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"We have two round trip, first class Mileage Plus reward tickets from San Francisco to Paris on August 10, returning on Sept. 6. We are concerned about the viability of United Airlines at that time. What are the chances that another airline in the Star Alliance program will honor those tickets? Is there anything we can do to ensure or insure our trip plans for those dates? All suggestions are welcome!" (Connie E.)
[Editor's Note - First, it's highly unlikely that United would be forced into liquidation (Chapter 7) between now and the end of your trip.
But it is possible, so it's worth considering how it might play out.
In the event that United disappeared, the Star Alliance carriers would be under no legal or contractual obligation to honor Mileage Plus award tickets. As a goodwill gesture, they might try to accommodate United passengers on a space-available basis. But given the number of potentially affected United customers, including both revenue and award ticket holders, and the likelihood that planes will be flying full during the period in question, there's a limit to the amount of assistance Star carriers could provide, even if they choose to do so.
For more on bankruptcy and liquidation, and their effect on frequent flyer miles, see http://frequentflier.com/bankruptcy.htm.
Last, but hardly least, congrats on earning those miles and, more importantly, putting them to good use. A month in France... c'est tres bien!]
"So now that United Airlines has received approval to pass it's pension obligations on to the PBGC (Pension Benefit Guaranty Corp), you have to
wonder how this might impact the economy. Some elements that can be mixed
and matched for various outcomes:
"1. United workers strike. Implies a United liquidation.
"2. United workers strike and United does not liquidate. The good news are all the fare sales that your readers will enjoy. The bad news are all the fare sales that their competitors will have to match, resulting in larger losses later this year and more wage cuts for their employees. I'd also be interested in better understanding how United's employee costs will compare to Southwest's. Is there an unprofitable quarter in SW's immediate future?
"3. United liquidates. Implies that all of their miles become worthless, will shrink industry capacity measurably, impacting hundreds of industries that rely on United for business - catering, engines, parts, advertising, fuel, airports, economies of various destinations, etc.
"4. Other traditional airlines reduce their pension debt by working collaboratively with their unions. This implies that (a) they do not have workplace slowdowns and (b) their cost structure is not as low as United's.
"5. Other traditional airlines reduce their pension debts through similar court decisions. Now you can count on the PBGC (Pension Benefit Guaranty Corporation) changing it's business model (more on that below). Plus one or more of these other airlines may liquidate, with all that implies. But before we have two or more airlines vanishing into thin air, I'd bet that the Bush administration would step in. Which implies a tax-payer supported industry, perhaps a move toward regulation (unlikely, but I'll throw it out there); which in any case has lots of implications for the domestic economy, international economies and travel, and open skies agreements.
"6. Changes to the PBGC take place. Having shouldered US Airways' and United's pensions, the PBGC is under water by more than $20 billion. Today, it brings in $600 million per year in funding, which it gets when companies with unions pay $19 per year per employee. The Bush administration has already proposed raising that $19 to $30, which would give it another $400 million per year; plus increase the costs of the very companies that can't manage their costs or pension plans in the first place. And that's the good scenario. The bad scenario lies with Detroit. The pension obligations of GM and the like would crush the PBGC into debt levels not even seen by the airline industry. If this happens, those pension plans will likely be saved by a tax-payer funded government bail out. And you can go and draw your own conclusions about the future of unionized work groups after that.
"I'm guessing that at least a couple of these questions will be answered by the next publication of the FrequentFlier Crier. In the mean time, I probably won't be booking any tickets on United. And I realize that earlier in the year I had written a note in favor of the United Prepaid travel card (in concept if not in execution)... Oops." (Glenn)
[Editor's Note - As I responded to Glenn, I too have mixed feelings about the UA situation. Having worked in the industry, I feel for the employees. Having spent time on the management side, I sympathize with the challenges they face. I'm also a traveler and a taxpayer. And at least indirectly (assuming at least 1 of my mutual funds owns UA shares), I'm a stockholder.
I think there's been incompetence on management's part, greed and short-sightedness on the part of labor. So there's plenty of blame to go around.
Should my tax dollars go to bail out a company whose wounds are largely self-inflicted? Part of me says no, absolutely not. But then again, with that many jobs at stake, I'm equally inclined to think that heroic measures are warranted.
In a word, I'm confused.]
"My family and I are all flying Star Alliance around the world in Dec/Jan. Our London-New York-Honolulu leg is with United. What recourse do I have if, before or during our trip, United goes into full bankruptcy and stops operating?
"I have looked at numerous sites including that of Star Alliance and none give me an answer." (Bruce in Wahroonga, NSW, Australia)
[Editor's Note - Since you didn't specify, I'll assume the tickets in question are revenue tickets rather than award tickets.
As with award tickets (see above), if United were to shut down completely, you'd be at the mercy of other carriers flying the same routes. They might offer to transport you for free, or for a service charge, or at their lowest restricted price, or for the full published fare. It's impossible to know in advance.
In your favor is the fact (again, an assumption on my part) that you are flying on a branded Star Alliance 'round the world ticket. Since it's a Star "product" it's much more likely you would receive preferential treatment by other Star carriers in the event of United's demise.
While it won't mitigate the inconvenience of being stranded mid-trip, don't forget that most credit cards will refund the amount charged for a ticket if the airline is unable to deliver the promised service.]
"As usual, United Airlines management protected its own interests and then went after the well being of its employees. UA's executive pension plan is fully funded and set aside in a trust, exempt from cuts during the bankruptcy reorganization.
"Sadly, United is not alone. Delta, US Airways and American Airlines management has done much the same. Don Carty lost his job as CEO of American Airlines for the underhanded way in which this was handled.
"Management (of any business) should not be exempt from sacrifices and hardship during tough times. Capitalism provides people with the opportunity to be richly rewarded for taking risk, innovating and working hard. Unfortunately, in far too many companies in a variety of industries, the boards of directors and executive staff make sure there is very little risk and a whole lot of reward. Frankly, I think golden parachutes and special executive pension plans should be illegal. That would answer the frequent argument which says that a company has to offer these kinds of compensation plans in order to attract and retain top managers.
"As much as I would like to support UA's premium service between SF or LA and New York City (because I am so tired of eating fast food at the airport or snack boxes on jam-packed planes), I cannot in good faith give another dollar to this airline." (Mike M., former UA Premier member)
"Howdy from AZ.
"I'm an America West Platinum flyer who has noticed a tightening of availability of tickets purchased with Flight Fund miles. AWA has a an extremely limited number of seats available at standard mileage requirements. HOWEVER, you can always get TOP VALUE seats for any flight. (50,000 miles) For the last few days I've been trying to find flight availability for anything other than TOP VALUE....forget about it. I tried Spokane WA on July 14th...no standard value flights available. It's pathetic. America West has gone the way of the majors in screwing its best and most loyal Flight Fund members. What good are mileage programs if you can't use them for anything less than the cost to go to Hawaii?
"Southwest currently earns 1/2 of my business. It appears that they will soon be getting all of my business." (Ken S. - Glendale, AZ)
Until next week...
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