123miles brings uncertainty to the air miles market – 09/15/2023 – Market

In the list of 719,440 123milhas creditors, there are not only those who purchased tickets for non-existent flights. An unidentified number are airline mile sellers. And this type of business suffered a shock with the closure of the company and its partner, Hotmilhas.

“I have a colleague who sold R$120,000 [e não recebeu]. But there are those who have lost R$300,000, R$400,000. It’s a huge hole. A lot of people got it wrong,” says Augusto Muraoka, owner of the Milhas Fora da Caixa course, which teaches how to accumulate and use airline miles, something increasingly popular on social media.

Two operators in that market told the Sheet having negotiated around R$350 thousand in total. Both are in the line of 123milhas creditors, with the uncertainty of whether they will receive payment. They do not want their names disclosed because they also used credit cards and CPFs of relatives to carry out the transactions.

“It’s relatively simple. You just need to know how to generate miles at a low cost and then resell. Take advantage of a promotion to buy points, convert them into miles and resell. Many people invested in this and, as it worked the first time, they started to put in what they didn’t have : installments on credit cards, loan sharking… Purchase in installments over 12 months, receive payment in five and create a small working capital”, says Heron Alonso, owner of the Emissions Map and Miles Code courses.

Influencers on social networks promise to teach how to profit from these transactions. Loyalty programs often allow discounted point purchases. These can then be converted into airline miles and resold for a profit. Almost always, the buyer was Hotmilhas.

It worked like this: when purchasing miles, Hotmilhas also asked for the customer’s login and password for the loyalty program account. When selling an airline ticket, 123milhas used the miles from this account to pay the airline and issue the ticket using the final buyer’s CPF.

For those who collected the miles and started negotiating, the deadline to receive the money from 123milhas (or Hotmilhas) was five months. When they went bankrupt, the only way was to get on the list of creditors in the judicial recovery.

Airlines limit how many CPFs each customer can use to issue a ticket. They can vary from 25 (Latam) to five (Blue). To circumvent this rule, the solution found by operators was to create new accounts with data from family and friends to invest more and maximize profits. When 123milhas went into judicial recovery, the default remained.

For course owners and tourism agencies consulted by the report, the schedule is legal. But the opinion is not shared by Latam, which manages the Latam Pass loyalty program.

“Latam clarifies that it has never had any commercial relationship with 123milhas and other group companies that sell tickets purchased with loyalty program points, and reinforces that the Latam Pass regulations prohibit the sale of points and punish participants who sell points, according to the program regulations”, says the note sent by the company’s press office.

When consulted, Azul stated that it would not comment. Gol said that the consultation would have to be made to Smiles, which also did not comment. The same goes for Livelo, the main loyalty and mileage points company in the country.

“From the moment the miles are accumulated by the customer, this happens due to expenses, strategies, costs. The miles are theirs, they are not obtained for free. No airline goes about depositing miles into your account. The customer is paying for some way to acquire these miles, which are for him to do what he prefers, travel or give them to someone else to travel, which is the sale”, argues Rafaela Molás, one of the owners of the Milhas sem Segredo course, who claims to have already had more than 15 thousand students.

Research by ABEMF (Brazilian Association of Loyalty Market Companies) showed that the number of points or miles issued in Brazil in 2022 reached 509.4 billion, 61.8% more compared to 2021. The majority were used in exchange of other benefits offered by the program and 6.35% ended up purchasing airline tickets.

“ABEMF understands that loyalty programs have their own specific purpose: to reward loyal consumers. Therefore, the objectives are to allow consumers to accumulate points or miles and for them to exercise their right to redeem for new products and services made available” , says Paulo Curro, executive director of the Association.

Air miles emerged in the United States in 1979 as a way not only to retain customers, but also to make it easier to purchase extra services on the flight, such as better seats or special meals. In 1994, in Brazil, Varig created Smiles, currently operated by Gol.

Especially during the Covid-19 pandemic, between 2020 and 2021, companies used the sale of miles as a form of capitalization. But this is an area where the same company sells miles and determines how many are needed to buy a ticket. This inflated the market.

“In 2014, I booked a round trip to the United States, in business class, for 75 thousand miles on Smiles through Delta [parceira do programa]. Today, if I want to take the same route it will be around 400 thousand”, says Muraoka, adding that even the resale market does not provide the profit of the past decade. “There are people nowadays who talk about earning 15% or 20% on a year. In the past, you could earn 30% or 40% in a month.”

There are banks too. Financial institutions regularly buy millions of miles to benefit their credit card customers and encourage use.

“The sale of miles saved airlines during the pandemic. But it is the market in which the creditor is the one who defines the value of the ticket. It defines it according to what you want. It stopped being a reward program a long time ago”, adds Alonso .

The collapse of 123milhas hurt the buying and selling operators (they call themselves “traders”) who had money to receive, but it did not end this market. Small tourism agencies have made this negotiation, obtaining the same profits as the company in judicial recovery.

“The miles market will not end. On the contrary, it will only grow. People will continue to collect miles, especially those who have knowledge. The airlines themselves will continue selling to customers because it generates income for them. New companies and models businesses will emerge to take advantage of this space. Anyone who wants to do this resale has to become professional, whether issuing a ticket privately, for friends, family or giving it to a travel agency they trust”, guarantees Rafaela.