I was reading some days back that the airline industry is courting trouble because of the amount of frequent flyer miles accumulated by passengers. According to The Economist, the total value of frequent flyer miles still to be redeemed exceeds the total amount of money in circulation in US & Europe!
By the end of 2004 almost 14 trillion frequent-flyer miles had, by our estimate (updating figures from webflyer.com), been accumulated worldwide. But what is a mile worth? Airlines sell them to credit-card firms at an average of just under 2 cents a mile; their value when used to buy a ticket or to upgrade to business class can be anywhere between 1 cent and over 10 cents per mile. Using the mid-point of this range means that the global stock of frequent-flyer miles is now worth over $700 billion, more than all the dollar notes and coins at large. Pedants will complain that we have ignored dollars sitting in bank accounts, but after a couple of free in-flight gin-and-tonics, most frequent-flyers care little about the difference between M0 (the narrowest measure of the supply of miles, or rather, money) and M3.
Sounds like another disaster in waiting for airlines right? Not if this new business system takes off (pun unintended).
Evan Demestihas, a physician who runs a medical company in Atlanta, had always wanted to slip the surly bonds of earth and get out into space, but it looked for a long time as if his abundant business travels on commercial airliners would be the closest he would come. Then came an unexpected opportunity — thanks to those very trips.
In July, he traveled to Star City, Russia, just outside Moscow, for a ride on a MIG fighter to an altitude of 80,000 feet, about 15 miles up. Looking down from a black sky at the curve of the earth, he marveled at how thin the atmosphere, a band of hazy blue, really looked. He was up there with the pilots who travel higher above the planet than anyone but astronauts.
"That day was all mine," he said.
And instead of paying the full fare of $18,995, he spent $8,000 — and 275,000 frequent-flier miles.
Do the math. By offering this kind of adventure trips, the outstanding stock of unredeemed miles can easily be handled.
Well maybe not so easily (given airlines tendency to attract trouble)…but nevertheless possible.