Alaska Airlines Wins Lawsuit Against Mileage Broker

Alaska Airlines won the trial phase of a federal lawsuit arguing against buying and selling of award tickets. 

The argument that work (or at least that I find persuasive), I think, is that when consumers join a frequent flyer program they agree to abide by its rules, which include only redeeming or trading milesa according to its sanctioned practices.  That is, consumers agree not to sell awards, so they shouldn’t be allowed to.

The relevant questions are whether consumers actually own the miles in their accounts, or whether the airlines do (an important question as it has implications for taxation as well), and whether an airline can create a monopoly in the sale of its miles as well as a monopoly in aftermarket trading via platforms like Points.com.

But Alaska does make some pretty silly arguments in advancing its claims.

First, they argue that damages are caused because when an award is sold and redeemed, it’s a seat that cannot be redeemed by one of their actual customers and thus they lose the goodwill of that customer who is denied the award they want. But the person selling the award has the points in their account, and the alternative to selling the award ticket is redeeming one for themselves. So while the particular seat getting redeemed may be different, it’s still an award seat redeemed, and someone else potentially turned away. The only way Alaska’s argument here makes any sense is if the person selling the award would otherwise have done nothing with their miles, which isn’t plausible as long as the miles have value — something Alaska must maintain in order to argue that there are damages, in this case in terms of lost goodwill.

Second, they argue that the award sale takes away revenue “that would otherwise go to Alaska Airlines, or to Alaska to (a third-party vendor called) Points.com.”

In the first piece, it’s not plausible that it denies revenue that would have gone to Alaska unless the redemption displaces an Alaska purchased ticket. But why assume that (a) the trip would have otherwise been taken, (b) that it would have been taken via a revenue seat, and (c) that the seat purchase would have been on Alaska rather than on another carrier? This is only plausible on a route where Alaska operates a monopoly or near-monopoly and where the trip itself was of vital importance.

In the second piece, taking revenue from Points.com, this begs the question as Points.com as the trading platform is precisely the aftermarket monopoly which Alaska has granted. If the monopoly is permissable, then trading outside the monopoly is a problem. If the monopoly is impermissable, then trading outside the monopoly is fine. Saying that the monopoly is valuable to Points.com is beside the point. Besides, it’s implausible to assume that an award sale takes revenue away from Points.com, as the sale proceeds precisely because it’s the best and most lucrative option available. If Points.com were a reasonable alternative, there wouldn’t be an opportunity to sell or trade outside of its platform.

Ultimately, I accept the airlines’ rules, buying and selling miles is against their rules and doing so risks the mileage in your account. So far these restrictions have been upheld, as in this case, but little irks me more than claims made which strain credulity — like the magnitude of losses incurred by record labels as a result of online file sharing. And in the end, suing your customers is just not a very good business practice. And relying on the courts to protect your business model isn’t a particularly viable long-run strategy either.