Who will rescue frequent-flier programs from the airlines?

The airlines are ruining their frequent-flier programs.

With new and higher fees, increased prices for awards, and an ever-shrinking supply of award seats, the airlines have retroactively devalued trillions of frequent-flier miles stored in the accounts of tens of millions of loyalty program participants. And there's no sign of better times ahead.

Does anybody care?

We frequent-flier program members do, obviously. Rationally or not, consumers see their miles as a form of magical currency — currency because miles, like money, can be exchanged for goods and services, including trips; magical because trips are imbued with the romance of the unknown, an emotional charge that a cash rebate can never approximate. But equally obviously, our fervent cries of "Enough" and "No more" have fallen on deaf ears.

The regulators don't care. By a neat bit of verbal jujitsu — claiming for themselves the right to do whatever they please, whenever they choose — the airlines have exempted their loyalty programs from the kind of scrutiny which would hold them to reasonable and fair standards of business conduct.

But there's another group whose voice, if raised in protest, could pressure the airlines to resuscitate their flagging programs where others can't or won't.

CREDIT CARD ROLE

After flying, the most miles are earned for charges made to the credit cards linked to all major programs. The issuers of those cards have an enormous financial stake in the programs' continued viability. And they have the clout to press their concerns upon the program operators.

Precise numbers are hard to come by, since neither the airlines nor their credit card partners willingly disclose revenue or cardholder data. But a recent story in the Minneapolis "Star Tribune" on the Delta-Northwest merger estimated that U.S. Bank issues between 800,000 and 1 million Visa cards affiliated with Northwest's WorldPerks program, generating as much as $65 million in annual membership fees, plus tens of millions more in merchant fees and other charges. The same story notes that American Express issues 3.7 million cards linked to the Delta SkyMiles program, accounting for $300 million in annual fees alone.

With such revenues at stake, U.S. Bank and American Express have a clear interest in the health and well-being of the programs their cards are affiliated with. The same is true for Chase (issuer of Continental and United's cards), Citibank (American's card issuer), Bank of America (Alaska Airlines, US Airways), and so on.

By virtue of their contribution to the airlines' bottom lines, the card issuers also have the leverage to influence the airlines' behavior.

Credit card companies buy blocks of miles to use as sign-up bonuses for new cardholders, assuming that upfront investment will be repaid many times over during the course of the consumer's use of the card. And once cardholders are onboard, the card company continues purchasing miles from the airline, generally awarding one mile for every dollar charged. It all adds up.

According to Jay Sorensen, president of consulting company IdeaWorks, American sold approximately $900 million worth of frequent-flier miles to Citibank in 2007. United and Delta, with somewhat smaller programs, are assumed to have sold slightly lesser amounts to Chase and American Express, respectively.

If money buys influence, the credit card issuers are surely in a position to nudge the airlines back onto a more consumer-friendly course. And if they don't, the loyalty program house of cards could come tumbling down.

As the programs lose value in the eyes of consumers, the payback for credit card issuers dwindles, approaching the point where the return on investment turns certifiably negative. Consumer disengagement leads to program partners redirecting their marketing efforts elsewhere, making the programs even less attractive, leading to even more member flight, and so on.

AWARE OF ISSUES

There are signs that the credit card issuers are attuned to the problem.

Delta and its credit card partner, American Express, recently introduced Pay with Miles, permitting members of Delta's program to redeem their miles at a value of 1 cent each for Delta tickets. The move was clearly an attempt to shore up the program's declining value.

When program members do the math, however, they will find that using Pay with Miles amounts to a 1 percent rebate, which can only be applied when purchasing Delta flights. That may suffice as a stop-gap measure. But as consumers discover that other credit cards offer a 1 percent cash rebate — that can be used to purchase anything, not just Delta tickets — the Pay with Miles option loses much of its luster.

Knowing what I know, and putting my plastic where my mouth is, I should cut my Citibank AAdvantage co-branded card into five pieces — as many dollars as American now charges me simply to have an award ticket issued.

As I reach for the scissors, though, I'm brought up short by the cruelly ironic realization that, as airline service has deteriorated, I've become increasingly dependent on miles for upgrades on my business flights. So I'm not quite ready to exchange my airline card for a straightforward rebate card.

But I'm awfully close. And if the airlines don't care enough to resuscitate their own programs, it's in the card issuers' interest to intervene on behalf of their current and prospective cardholders.

Note to Citibank: Time's running out on my loyalty to American's mileage program, and to your card.

Tim Winship is founder of FrequentFlier.com.

Reach Tim Winship at questions@frequentflier.com