The ethical dimensions of airline frequent flier programs

Business Horizons, Jan-Feb, 1997 by David W. Arnesen, C. Patrick Fleenor, Rex S. Toh

So the personal use of awards earned through company travel would usually pass the deontological test for ethicality--unless there is a third party involved. If, say, a lawyer accumulates mileage credits on business travel that are ultimately billed to a client, then we may have an ethical problem. Jane O'Dell at KPMG Peat Marwick believes that in such a case, the mileage credits may actually belong to the client. The solution to this ethical dilemma may very well be intractable from an accounting point of view.

Using utilitarian rules, the net cost of personally using bonus awards earned through business-related travel is zero, for the alternative is to use the free ticket for business-related travel. The employee's loss would match the employer's gain, leading to a neutral result.

3. Corporate Confiscation Of Frequent Flier Awards

Instances of corporations confiscating frequent flier awards earned through company-sponsored travel are rare. Our survey of corporations revealed that only 11 percent of respondent firms claim ownership of these bonuses. Nevertheless, many large companies have begun to do so. Abbott Laboratories, Chrysler, General Motors, GE, Hughes Aircraft, Raytheon, Gelco Corporation, Texas Instruments, K mart, Wendy's, and Boeing all require their employees to use their free tickets for future business trips. Unisys has introduced a program whereby an employee who earns a free ticket is encouraged to use it on a future business trip in return for a cash payment equal to half the value of the ticket.

From the deontological viewpoint, there is nothing immoral about companies expropriating what is rightfully theirs. Observes Harry Versen of Texaco, "Not using the payoff from company-paid trips for business is like not sharing the prize in a lottery with the guy who bought the ticket" (Dubin 1985). The practice is deontologically ethical, unless some of the points were earned through personal travel or the use of affinity cards such as the one sponsored by the Membership Miles Program of American Express.

But is it in the best interest of the corporations to confiscate these travel awards? Stephenson and Fox (1987) found that attempts by a company to share or use frequent flier benefits accumulated by employees meet with considerable employee resistance. Our own survey of passengers confirms this. Because business trips today are long on tedium and short on glamour, weary business travelers see bonus awards as compensation for flight delays, lousy food, lost baggage, and time spent away from home. Confiscating them may very well lead to lower employee morale, which affects productivity. Thomas Jones (1995) notes that the point of instrumental stakeholder theory is precisely this: Manifestations of opportunity (such as confiscating frequent flier awards) may not lead to optimal economic performance. This practice, then, is unethical under the utilitarian cost-benefit calculus, because ownership of the awards is transferred at the cost of lower employee morale and productivity.