Such a Thing as a Free Lunch?

Several hundred US Airmiles junkies discovered that a free shipping offer on Native American $1 coins, sold at face value by the U.S. Mint, was the equivalent printing free frequent-flier miles. Coin buyers charged the purchases, sold in boxes of 250 coins, to a credit card that offers frequent-flier mile awards, then took the coins straight to the bank. They then used that deposit to pay off their credit-card bills.

The coin program was a popular play on www.FlyerTalk.com, an online community where frequent flyers share travel tips and profitable mileage strategies. One FlyerTalker, identified by his online name, Mr. Pickles, claims to have bought $800,000 in coins.

He says his largest single deposit was $70,000 in $1 coins. He used several banks, and numerous credit cards. He earned enough miles to put him over 2,000,000 total at American Airlines, giving him lifetime platinum-elite status.

Hyatt Hotels Corp. currently offers its Gold Passport program members one free night for every two nights at one of its hotels. Charles Witt, from Washington, D.C., stopped by a suburban Hyatt hotel on his way home from work several times this autumn, swiped his credit card to buy a $50, room and then went home, never even opening the door to his hotel room.

For every $100 he spent, he got a free night at any Hyatt hotel. He's booked three free nights at the Grand Hyatt in Tokyo in the New Year – rooms that would have otherwise cost him $600 a night.

The allure of frequent-flier miles, which were introduced by American Airlines in 1981, was that they offered something for nothing. The miles rewarded loyalty and proved to be an extremely powerful marketing tool.

These days, airlines have turned miles into more than a competitive device; they have become a currency that airlines can sell, usually at less than a penny a mile, to other merchants to generate revenue. More miles are put into circulation by companies – including credit-card issuers, hotels, and mortgage lenders (C&G, recently) – than are given to travellers for flights.

The Airmile is such a cherished commodity that airlines have even bolstered their balance sheets by pre-selling billions of miles. Citigroup Inc., which gives away American AAdvantage miles to credit-card customers, agreed to lend American Airlines $1 billion in September. The loan is to be repaid between 2012 and 2016 – not in cash, but in Airmiles.