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THE INVESTOR
March 22, 2019
Big Reunion

Industrials

Air carriers face criticisms over air mileage system

  • PUBLISHED :December 09, 2018 - 16:18
  • UPDATED :December 09, 2018 - 16:18
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[THE INVESTOR] Passengers’ air miles earned on South Korea’s full-service air carriers and their partner airlines after July 1, 2008 are set to begin to expire on Jan. 1, sparking criticism that they should give more time and more options for customers to spend them.

In the face of customers’ criticism, air carriers vowed to revise the current mileage system. But passengers are calling for more ways to spend air miles. 




The ministry forecasts that, of the total air miles set to expire when their expiry dates run out next year, up to 20 percent still had not been used as of Dec. 6.

To encourage passengers to use air miles, the Ministry of Land, Infrastructure and Transport agreed with air carriers to enhance their current mileage systems to offer more benefits.

As part of the improvement, companies agreed to get rid of cancellation fees up to 91 days prior to departure. Until now, passengers had to pay a penalty of 3,000 air miles for cancelling a mileage seat within 91 days after reservation.

This will apply from flight tickets that will depart from Jan. 21.

Also, airlines need to allocate 5 percent of aircraft seats for mileage customers.

Even during the high season, airlines must transparently disclose the mileage seats’ reservation status, which both carriers have been declining to do, citing “confidentiality issues.”

Despite the changes to the mileage system, passengers say it’s still inconvenient to use.

Foreign air carriers allocate up to 10 percent of the total seats for mileage customers.

In case of Lufthansa or Singapore Airlines, mileage can be freely passed on to others or bought with cash to easily purchase mileage seats.

“While the airlines say they will open everything and support customers to make it easy (to use mileage points), it is not guaranteed that mileage customers can always make reservations, even under fixed allotment,” said a 55-year-old business man who currently has 170,000 air miles but has no plan to spend it due to lack of options.

Passengers also argue that the ways they can spend their air miles are too limited. 

According to the industry, the air miles accrued by the passengers since 2008 have a value equivalent to about 2.9 trillion won and 550 billion won for Korean Air and Asiana Airlines, respectively.

While both airlines vowed to come up with more options to spend them at offline stores, such as movie theaters or restaurants, the mileage to cash exchange rate is controversial.

According to Asiana Airlines, customers can spend air miles at CGV and E-mart, but the points tumble in value by half, to 10 won for 1 mile. Korean Air has a similar situation: Customers need to spend the equivalent of 48,000 won for a fried chicken and 16,000 won for a cup of coffee when using air miles.

Civic groups for consumer rights argue that mileage usage must be standardized and come under wider regulation. 

An official from Citizens Unified for Consumer Sovereignty said that the air mileage system must be fundamentally revised to one of cash credits, so that passengers can freely use them without fixed expiration date.

Last week, a civic group said they had sued Hanjin Group Chairman Cho Yang-ho and Kumho Asiana Group Chairman Park Sam-koo for violating fair trade regulations.

The group argued that two main air carriers, which altogether have over 90 percent market share, tried to block consumer rights and get rid of customer profits by putting expiry dates on their air miles.

A Korean Air official told The Korea Herald that it is open to hearing consumer feedback and improve the system in the future.

“We do not have a plan to revise the mileage system for now,” an Asiana Airline official told The Korea Herald.

By Kim Da-sol/The Korea Herald (ddd@heraldcorp.com)

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