LifeMiles, the loyalty program from Colombian carrier, Avianca issued an email this week to reassure members that their miles are safe. But are your LifeMiles safe? I’m not so sure and, clearly, neither is Avianca.
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Avianca Turmoil
Matthew has covered a number of issues that the merged airlines under the Avianca flag have encountered over the last few years. Most recently, Avianca Brasil has shut down entirely and the principal shareholder who maintained a considerable stake in Avianca (Colombia) leveraged his ownership to satisfy debt obligations for which he has defaulted. Those shares were sold to United and there were questions as to what United would do with their ownership stake in Avianca (Colombia).
It’s a mess.
Avianca in its own right is profitable.
LifeMiles is Separate from the Airline
Like Aeroplan, the loyalty program utilized by Air Canada, LifeMiles is a separate entity from the carrier. That makes sense to a certain degree. The program is certainly its own business and arguably a more successful one than the airline. The carrier does fine but loyalty program, known for selling their miles with 100-140% bonuses (buy one get one and half free essentially) does well as the liquidator of Star Alliance.
Can LifeMiles Stay Insulated From the Mess?
I have a pair of concerns regarding LifeMiles which I have purchased and earned through credit cards. First, is that if the turmoil from Avianca spills into the loyalty program I could lose my investment (from purchased miles) and the trips I won’t take.
Additionally, I am concerned that if the program were to separate fully from the carrier, the ability to redeem for star alliance travel would drop. American Airlines has stated that they need to fly planes in order to sell miles, the profitable aspect of their business at this point. Unlike Aeroplan, for example, American believes the two are inextricably linked and I agree.
“American argues that you can’t entirely separate out passenger carrying from loyalty revenue, because they would not be able to earn the loyalty revenue without having an airline.”
Reassuring Email Simply Raises More Questions
Lifemiles sent out emails to members this week to reassure them that the struggles of Avianca Brasil, the management changes at Avianca, and all of the noise around the carrier had nothing to do with Lifemiles:
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While I understand the intent of the email it also caused me to look up Avianca Brasil because I knew there was turmoil but had not realized they were fully out of business. In fact, just last week their slots in Brazil were scheduled for auction, demonstrating that there is no possible way the airline finds a way to come back and serve customers.
Conclusion
Avianca’s turmoil may or may not bleed over to LifeMiles, but regardless I will expedite the use of my miles and halt any future purchases of their miles. I will continue to fly Avianca when the opportunity arises, we enjoyed our trip to Cartagena from Miami on the carrier. But nonetheless, their email to satiate fears activated mine.
What do you think? Were you set at ease by the LifeMiles email? Will you buy more in the future given the turmoil or avoid the carrier?
Kyle,
I love reading your blog. To set a context here, this is the email I had received from Jetprivilege (before Jet Airways shut down)
“We thank you for being part of our growing JetPrivilege family which stands strong at 9.8 million members. As our airline partner, Jet Airways, navigates through these turbulent times, we understand that you may have concerns around the value and validity of your JPMiles.
We, at Jet Privilege Pvt. Ltd., as part of the Etihad Aviation Group, want to reassure you that your JPMiles are secure and their value remains intact. We know that you have earned and nurtured your JPMiles over the years and we consider it our foremost duty to safeguard the trust you and our partners have placed in us.”
And a few days later, Jetprivilege was devalued massively – you would be lucky to get 0.3-0.4 cents per mile. Earlier, it was routine to get a value of 1 cents and above.
Moral of the story, never trust an airline and its FFP.
As PointsOfArabia says, one should never really trust an airline and its FFP, given that the next “enhancement” is one press release away, but I don’t see a major threat to the existence of LifeMiles at this time. I looked through Avianca’s financial statements for a related post, and while its numbers aren’t good, EBITDA is still positive as is operating cash flow. That doesn’t suggest an airline in dire straits like Jet or WOW. Also, the debt default is between United and AV’s parent holding company, not AV itself.
I suspect the worst case scenario is United flexes some muscle and orders LifeMiles to “enhance” the program, but an outright collapse doesn’t seem likely. No, I wouldn’t stockpile miles without a specific use in mind – but I’d argue you shouldn’t do that anyway in today’s FFP climate.
Kyle, a hypothetical question here: Suppose I get uncomfortable sitting on a large balance of LM miles and decided to redeem miles for flights some times near EOS. If something really bad would happened to LM (or Avianca) itself, will those redemption tickets issued on Avianca stock still be honored by the opearting carriers? How does the Star Alliance reimbursement system works? Does FF program “paid” for the tickets to the operating carrier at the time of ticketing or after the segment’s flown? If the latter is true then I think the risk of denied boarding is much more substantial for holders of such redemption tickets.
If it’s ticketed, they have received the funds from my understanding, so if you’re concerned I would suggest booking as you outlined and adjusting your schedule as the year progresses.
We just has this problem here in Brazil. TAP announced on a Friday night that they would not honor Avianca Brazil issued tickets, even though they allowed them to continue issuing TAP tickets until the very minute Av Br was kicked out of IATA. We have good costumer protections in Brazil (considering all companies in the sales chain responsible), so starting Monday people were easily getting court orders forcing TAP to honor the tickets, they actually were losing so much that by the next Friday they apologized and decided to honor all the Avianca Brazil tickets.
I don’t know how that would have played out in other countries. I actually had tickets and had to hire a lawyer to get an injunction, and now am going for punitive damages.
I’ve been trying to book a Lifemiles flight with Star Alliance airlines for several days. It was not possible to book, although there is availability shown on the website. I got an error message every time I tried to book. The support of Lifemiles is not helpful at all. Maybe this is the end of the Lifemiles program?