Air Miles threat to BA: Travel experts warn of potential 'time bomb'

AIR MILES, the frequent-flyer promotion by British Airways, is a potential 'time bomb' which could send the airline's costs spinning hopelessly out of control, travel specialists are warning.

The scheme is expected to mushroom this year from 3 billion to 5 billion miles in circulation as more and more banks and retailers offer Air Miles as a customer perk.

The airline will suffer increasingly as hundreds of thousands of passengers obtain flights free with Air Miles instead of paying for them. Experts fear the cost of the promotion will be incalculable.

The airline countered: 'We benefit from our ability to dispose of excess capacity in a controlled manner and we are world leaders in the sophistication of your yield management systems.'

Brian Axon-Boyes, the head of industry affairs at the travel agent Thomas Cook, and a senior figure in both the Association of British Travel Agents (Abta) and the Guild of Business Travel Agents (GBTA), said: 'People see Air Miles as the best thing since sliced bread. But I would like an assurance that it is controllable, because it has all the markings of being out of control. It is a time-bomb for BA.' Thomas Cook is one of Britain's largest travel agents and a big retailer of British Airways tickets.

Steven Freudmann, Abta Travel Agents Council chairman, said BA was 'making a rod for its own back'. He also queried why the Inland Revenue did not tax people for free flight benefits earned with miles gathered on business trips.

The experts believe BA and Air Miles, the company that runs the scheme, could suffer in the same way US airlines did in the 1980s when their massive frequent-flyer schemes went out of control. This contributed significantly to the collapse of Pan American - and the deep red ink still running across the balance sheets of all the other large airlines in the 1990s.

As a marketing ploy, Air Miles have been a runaway success. Introduced by BA five years ago to combat the competitive challenge of large US airlines such as United and American, they are becoming a currency in their own right.

This year, a prominent department store and restaurant chain, both yet to be revealed, will join big names such as Shell, National Westminster, Cellnet and Safeway as outlets giving away miles with every transaction.

BA, chaired by Sir Colin Marshall, and the Air Miles company claim all participants are in a 'win-win situation'. The airline fills airline seats which would otherwise remain empty, while the public feel they are getting something for nothing when they pick up vouchers with their petrol, shopping or air tickets and redeem them for free trips to the Caribbean.

In the UK, the Air Miles company is 51 per cent owned by BA. Last year, BA gave 500,000 free flights to Air Miles collectors, with London-Paris the most popular choice.

Paul Dickinson, the Air Miles travel products director, said BA had learnt from the US failures and was controlling the scheme tightly. 'We are giving away empty seats on BA planes and empty ferry places on P&O - not premium business which those companies would have got anyway.'

tion of profitability for BA.'

The airline insists that it is able to contain the cost of the scheme by calculating which flights will be under-booked.

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