What to do with frequent flyer miles when an airline goes bankrupt—and you fear they will disappear altogether

It’s the mileage question of our time. And the recent labor troubles at Northwest put it in the spotlight once again. My first piece of advice is: Don’t panic. Airlines have gone into bankruptcy and come back out again—without loyalty program members losing miles. Look at how United’s and US Airway’s loyalty programs have survived their Chapter 11 filings. Before a troubled airline tanks, it’s more likely to be bought by another carrier, as happened when American took over TWA. There, as most often happens, the acquiring airline honors the frequent flyer miles of the acquired airline. That was also the case with United; its Star Alliance partners honored UA miles while the carrier was in Chapter 11.

For those of you who can’t stand to stand pat, I suggest “hedging your bet” by turning your miles into tickets on partner carriers. In the case of Northwest, that gives you the entire SkyTeam partnership: Aeroflot, Aeromexico, Air France/KLM, Alitalia, Continental, Czech Airlines, Delta and Korean.

Here’s how to do it: Book a flight 11 months out (that’s usually as far in advance as you can book an award ticket). Make sure to ask for a paper ticket, so you’ll have a hard copy if the bankrupt airline does cease operations. (The ticket will still be valid because it’s on the partner airline. This is like getting your money out of a country with a fast falling currency.) As the departure date nears, you either decide to take the flight, change the dates, or, if the bankrupt airline seems ready to make a comeback, repatriate your miles—meaning cancel the ticket and redeposit them into your account. That cost is usually about $50 to $100 a ticket—a small amount to hedge the value of your tickets—otherwise worth many thousands.