20-40% chance of losing United Frequent
Flyer Miles if you do nothing
The key news over the past week has been the US government's third and final refusal to guarantee a billion dollar plus loan. This means that United Airline's only hope for emerging from bankruptcy is obtaining financing from the private sector.
First--let me reassure you that United will not disappear anytime soon. The airline has sufficient cash to operate for at least one more year, giving its executives time to sort out the significant challenges it faces AND providing you time to set up a plan to use your frequent flyer miles.
I predict one of four scenarios, and have assigned probabilities for each:
- United obtains private financing provided it pares back
costs even further, which will almost certainly require
more salary cuts and possible union resistance. However,
success under this scenario would place United in the
best competitive position relative to the other majors.
Probability 40%
- United obtains private financing without further cost
cuts, and needs to revisit bankruptcy court within
another 1-2 years.
Probability 20%
- United is liquidated, and a private firm familiar with
financing airlines cherry-picks United's best assets
(including prime routes and aircraft), possibly honoring
frequent flyer miles in an attempt to retain the loyalty
of United fliers.
Probability 20%
- United is liquidated, and ceases to be an operating
entity.
Probability 20%
There you have it. Certainly these are "wild" predictions without much to go by in terms of precedents, but I do want to help those of you with United frequent flyer miles get a sense of risk. My guess is a 20-40% chance you will lose all your frequent flyer miles if you do nothing in the next 12 months.
So, let me tell you what I am doing with my United frequent flyer miles (United has been by first choice carrier for significant amounts of business travel over the past eight years). I plan to redeem my United frequent flyer miles for international tickets early in 2005, and have already made my reservations. If all looks good early in 2005, I may book some additional tickets on United partner Singapore airlines for late 2005--but note that partner airlines may or may not honor an award if you use frequent flyer miles from a carrier that has ceased operations.
Bon voyage -- Theo
Dr. Theo Brandt-Sarif
9108 Hillboro Drive
Los Angeles, CA, 90034-1125
United States