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What The American Airlines-US Airways Merger Will Mean For Your Frequent Flyer Miles

If you fly American Airlines or US Airways with any regularity, news of the merger between the two airlines could have you worried about your frequent flyer miles.
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If you fly American Airlines or US Airways with any regularity, news of the merger between the two airlines could have you worried about your frequent flyer miles.

Don't worry. You won't lose any. They'll be fine.

While many of the merger details have yet to be decided, many travelers have questions about what it will all mean for frequent flyers and their miles. We can examine a number of questions by considering previous airline mergers and public statements from the companies.

Will I lose my American Airlines and/or US Airways frequent flyer miles after the merger?

Absolutely not.

Anytime two airlines merge -- something that's happened frequently in the last decade, including Delta-Northwest, United-Continental, US Airways-America West, and Southwest-Airtran -- the new company always honors customers' frequent flyer miles from both airlines.

There are very good reasons why. Firstly, when two airlines merge, it creates a lot of flux in the industry. Because frequent flyers are among the most profitable, airlines work extra hard (especially during a period of uncertainty) to retain their best customers. Undermining frequent flyer miles is a perfect way to drive loyal customers elsewhere.

Similarly, if for some reason the newly-merged airline decided not to honor its customers' old frequent flyer miles, the uproar -- not to mention lawsuits -- would drive so much negative coverage that the airline would almost certainly back down.

In short, you will not lose your miles. If you have miles with both airlines, they will likely be merged down the road.

Will my miles lose value?

Possibly, but not soon.

To better answer this question, though, it's important to understand that frequent flyer miles are, at their core, a fiat currency. At any moment, an airline can decide that a mile is worth far less today than it was yesterday. That is true for all airlines, whether they're merging or not. Indeed, in 2011, both Air Canada and British Airways made major changes to their award charts, significantly lowering the value of miles in each program.

It's hard to say what precisely will happen with American Airlines-US Airways, but we can make a few informed guesses.

First, US Airways miles, which are widely seen as less valuable than American miles, would likely see their worth increase in a merger, for two reasons. First, US Airways flyers would gain access not only to American routes, which are far more prolific, but also to the Oneworld network, opening more access to Latin America and Europe. Second, American flights tend to have more award seats available than US Airways flights, so you can actually use your miles.

Second, American miles likely won't see any immediate change in their value. The new airline will likely stick with American Airlines' award chart and booking system, which is larger and works far better with partner airlines, for the time being.

However, over the long-term, the combination of consolidating airlines (thereby reducing competition) and an influx of millions of new frequent flyers into the new airline will create pressure to eventually reduce the value of a mile. Therefore, hoarding miles for years and years is not an advisable strategy.

How soon could changes take effect?

The soonest we could reasonably expect the two airlines to merge and get a single operating certificate, which allows the two airlines to operate as one, is in a year or two. Indeed, Doug Parker, CEO of US Airways and slated to be CEO of the new merged airline, predicted that it will take 18 months for the FAA to issue a single operating certificate.

In the meantime, literally thousands of hurdles must be cleared between now and when the two airlines officially become one. Some are legal, like getting approval from regulators to merge and form the world's largest airline. Others are seemingly trivial, like what shape the plastic cups should be. (Businessweek ran a fascinating article last year on the hundreds if not thousands of little things that must be synchronized when two airlines merge.)

Making these decisions takes time. If merging airlines try to rush the process, it can lead to snafus that have to be worked out on the go (read: angry customers). Indeed, United's ongoing difficulties synchronizing its system with Continental's are public knowledge. Airlines see that experience as a cautionary tale of trying to merge too quickly. Southwest, on the other hand, took a far more cautious approach after acquiring AirTran in 2010.

All in all, the soonest we could expect American Airlines and US Airways to fully combine is late 2014.

Which alliance will the new airline be in?

Oneworld. US Airways CEO Doug Parker announced Thursday morning that the new airline would be in the Oneworld Alliance, currently home to American Airlines. Precisely when US Airways leaves Star Alliance remains to be seen.

The new airline will also likely maintain the American Airlines name.

What will happen to the elite status programs?

Currently, American Airlines offers three levels of elite status: Gold (fly 25,000 miles in one year), Platinum (fly 50,000 miles), and Executive Platinum (fly 100,000 miles). US Airways, meanwhile, employs a four-tier system: Silver (25,000 miles), Gold (50,000 miles), Platinum (75,000 miles), and Chairman's (100,000 miles).

The benefits of each airline's elite status are fairly similar, including free checked bags, priority boarding, bonus miles, and waived fees. Most of the experts predict that the new airline will adopt something similar to US Airways' four-tier system, though the details of particular benefits have yet to be decided.