In 1995, PepsiCo ran an advertisement offering one Pepsi Point for every 10 cents spent, with 7 million points redeemable for a Harrier vertical takeoff and landing fighter jet. A Harrier cost about $20 million apiece at the time. People laughed. But John Leonard, a 21-year-old college student, ran the ad copy through a calculator. Points he was short of could be bought at 10 cents each. He rounded up investors and sent in a check for $700,000. Pepsi refused, saying it was "just an advertisement," and a court sided with the company, ruling the ad could not be treated as a genuine offer.
Thirty years later, Leonard's arithmetic drew an unexpected reward. In February this year, U.S. carrier Frontier Airlines made him the face of a promotion converting points from other programs into its own frequent-flyer miles. The 7 million Pepsi Points became 7 million air miles. He missed out on the fighter jet but walked away with enough miles to last a lifetime. Frontier revived the three-decade-old episode as marketing that showed points can actually be used. The message was that points earn trust only when they can be spent.
Airline miles are a private currency printed by carriers. Airlines sell miles to credit card issuers and others, taking in cash up front and repaying it later in tickets or seat upgrades. Miles cannot be converted into cash, and the issuer decides where they can be used and at what redemption rates. They feel like assets while you accumulate them, but they are bound by the airline's rules when you spend them. Easy to earn, hard to use.
A plan to merge the mileage programs of Korean Air and Asiana Airlines was finalized on the 15th. Asiana miles will keep their existing expiration dates and redemption rates for 10 years after the integration. They can be used across all Korean Air routes, and members who wish to can convert them into Korean Air miles. The conversion math differs, however: miles earned from flights convert one-for-one, while miles earned through credit cards and other partnerships convert at 0.82. That does not mean an immediate 18% haircut. Members can continue using Asiana miles as they are for a decade. The arithmetic of the mileage merger is settled. But settled numbers do not automatically bring trust with them. The real value of a single mile depends on how easily it can be spent.
