As air fares soar, will your employer try to claim those free airline tickets you earn in frequent flier programs? Possibly, at least according to one management consulting firm, which sees the action as a way of cutting the cost of corporate travel.
In another scenario, your company is wavering on the brink of bankruptcy in today's troubled economic climate. Wouldn't it be a sensible decision by management to save money by using your free tickets for business travel? Better than imposing a wage freeze, say, or laying off employees?
And here's an idea designed primarily to boost overall corporate morale rather than to save costs: You put your free tickets in a company pool so they can be shared -- perhaps by means of a lottery -- by everyone, including secretaries and other clerical and support staff who don't regularly fly on business.
If your employer does choose to claim your awards, do you scream bloody murder or agree that what's best for the company is best for you? It could be a decision some business travelers will have to face in the months ahead.
The debate over who actually owns frequent flier awards -- you the traveler or your employer who paid for the airline tickets -- has raged since the airlines introduced the popular frequent flier promotions a decade ago. Nothing really has been settled, but the ongoing recession has prompted some companies to take another hard look at the possibility of profiting from frequent flier freebies.
Unisys of Blue Bell, Pa., the computer corporation, recently introduced a voluntary program with cash incentives that might serve as an example for other companies interested in cost-cutting. Unisys has achieved savings of about half a million dollars a year in travel costs, according to travel manager Robert Anderson, and it did so without having to face an outraged protest from its frequent flying employees.
Under the program, an employee who has earned a free ticket is encouraged to use it on company business, and he or she is urged to pick the most expensive trip on the agenda. The employee is then rewarded with a cash payback of half the amount the ticket would have cost -- as determined by American Express, the corporation's travel agent.
So far, two types of frequent fliers have taken advantage of the offer, says Anderson -- those who fly so much they look forward to time at home and employees who need the extra cash.
As Anderson acknowledges, a half a million dollars is "a drop in the bucket" compared with the corporation's annual air fare costs of $80 million. But, he says, "It's still found money." The company deducts income taxes from the amount paid the employee.
Cost-cutting is not the only factor that might tempt an employer to recover frequent flier awards. Since their inception, the airline promotions have been subject to abuse by some employees. Eager to accumulate extra miles for free tickets, these travelers try to book the airline on which they are earning awards rather than the carrier with the best fare. If the employer collected all the awards, the problem should disappear.
Chemed Corp., a Cincinnati chemical manufacturer, has been collecting the airline mileage awards of its employees since 1984. In the first year alone, Chemed saved $185,000, according to Margie Crace, who manages the firm's in-house travel office. As of May of this year, Chemed had used $29,000 worth of free tickets and still had $116,000 worth on hand. Its annual air travel budget is about $1.86 million.
Crace, who also is president of the National Business Travel Association, an organization of travel managers, enthusiastically endorses her company's policy. She considers it "foolish" for any firm to ignore the potential for cost savings in claiming the awards.
After studying the benefits and drawbacks, she says, a company may decide it wants to continue to permit employees to keep the awards "as a perk. That's certainly management's decision. But they should make an educated decision," which means taking a hard look at the savings potential.
In the beginning, when Chemed acted to claim awards, "there were some problems," says Crace. "People really resented turning over their points. But they don't belong to the individual. The company paid for them." She estimates that employers claiming frequent flier awards can save a minimum of 10 percent on air travel costs -- and even more when airlines offer triple mileage credits to attract passengers.
Most airlines update frequent fliers regularly on the number of mileage credits they have accumulated. In line with Chemed's policy, employees are instructed to have these reports mailed directly to Crace's office. When an employee qualifies for a free ticket -- after earning 20,000 to 40,000 mileage credits, depending on the airline -- the ticket must be used by the same employee for an uncoming business trip.
Occasionally, a Chemed traveler will attempt to claim the free ticket for personal use, she says, but her office monitors mileage credits closely. "It keeps people from playing games." So far, only one employee has come close to being disciplined for failing to comply. "We try not to hassle anyone any more than we have to."
Crace says an assistant spends about eight hours monthly tracking the frequent flier awards of about 1,500 Chemed employees who travel on company business.
To date, Chemed is one of only a relatively small number of U.S. firms claiming its employees' frequent flier awards. However, Crace says she was overwhelmed by phone calls from other companies seeking more details after she appeared on national television earlier this year outlining Chemed's position.
According to a recent survey of nearly 1,000 firms in the United States and Canada, about 22 percent currently consider airline awards company property, although far fewer make any effort to collect the awards. The results of the study, undertaken by Runzheimer International, a management consulting firm, were published in May in a 44-page report, "Frequent Flyer Mileage Programs."
Bradford Burris, executive vice president of Runzheimer, estimates that about 40 to 50 U.S. companies today are collecting mileage awards, although he believes others should give it a try. The survey names a number of major corporations that recover frequent flier awards totally or partly, among them Abbott Laboratories, Chrysler, General Motors, K Mart, Wendy's and Nordstrom.
In large part, it is consulting firms such as Runzheimer and others that are keeping the idea alive and tempting. Runzheimer, for example, has developed systematic procedures by which management can begin to claim corporate control of awards to its employees. In Burris's view, the free tickets awarded by airlines are no better than a bribe designed to get business travelers to use a particular carrier.
Among the Runzheimer report's conclusions: " ... frequent flier programs represent a vast, untapped resource for companies wishing to cut travel costs. Indeed, for many firms it may be the last significant step available to contain soaring travel costs."
Randy Petersen, publisher of Frequent, a newsletter for frequent fliers, agrees. "If a company is in trouble or trying to hold down expenses," he says, "I'd rather see them collect the awards than cut employee pay."
In sharp contrast to the private sector, federal employees are strictly prohibited by law from using airline awards accumulated on government business for personal reasons, according to Donna Bennett, director of travel management in the General Services Administration. Two years ago, however, the government eased up a bit on the policy. At the discretion of each agency, federal employees now may use mileage credits for first-class upgrades when they are traveling at taxpayer expense.
Right now neither Petersen, Burris nor Crace sees any sort of mass movement by corporate employers to claim frequent flier awards, although interest remains quite high. One reason, says Burris bluntly, is most firms lack the "guts." Free tickets are a perk frequent travelers have come to enjoy, and managers worry that to suddenly snatch them away could spark an enormous morale problem. Business travelers tend to see the awards as hard-earned compensation for on-the-road hassles.
"Capturing frequent flier awards does, in fact, reduce and contain costs; that cannot be disputed," says the Runzheimer report. "The dilemma is whether or not to confront the morale issue that comes with the decision to capture travelers' awards."
"Some companies agree they would like to have the money," says Crace, "but they are not up to fighting their employees. It's a shame."
In addition, administering a program to collect mileage awards from reluctant employees might cause more headaches than it's worth. The airlines themselves, which side with the frequent travelers, don't make it easy. On several airlines, including Pan Am, only travelers earning the miles or members of their family are eligible for free ticket awards.
North American Philips, a large electronics firm, briefly considered claiming mileage awards earlier this year. But travel manager Bob Brunner concluded after a lengthy study that the "dollar appreciation was so small" it wouldn't make up for loss of productivity due to lowered employee morale. "Dedicated" employees who are willing to fly on their own time on weekends, he suggests, might decide to travel only on company time if they weren't allowed to earn free tickets.
Another reason, hinted at by corporate travel managers who prefer to remain anonymous, is that the executives who must make the decision are the frequent travelers who reap the most free tickets from the airline promotions. Travel managers themselves often are frequent fliers who benefit similarly.
The Runzheimer report suggests several ways a company could initiate a policy to claim mileage awards while minimizing employee backlash. Perhaps the most appealing one is to adopt the Unisys program in which the company offers to pay a reduced rate such as 50 cents on the dollar for free tickets. Some travelers earn so many free tickets, says Burris, they have no possibility of using them all. "You can afford to go to Hawaii once a year but not four times a year."
Another way is to establish a company lottery. In such a plan, company policy would require employees to turn in free tickets for monthly drawings. Anybody could win. Or a company might turn over free tickets to a charity.
Though frequent flier awards are under on-going scrutiny, frequent travelers do have some consolation. So far, nobody is trying to claim the freebies awarded by hotel chains and car rental agencies.
A copy of the Runzheimer survey of "Frequent Flyer Mileage Programs" can be obtained for $79 from Runzheimer International, Consulting Services Division, 555 Skokie Blvd., Suite 340, Northbrook, Ill. 60062, 708-291-9011.