non-cash transactions aren't protected from the income tax.