There is currently a lot of uncertainty in the travel industry, as hotels chains & airlines push for government bailouts one of the things their respective lobbying groups and media teams push is the prospect of filing for bankruptcy. This has lead some readers to begin to worry about what happens to their points & miles in the event of a bankruptcy.
The short answer is that it really depends on the type of bankruptcy we’re talking about. For example in 2005 Delta filed for chapter 11 bankruptcy and after 19 months of restructuring they exited that bankruptcy. Before they entered bankruptcy co-branded credit card partner American Express provided delta with $600 million in cash and financing. In this case Delta frequent flyer members kept their miles and Delta was able to show that this program was a positive asset. American Airlines also filed for chapter 11 bankruptcy in 2011 and members kept their miles as well. A counter point is Midway Airlines when it filed for chapter 7 bankruptcy in 1991, all 700,000 members lost their miles.
It’s hard to know what will happen this time with so much uncertainty at the moment. I think we will see some airlines enter chapter 11 bankruptcy but in those cases I think points & miles are relatively safe as the loyalty programs as a whole are extremely profitable. The other thing to keep in mind is that loyalty programs can basically make changes at any stage so while the COVID-19 situation is extremely scary it’s not unique in the threat to miles/points.
