In the good old days the only thing better than cheap airplane tickets or cheap vacation packages was the ability to purchase airplane tickets with frequent flier miles. Now frequent fliers have to be much more careful monitoring their accumulated frequent flier miles or those miles will evaporate. United Airlines is increasing its first quarter revenue by $64 million by changing the way it estimates how many frequent flier miles will expire.
This change is anticipated to have a similar impact throughout the remainder of the year, which will effectively boost Uniteds full year revenue by $256 million. The change behind this positive impact on revenue is Uniteds new policy (announced in January of 07) that frequent flier accounts would expire after 18 months of inactivity.
When a passenger flies on United, the airline recognizes part of the revenue immediately, but must defer another part, to take into account frequent flier miles that will eventually be redeemed for future tickets. United is changing its projection of the number of miles that will never be redeemed, allowing it to recognize more of that revenue immediately.
United reviews its estimates for expiring miles (referred to as breakage) annually.
Many airlines over the last two years have reduced the number of years/months it takes before zeroing out inactive frequent flier accounts.
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