Posted on: Saturday, October 23, 2004

Frequent-flier plans safe in bankruptcy

By Harry R. Weber
Associated Press

ATLANTA — The two major U.S. airlines in bankruptcy have made tough choices about jobs and wages, while largely protecting the free tickets and other perks offered to their frequent fliers. At Delta — which soon could become the third major carrier in Chapter 11 — frequent fliers are being told their rewards program also will be honored.

Wage reductions and service changes often are a fact of life when a company reorganizes. Sometimes there are even job cuts. The airlines, however, realize that the one constituency they can't mess with are their most valuable customers, observers say.

"It's all about fixing the company," said Bill Warlick, an airline analyst with Fitch Ratings in Chicago. "If you recognize you have a significant revenue ordeal, you certainly don't want to undermine your high-yield revenue base. That is job one, to ensure your best customers are still with you."

Atlanta-based Delta Air Lines Inc. this week sent an e-mail to its frequent fliers telling them their program will remain intact if the nation's third-largest carrier files for bankruptcy, a move that grows more likely by the day without concessions from pilots and debt-holders.

"We continue to work to avoid this outcome," Delta marketing chief Paul Matsen said in the e-mail.

"However, even if it were to happen, we will continue to provide you with safe, secure, and reliable service both in the air and on the ground."

Matsen said that in the event of a Delta bankruptcy, tickets will be honored, refunds and exchanges will be made as usual and, most importantly perhaps, its frequent-flier accounts will not be affected.

Elk Grove Village, Ill.-based UAL Corp., parent of United Airlines, and Arlington, Va.-based US Airways Group Inc. say they have not reduced any benefits in their frequent-flier programs as a result of their bankruptcies. In some cases, they say, the programs have been strengthened.

"These are our most important, loyal customers," said US Airways spokeswoman Amy Kudwa. "Maintaining that relationship and upholding the standard is very important.

"We don't have any intention to change the program in our reorganization."