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What happens to my miles when the airline goes bankrupt?
Should I liquidate the miles or keep it?
Are my airline miles worth anything if the airlines is bankrupt?
Can I still use my airlines miles?
Today's Tip: What Happens To Your Airline Miles?
It either gets saved or it is destroyed and worthless.
When is it saved?
Miles are a separate legal entity from the airline. And the airlines can be bankrupt, but the miles and loyalty points are not part of the bankruptcy deal.
In previous restructuring bankruptcies people have kept their miles. In general if the airline wants to continue to exist, it doesn’t want to alienate all of its former frequent customers. Fears about losing frequent flyer miles on a bankrupt airline may be exaggerated since companies do emerge from bankruptcy with financial health. That being said, the airline might alter or change its frequent flyer program like having more black-out dates and requiring more miles to book the same flight.
So you can still use your miles on other methods like partner airlines and partners like hotels and restaurants.
When is it Worthless?
This is usually the last option for airlines and the miles system.
Sometimes, the mileage program is saved from bankruptcy. But that does not mean the miles will mean something. The miles only mean something because people believe it in and there is a value to the miles holder. When the miles program has lost the confidence from the miles holder, the value of the miles vanish due to the lack of confidence.
Case in point: Air Berlin
Air Berlin declared bankruptcy in late summer 2017. The mileage program, Topbonus, also declared bankruptcy. In this specific case, the miles are GONE with the wind.
Another Case: Jet Airway
Jet Airways went bankrupt in spring 2019. The miles program survived but lost its value due to the lack of confidence. Today, the miles program (renamed to Intermiles) is still in existence, but there is only 1 airline to redeem your miles, Etihad Airways.
Application to your life
It depends on your airlines. For big airlines (like American Airlines), you’re safe according to history. For smaller airlines, good luck. If you don't have faith in your frequent flyer program, you can redeem it with the participating partners. However, remember that the exchange rate might not be favourable.