Ethics of Frequent Flyer Miles

In My Humble Opinion
1

This ocurred to me while reading this thread:
http://boards.straightdope.com/sdmb/showthread.php?threadid=41248

I have worked as purchasing manager for a number of years and I know I could not accept anything of any significant value from my suppliers. As the saying goes, I had to avoid not only any possible conflict of interest but also even the appearance of impropriety.

I think this is a well established principle in all purchases a company makes except when it comes to travel. When it comes to travel the airlines offer incentives in the forem of frequent flyer miles (in other words, free travel).

The way I see it, the cost of this private travel was obviously built into the cost of the original travel that earned it (just like kickbacks are).

The Federal government sees it that way and does not allow its employees to earn FF miles with travel paid for by the feds.

This is the way I think it should be. I do not understand why it is acceptable that if I choose to travel with airline X they can give me for my private use a percentage of the cost of travel I purchased and that is OK BUT suppose I purchase computers and the company I buy them from gives me a computer for every 15 computers I buy for the company… now that is a kickback and can land me in jail.

Where’s the logic?

I cannot see why FF miles are not illegal, but even if they are legal I cannot see how they cannot be taxed as income: you got them and your company paid for them. (this is merely a theoretical proposition, we all know in practice it would be almost impossible to control)

2

Are you absolutely sure about that? I know two people working for the Feds who get to keep all of their FF miles they get on business.

Do you ever put reimbursable business expenses on your personal Discover card? If so, what do you do about the cash back? Do you give it back to your company? How about a credit card that gives FF miles on it, that you use for business expenses?

When you earn the FF miles, they are not worth anything until you use them. And then, you even have the option of donating them to charity as well. If they are taxable, then should donating them to UNICEF be a new tax-deduction? And if you lose them because they expire, can you claim this as a loss?

And what are they worth really? Like I posted in the thread you reference, the cost for a free roundtrip to Europe (40,000 miles for $1000 value) is the same as for a Coach-Business class upgrade (40,000 miles for a $4000 value). Who determines the value of a FF mile? When you have to have three PhD’s to decipher the airline pricing plans as it is?

I think there are a lot of ambiguous issues to be resolved. And making the US tax code even larger than it already is isn’t my goal in life.

Plus, the miles are often considered a “perk”, for all the times you drive to the airport on your own time, sleep on a bench in Charles de Gualle because your connection to Cairo was cancelled, have your luggage broken into and/or lost forever, etc.

3

I have always heard federal employees are not allowed to claim FF miles. Maybe someone can confirm or disprove this.

Regarding the point that they should be taxed as income, I did say this as a theoretical thing acknowledging the practical difficulty. After all there are many laws out there nobody bothers to comply with because they are impossible to enforce. “perks” as you call them are considered income even if you do not bother to report them. In many states you are supposed to pay sales tax for items you purchased by mail and did not pay sales tax on. The fact that nobody does it does not mean the law isnt there.

To all your objections about the difficulty of taxing this form of income, the obvious answer is to outlaw it just the same as other kickbacks are outlawed.

At any rate, you do not address the main question I pose: Why are these kickbacks considered OK while all other kickbacks are considered unethical and illegal.

I used to purchase computers by the dozen and it never ocurred to me that the supplier should give me one for my home. Yet the airline does exactly the same thing. Why is it OK?

Anyone?

4

Doesn’t just about every major airline have frequent flier plans? My father works for a major airline, so I can fly for free and consequently I have no experience with frequent flier plans, or other airlines for that matter. But I get the impression that most airlines have them.

Since you’ll get FF miles more or less regardless of which airline you use, and since they’re rewarded in a standard manner (i.e. the airline doesn’t single you out in order to influence your choice of carrier for your business trips) I don’t think they can be ethically considered as kickbacks. At least I think it’s different enough for those reasons that your analogy of a computer supplier giving machines to a purchaser in order to influence purchasing decisions doesn’t fit.

5

Sorta. Southwest has a deal where you earn free tickets based on the number of trips, not the number of miles. If you don’t earn enough trip legs in one year, then you lose everything. One reason I avoid Southwest, along with unassigned seating that makes each boarding look like a Viking plunder of seats, pillows, and magazines. Goddamnit, I need my window seat near the rear of the plane…

Plus, it’s very possible to never take a single flight on some airlines and still get free tickets. Delta Airlines is a very cool airline w.r.t. it’s miles program - one reason I purposefully have chosen nearly all of my last 20 or so flights to be on Delta. They have a really cool American Express Card that gives you 15,000 when you sign up for a Platinum card, and then you earn 1 mile per every dollar charged. If you open a $5000 account on E-Trade, you get 5000 Delta miles. If you switch to MCI for 6 months, you get another 5000 miles.

15,000 + 5,000 + 5,000 = US Domestic Free Roundtrip ticket

If you charge $15,000 the first year on your card (which I do), then you get:

15,000 + 25,000 = Free Business Class upgrade from full-fare Coach to Europe.

6

I didn’t address it because it seems like you are asking a moral question more than an actual “what are the obstacles to doing this” question.

Realistically? The answer is that they are allowed because they are felt to be a perk that if removed would make so many people angry, it would affect their votes at the next election. And since at lot of these angry people will be corporate executives who donate lots of $$ to these political candidates, there is no possible incentive to make these miles illegal, or to tax them.

Business travel is not fun, and not romantic, and is a lot harder than it looks. It sure seemed cool at first, to go jetting all over the country and Western Europe like some bigshot. But the truth is, it is a hard, boring, frustrating process. If my company did not put me in Business class for overseas flights, I would fight tooth and nail to not go. I’ve spent 9 hours in the “cattle car” of Coach to Europe also, on a personal trip I took (actually, 18 hours for the round trip). There is no way in hell I could do that and be refreshed enough on landing to go into hard-core negotiations or start doing heat balance calculations with the client.

What this last rambling paragraph is trying to say is - I want and need my miles as a reward for choosing that airline and flying on them. I don’t give a rat’s ass how many people I offend with that statement, it is how I feel. I consider it some tiny compensation for the unpaid nights and weekends I spend flying or waiting in the airport. I’m sorry that when you buy PC’s the manufacturer is not allowed to give you a free one. Probably something should be allowed for making a choice that satisfies your company’s needs while saving money. But I think we’re talking about similar, but different things here.

I am supposed to choose flights that are the cheapest from hither to yon when I buy tickets (except for International). Typically when I set up a flight, I have 2 to 4 airlines that are all the same price or within $30 of each other (on a ticket that is from $500 to $1100, so between a 3 to 6% difference). The one I choose of this subset is dependent first on whether or not I hate them ***, second on the timing, and third on the miles I get. And overall, the end service is the same regardless of whether I get miles or not. But I guess this still does not tell you as to why they are not illegal - my second paragraph will have to do I guess.

*** I will not fly US Air, for example, since they lost a bag and would not reimburse me for it properly. This is a case where the stingy person pays the most. They refused to pay for the $100 of insulin, syringes, glucometer, and blood test strips that were in it. Which is a travesty when you think about the fact that they lost the bag, but think they have no moral responsibility to reimburse you fully for it.

They are normally the “default” provider for us for anywhere North of SC and East of Kansas. I refused to fly on them after that incident, and I even keep track of how many ticket sales and the money they have lost in a spreadsheet, which I occasionally mail to them to mock them.

As a result, they have lost (to date) 27 roundtrip tickets, at a price of about $22,300. Yup, I guess they showed me. :rolleyes:

7

My husband travels extensively (mostly domestically) and I use his miles to fly free (and first class! :smiley: ), but I don’t consider it unethical.

You see, my husband also uses his miles to “buy” memberships to the private lounges (Delta’s Crown Room, American’s Admirals Club, etc.) inside the airports. Sure it’s nice to be in a relaxing environment, but he also uses their phones and internet connections for work purposes.

Also, his company has a policy where the employee is supposed to fly first or business class if the flight is over three hours. Does he buy first class tickets? Naw, he uses his miles to upgrade.

He uses his miles for business as much as he can but anything left over is his, he earned it. If you think that’s unethical you can bite me.

8

sailor noted: “The Federal government sees it that way and does not allow its employees to earn FF miles with travel paid for by the feds.”

…to which Anthracite asked: “Are you absolutely sure about that? I know two people working for the Feds who get to keep all of their FF miles they get on business.”

Yes; the Feds are QUITE strict about things like this, and they WILL ding you for doing this. Another thing you can get dinged on by the Feds, is if you work as a consultant OUTSIDE your Fed job, in a field you are hired for in your job. That is, if you are a Federal geology expert, you cannot take money for teaching a class at a local college for geology. Bummer, I know.

9

That’s not good…maybe I’ll casually ask them what the deal is here in a bit.

10

Damn, I wish my company had that policy. They divide it into International/Domestic. Which means a Boston to LA flight is 6 hours of coach…

11

>> If you think that’s unethical you can bite me.

That is rude and totally uncalled for. Do you want me to tell you what you could do to me? I will ignore your rude post.

Bobort, your reasoning does not hold water. To begin with, if you believe airlines award these kickbacks out of the goodness of their hearts and not because they influence your choice, then you are very naive and do not understand the first thing about marketing.

In some countries kickbacks are an everyday fact of life. Every supplier gives them and every buyer takes them. Obviously, if you do not play the game you have no chance of selling. You could argue the kickback does not affect the purchase choice since they all do it.

Well, I guess I will have to explain what I consider some very basic stuff. Countries run like that usually have economies that are not too productive because the purchaser is not solely looking for the benefit of the company but also his own.

No matter how you look at it, the cost of the kickback is included in the sale price and so, ultimately it is your own employer who pays for the kickback.

American companies are prohibited by American law in playing the kickback game even in foreign countries and they routinely complain this puts them at a disadvantage with firms from other countries. (But if they bribe foreign officials then they America is accused of corrupting them etc. you can’t win)

Accepting any significant gift from someone you are buying from or who has any interest with you (politicians) is considered unethical and most of the times is illegal. FF miles are the sole exception I can think of and the only reason I see is “it’s always been done and never seriously questioned”.

Anthracite, I do not want to make this thread about whether you like them or not. Of course we like them but that is not the point. The point is “what makes them essentially different from other kickbacks?”

I know very well what it is like to travel very often. I will give you an example that will illustrate what I am trying to say.

Some years ago I was travelling 2 - 3 times a month to Mexico city for almost a year for work. My private trips to Europe were all with United airlines so I had an incentive to fly United to Mexico and earn free travel for myself to Europe. United did fly to mexico City but Continental had better fares. Should I fly United and earn miles I can use or fly Continental and earn miles I really have no use for? What would most people do?

I chose to fly Continental and flew with them for all those months. IMHO choosing United for my own interest would have been unethical. In the end I had a rift with Continental for their lousy service and an incident where they messed up. Like you, if I would have continued to travel to Mexico I would not have continued to fly with them. But this is a valid reason while the other is not.

It is quite clear to me that the flights used with FF miles were ultimately paid by the employer. This is the way the federal and many State governments see it. If you see a government official going on vacation with FF miles he earned through his official travel, you can be sure your tax dollars paid for it. Not only is he encouraged to selelct a certain airline but he is encouraged to fly on business more often than would be necessary.

The Federal Government considers all frequent flyer miles earned as belonging to the government and not the individual:

from http://robins.jag.af.mil/Handouts/ETHICS/freq_fly.htm

It makes sense to me and it would make more logical sense if it was applied to the private sector (in which case, obviously, FF programs would disappear).

12

Well, I will refer then back to my response where I said that I think it is simply just too politically disasterous for most politicians to prohibit them.

I don’t have any better ideas, I’m afraid.

13

Well, obviously they’re not doing it out of generosity. Where did you get the impression I thought that? I was just assuming based on oligopolistic game theory the FF rewards are roughly similar across major airlines. As Anthracite points out, this isn’t really true (I should have guessed that airlines like Southwest wouldn’t have FF plans like other major carriers).

Of course the free stuff comes out of the purchaser’s pocket, but I really don’t think most companies are unaware of this. If your company allows you to use FF miles bought on their dime, you certainly aren’t stealing from them. I agree that such miles would reasonably be regarded as income (and you’re right that taxing them would be a huge pain in the ass).

However, theory must be tested by experiment: do business travellers gravitate toward airlines with above-average FF rewards? If so, then perhaps it is evidence of unethical practices w.r.t. FF miles since employers would be implicitly paying for employee benefits through necessarily higher ticket prices. Since I basically only fly on one airline, I can’t really say whether this happens or not.

14

I have a friend who works for NIST and he told me that they also won’t let employees fly in First Class…no way, no how! Even if you are bumped into First Class and those are the only seats left on the plane you can’t go there. Apparently they are nervous about the possibility of a seatmate asking who you work for and then thinking, “Oh, so this is how the government spends my tax dollars!”

By the way, I can remember my grad school advisor 10 years ago telling me that he refuses to sign up for Frequent Flyer programs exactly because he thinks it’s a kickback scheme.