Profiting From Your Frequent Flier Miles (and Others)

July 2, 2008 | Uncategorized

Our friends Jeff and Domenica flew home last night on American. It was quite an experience since the 3½-hour trip from New York took them 26 hours. It’s a harbinger of what’s coming this fall — when all the promised downsizing and cutbacks in service by the airlines falls into place.

Like many frequent travelers Jeff has gazillions of miles in his account. In fact, every time he returns from a trip I notice he moves just a bit slower when walking his dog Kozmo, since he’s laden down by another few thousand frequent-flyer miles in his pocket.

Like many of us, he knows he needs to manage his points well or they’ll be gone. Carriers have raised their award levels, increased old fees and implemented new ones. Try to use your points and you’re confronted with blackout dates and limited availability of seats. And since the cutbacks announced by most carriers will take place in just a few months — resulting in many fewer available award seats as airlines cut capacity and service — this fall will be a hellish time at the airports.

There hasn’t been any good news coming from the airline mileage program folks in a long time.

So what can you do? Perhaps it’s time to take action by taking control of your unused miles. On the other hand, like Peter Finch’s character in the old movie “Network” (click here if you’d like to see that great clip), you could just go to the window and scream “I’m mad as hell and I’m not going to take this anymore!”, although I don’t know how much good that will do since the airlines are in such a mess already.

Of course, the first thought for many is to use those miles as soon as possible by getting an award ticket. But for frequent flyers who continually endure today’s horror of air travel the thought of getting back on another plane is utterly depressing. Self flagellation would seem more enjoyable to many.

Today’s technology, though, has provided us an alternative.

You can now convert those miles to cash — yes, actual “cash,” as in moolah – or, alternatively, use your miles to get things you actually need to buy. We’re not talking magazine subscriptions here, but watches, computers, clothes, dining, gift certificates for your favorite stores. And this isn’t just for airline miles but also for points accrued with loyalty programs for hotels, department stores, banks cards, etc. Better yet, you don’t even have to be a member of a loyalty program to use the site.

The innovative company that now does this for you is called LoyaltyMatch (www.loyaltymatch.com). Founded just this past February in Canada — which is why you may not have heard about it until now (not because it’s in Canada but because it’s only five months old) — it provides the ways and means to unlock the value of all those unused miles.

The company describes itself as” the first  person-to-person marketplace that enables loyalty program members to convert their loyalty program points and miles into cash and offers shoppers the ability to trade or buy reward merchandise, services and entertainment and leisure activities.”

Instead of reading all that again, just think of it as mixture, or mash-up, of social marketing, the stock exchange, eBay and your frequent flyer program, all rolled into one. The New York Times called it a “virtual stock market” where “the miles and points are currency, and the free market — rather than the airlines — determines the exchange rates.” I think I just heard a cheer from business class.

How the system works is rather simple. You browse the site and once you’ve found an item that interests you, you’re matched with a potential seller to whom you submit an offer to pay cash or trade for the item. You then pay through PayPal or go to your airline loyalty program and order whatever it is you’ve agreed to trade.

LoyaltyMatch is not an auction site like eBay, but a matchmaking service that brings two parties together. The arrangements between the parties — how much will be paid, where the items are sent — are controlled by the two parties. But like eBay, people do rate others online so you’re not entering into the agreement blind as to whom you’re dealing with.

What I find interesting is that it would seem to be a good way to shop for discounts. Of course you can barter for merchandise to get a better deal than you could at the local store. But also say, for example, you want to buy Johnny and Jenny some new clothes for school later this summer. You can go online and look for a deal to buy a $100 gift card at Gap for, say, $80 or $90. Right away you’ve gotten a 10-20% discount before you even set foot in the store.

There is a similar program called Points.com which doesn’t allow you to buy or swap for merchandise, but allows you to trade airline miles (“I’ll give you 50,000 American miles for 40,000 Continental miles”). Points.com charges a per-transaction fee of $6.95, LoyaltyMatch $1.99 per transaction.

Unfortunately, if you’re a member of American Airline’s AAdvantage miles program — sorry, Jeff — and are interested in swapping for cash or merchandise, not flights, you’re out of luck since American’s program doesn’t provide any merchandise except magazine subscriptions. I still find this incredulous since American launched the first frequent flyer program back in 1981. (I’m awaiting another message in my inbox now: “Dear AAdvantage® Member: N7602N3 — Just give us a 100,000 miles and we’ll subscribe you to Good Housekeeping and Newsweek for the rest of your life.”)

On the other hand, I suppose you could go to Points.com and swap your American miles before heading off to LoyaltyMatch to get that barbecue grill you’ve been eyeing.

Jim Ferri