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Can You Sell Frequent Flyer Miles?

SmarterTravel

Airlines insist you can’t sell frequent flyer miles or rewards, and courts in the U.S. have generally backed this claim. But a court in Sao Paulo, Brazil, just ruled that frequent flyer miles can be sold, and it ordered American Airlines to reimburse one traveler for the tickets the airline canceled after citing a violation of the airline’s rules.

Could this change things? Don’t get too excited, yet: A Brazilian court’s decision is unlikely to impact American’s frequent flyer program rules or any other airline’s rules. But the precedent is interesting, and the legal rationale could, conceivably, be applied in other countries—hopefully, ones that have more clout with U.S.-based airlines than Brazil does.

The Case for Being Able to Sell Frequent Flyer Miles

The idea of selling frequent flyer miles has an interesting history. To help win over lost customers after an airline strike in 1977, United handed out simple coupons to travelers as they deplaned their flights. The coupons were good for either a big discount on a future coach flight or a free upgrade from coach to first class. American quickly matched the move with its own coupons. Some enterprising business people, recognizing that those coupons had potentially huge cash value, headed out to big airports and offered travelers cash on the spot for them. The coupons were basically currency, so the buyers, or “coupon brokers” could and did sell them on the open market.

Fast-forward to the early 1980s, and all the big airlines had started frequent flyer programs. Although flyers couldn’t sell frequent flyer miles as such, initial program rules didn’t prohibit the sale of rewards—so the former coupon brokers quickly started buying and selling the rewards.

Because planes back then were usually only about 60 percent full, reward seat availability was usually a sure thing. For example, at that time my wife and I flew first class to Buenos Aires (on now-dissolved Eastern Airlines) for about the same cost as economy tickets by buying rewards. Within a few years, however, airlines tightened their rules to prohibit the purchase and sale of awards, and they sued most coupon brokers out of business.

The Brazil ruling is interesting because it’s the first legal test of frequent flyer program rules with a pro-consumer outcome. What remains to be seen, though, is if anyone outside Sao Paulo will pick up the idea and run with it.

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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuses every day at SmarterTravel.

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