Miles Loom as a Threat To Airlines Bottom Line

Airlines in the US face a growing threat...trillions in yet un-redeemed frequent flyer miles that threaten to displace paying customers with those flying for free. Reuters reported on this Sunday.

After 9/11, airlines piled on the offers and offered double and triple miles as well as expanding the program to include credit cards, hotel stays and common purchases. Now that the system has become so ingrained in consumer's mind, there is no way for the airlines to stop awarding miles and flyers pay close attention when deciding which airline to choose.

"It does make a difference in the way that I fly," said one woman.

While many of those miles may never be swapped for trips or merchandise and they expire more quickly than before, that overhang of unredeemed miles represents a risk for airlines.

With planes fuller than ever, granting free trips could displace paying passengers, while unsettled U.S. consumers may be ready to cash in those miles to save money as the economy shows signs of slowing.

"The airlines just can't handle that level of reward redemption," said Rick Ferguson, editorial director at loyalty-program consulting firm Colloquy. "The liability's a big problem."