Mileage programs were originally devised as a cost center for the airlines to ensure continued loyalty in a deregulated air market. Over the years they have transformed to a profit center as airlines award fewer miles than ever for flights. Instead airlines make billions of dollars annually by selling their miles to banks and other partners, who then use them to incentivize consumer behavior.
The airlines open up saver award space on flights that they don’t think will sell out, so the redemption cost for them is marginal. You are allowed to give someone a mileage ticket, but you are not allowed to sell one. Many airlines have sophisticated audit departments to ensure that people don’t sell award tickets to people who would have otherwise paid for a ticket. The audit departments also watch out for cases of fraud, where someone may hack an account and drain their miles.
TheMarker (Hebrew) shares the story of a passenger who used his friend’s Delta miles to book an award ticket from Tel Aviv to Bangkok on SkyTeam partner Aeroflot before Yom Kippur 2016.
Unfortunately the passenger used his own credit card for the taxes. That’s a big no-no. You should always use the account holder’s credit card to avoid setting off red flags.
He went to the airport, only to find out that Delta voided his ticket under suspicion of fraud. Some airlines, such as Alaska and American, are notorious for cancelling award tickets just before flight check-in. However Delta’s audit department isn’t as vicious as those airlines. Sometimes those airlines even cancel a ticket during a trip, just to teach a lesson to suspected mileage brokers. Airlines act as the judge, jury, and executioner when they suspect fraud or mileage brokering.
In this case, Delta reinstated the ticket, but it was too late to travel before Yom Kippur, so he had to travel 2 days later.
Delta offered $200 in compensation, which he refused. He took Delta to small claims court in Israel and the judge agreed that Delta had an obligation to inform the passenger of the cancelled ticket. Delta claimed that he should have presented his friend’s ID, but that requirement isn’t found in Delta’s terms.
The judge awarded the passenger 10,070 shekels in compensation and 1,000 shekels for legal expenses, for a total of 11,070 shekels ($3,130) excluding interest from the date of filing.
Many people have taken banks and airlines to small claims court in the US, but often those cases are settled with a non-disclosure agreement, so it’s interesting to actually see the details of a case that went the distance.
It would be good to see similar cases in the US so that airlines will realize they can’t do anything they want without retribution. Unfortunately it’s hard to sue an airline in the US due to the 1978 airline deregulation act (ADA) pre-empting state laws. Most complaints have to go through the DoT.
United couldn’t be sued for taking away lifetime annual upgrades that they promised in writing to million milers due the ADA.
When Northwest banned Binyomin Ginsberg from their mileage program and stripped his Platinum status he lacked a course of action as well due to the ADA. However in that Northwest, Inc. v. Ginsberg opinion, the Supreme Court explicitly questioned whether the ADA would be able to shield an airline against a lawsuit to its mileage program if someone earned most of their miles from credit card spending or sources other than flying.
It’s no surprise that airlines choose to settle cases with non-disclosure agreements rather than let a good case from someone who earned their miles via non-flying sources make its way through the courts. That’s a precedent they can’t afford.
Perhaps one day someone will donate an award ticket earned from credit card spending to a charity, but manage to still set off red flags that causes the airline to cancel the ticket. If the donor would work such a lawsuit through the courts (including the court of public opinion) without settling, the result would probably greatly weaken the ADA protections that airlines currently use to abuse passengers…