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Airlines catch on to mile-swapping services

Trading frequent traveler points is getting easier, thanks to a growing secondary market for free travel and financial despair in the airline industry.
/ Source: Forbes

Trading frequent traveler points is getting easier, thanks to a growing secondary market for free travel and financial despair in the airline industry.

Sure, it's technically against the spirit of loyalty programs and could radically alter the value of the 650 billion-plus miles and points accumulated each year. But bartering frequent flier points, rental car vouchers, hotel room upgrades and even drink coupons allies savvy travelers and provides a hidden revenue boost to frequent traveler point-plan providers.

Even the airlines admit the underground practice of swapping points is catching on. At Richard Branson's Virgin Atlantic, a popular business program called FlyingCo, which gives parallel accrual of miles for the passenger and his employer, wins a new account each day. FlyingCo lets your boss bank the miles for future flights taken by one of your co-workers. That means that participating companies, such as DaimlerChrysler or HSBC Holdings, can apply the miles for future flights for any of its staff. It's unclear whether Branson's Virgin USA, a no-frills carrier scheduled for takeoff next year, will offer a similar benefit.

Three North American carriers have made monetizing miles even easier — albeit for a limited time and price. Air Canada, Continental Airlines and Northwest Airlines allow members of their respective frequent-customer programs to transfer miles to other members. With Air Canada, you can transfer a minimum of 1,000 miles to a maximum of three separate accounts per transaction, at a cost of 2 cents. Northwest WorldPerks members have until May 31 to transfer 5,000 to 10,000 miles to up to three accounts for just a penny per mile (but dings you with a silly $25 processing fee). The airline limits receipts to 10,000 and donations to 50,000 per calendar year.

Continental's offer looks the most generous: The floor for transferring miles between OnePass accounts is 2,500, and the airline charges just 5 cents per 500 miles — and you have the rest of the year to make your trades. All three airlines make customers register for mileage transfers on their Web sites.

"Never before have three different airlines offered such a promotion at the same time," says Timothy Winship, a Los Angeles-based consultant who launched in 1997.

A secondary market could shrink the pile of some 8.3 trillion frequent-traveler points out there, worth almost $500 billion. Some 75 percent of outstanding points never get used. "A lot of companies must do something on the redemption side," says Thal Poonian, chairman of Great Pacific International, a Vancouver-based clearinghouse of rewards program points.

Great Pacific partners with, a broker for various rewards programs that allows members to combine points and miles from one program — say, US Airways' Dividend Rewards — and dump them into another — say, Intercontinental Hotel Group's Priority Club. For example, 10,000 orphaned Dividend Miles converts into 2,700 points with Great Pacific's GPI Rewards, which offers free hotel nights through a partnership with Intercontinental. Investors can even get in on it, since Great Pacific is a publicly traded firm. (Disclaimer: It's currently at 59 cents on the unregulated Pink Sheets.)

You can pool your points even where it's not sanctioned.'s Coupon Connection discussion board links up 1,000 individual visitors each month to trade, offering up airline lounge passes, free companion tickets and rental car upgrades, among other things. A systemwide upgrade on UAL's United Airlines has become an even more prized asset since the airline moved the processing of such awards to electronic means and makes trading more complicated, says moderator David Friedman.

Run-of-the-mill mileage brokers get the job done too. will pay between 1.2 and 1.8 cents per mile and reimburses any ticketing fee and airport taxes associated with selling your miles for use by one of its future clients. Expect less satisfaction from trades made over eBay. Last year Australian carrier Qantas kicked out one of its frequent fliers when it found out the customer was trying to unload one million miles through an online auction.