With immediate effect, your United Miles will never expire!
In this past, United miles would have expired after 18 months of inactivity. Meaning to say, you could keep your miles indefinitely should you earn or use your United miles in any way before you hit the expiry date. There were countless of ways to keep your miles alive – transferring credit card miles to United, earning miles from flights/car rentals and redeeming miles for magazines/flights and etc.
Although United is not the first US airlines that adopt the”zero-expiry” policy, I find something to be quite odd about United‘s sudden decision.
Why I Find It Odd?
(Updated version)
It is reasonable to assume that one will proceed to change/implement a business decision when its Pros > Cons or at least Pros = Cons.
Why does new change align with United’s interest?
First, the new change may imply that United wants to be on par with Delta SkyMiles and JetBlue TrueBlue where both programs adopt a “zero-expiry” policy.
Second, this new policy may have a greater customer lock-in effect as well.
Why does the new change misaligned with United’s interest?
The previous policy brought 2 pros factors for United. Firstly, a program with an expiry date creates motivation for customers as it forces United members to be active members (Earn and burn your miles, otherwise, your miles will be gone). Secondly, when United puts an expiry to the miles, United accountability to its members will end at a certain point in time.
In fact, miles owing to customers are accounted as a liability in their Balance Sheet. It is reasonable to assume that there will be more redemption over a longer period of time as more members will have more time to earn their redemption tickets. While institutional/professional investors may filter/adjust this particular liability away when they do their analysis, it still does not look good in the eyes of general investors. This “zero-expiry” policy may reflect a greater liability on the balance sheet as well.
Balancing both Pros and Cons:
It seems like this policy change is bringing more cons than pros to United. Maybe United genuinely wants to keep its loyalty program attractive, in view that the US market is pretty saturated; or maybe United is planning to announce some new bad news in the near future? Earlier this year, United announced that it will introduce dynamic pricing in November, maybe this is a treat before heavy storm comes?
Whatever it may be, this is a welcoming decision for all the Mileage Plus members. This decision leaves American Airlines as the last US major airlines that still enforce a mileage expiry policy.
What are your thoughts on this?
The bad news was the introduction of dynamic award pricing.
Onbitsbown, the elimination of expiration is good news, there is nothing fishy herr. The US accounting rules changed in 2018 and miles are no longer reported as liabilities. UA can report them as deferred revenue, based on the estimated redemption value (or two other valuation approaches). Combined with dynamic pricing, there is little downside to the elimination of expiration for United – they control the value of miles.
You can find more explanation and a link to the audit white paper here:
https://dreamtravelonpoints.com/united-mileageplus-miles-no-longer-expire-good-news-for-travelers/
Miles are accounted on a deferred revenue basis and deferred revenue is a liability.
Good try, United! I don’t much care whether United miles are subject to expiration. After all, it is not difficult to get the expiration date extended, even if I have to keep track of it. My beef with the MileagePlus program has to do with (a) the unavailability of award seats at the “saver” level; and (b) the constant depreciation of the value of miles. No more Chase United credit card for me and my wife.
Sam, Continenal Airlines had a non-expiry mileage program. Maybe United had learned that such a policy will lead to greater loyalty among the less frequent flyers like myself.
People who only fly once every 2-3 years can have loyalty. That is worth something. There are millions of people like that.
As far as liability, only a few of them will redeem awards per year. When they redeem awards, it will be for domestic economy class, not Lufthansa business class to Munich or Singapore Airlines first class to Singapore.
Expiration can be harsh, particularly for a few people who lose 200,000 miles because of inattention. If that happens, those people may hate UA and never come back.
Very big, negative changes coming, among them changing GPU/RPUs and Million Miler benefits shortly.
too bad the decision is not retroactive
Thought the same thing, Delta pricing where they are going to be worth even less than Deltas miles. Easy to keep them from expiring when a rt to Europe costs 400k
International accounting standards have evolved to allow for liabilities to be based on the actual redemption history and costs, not just the total amount of outstanding miles. This change has negligible effect then on their balance sheet.
Agree on the point that accounting standards may have evolved to have a better reflection of the nature of the business.
From expiry policy to zero expiry policy, many things can change. Increase rate of redemption over a longer time frame is highly probable. So this can be detrimental for United as greater liabilities may have to be reflected over a longer period of time. So then, if the scenario happens, why do United wants to go against their interest? Is it to prepare United customers for some bad news? Or do they genuinely want to serve the interest of the customers?
– Adray