Swapping Frequent Flier Deal for Fare Cut Unlikely : Travel: IBM effort to get discounts for employees was thwarted. Such mileage programs are in fact expanding.

While some companies might like to swap frequent flier programs for cheaper air fares, there is every indication business travelers won’t see that happen.

The programs are in fact expanding. It is now possible to earn frequent flier miles, and ultimately free air travel, by sleeping at certain hotels, dining at specified restaurants, making long-distance calls and--soon--by ordering flowers.

A recent disclosure that IBM had approached major airlines asking whether it could get discounts for employee air travel by banning its employees from participating in frequent flier programs raised the issue anew.

American Airlines and United Airlines--the two airlines with whom IBM was talking--turned the company down, according to Randy Peterson, a frequent-flier expert who operates FlightPlan Inc., in Boulder, Colo.

The question is not a new one. But International Business Machines Corp., with a $300-million annual air-fare travel budget, won headlines because of the impact such a change would have had if the airlines agreed.

“I don’t think it’s really a story about frequent flier miles--it’s a story about where IBM is going, looking for a way to cut costs,” Peterson said in an interview.

“Because American and United rebuffed them, I think it says these programs do work and they don’t want to be messing with the relationships they already have with each flier,” he said.

“If there was any chance these programs weren’t successful, we’d see the airlines trying to get out of them,” he said. “But they’re wildly successful.”

Peterson said he’d be more worried about IBM’s musings if it were not for the fact that the programs have now sprawled far beyond the airlines themselves.

“These programs have become so big and so huge--it’s not really about frequent fliers any more,” Peterson said. “It’s about what airlines are doing to generate money from affinity groups” such as hotels, long-distance carriers and others who buy the miles from them.

Frequent flier programs are not without their critics. Corporations worry that traveling employees might sacrifice schedules and prices to run up points. Analysts say everyone in the end pays for them in the prices carriers charge.

But they also represent up-front money for the airlines, which sell the miles to hotels and others who use them as lures.

That end of the business is on a takeoff roll.

Red Lion Hotels & Inns, which operates in 10 Western states, recently announced it would hand out credits of 250 miles on Alaska Airlines for every restaurant meal of $25 to $49.99. It will give a 1,000-mile credit for a dining tab of from $50 to $99.99.

Northwest also has a restaurant-miles arrangement with some airlines.

Hilton, Hyatt, Marriott, Holiday Inn, Sheraton, Westin and Red Lion among others allow guests to earn mileage points by staying at their hotels.

Peterson said American Airlines has told him its next affinity partner for mileage will be Florist Telegraph Delivery--opening the way for earning miles by ordering flowers by phone.

Long distance carriers took the plunge a while back. According to the Travel Letter, published by Consumer Reports, here’s how the three major programs in that field work:

* AT&T; offers for each dollar spent one point, worth five miles credit on Delta, United or USAir. The points expire in two years if not used, but you need not specify which airline they go to until you’re ready to use them.

* MCI offers mileage on American and Northwest but the airline must be specified in advance. The credit is posted monthly and expires in three years.

* Sprint offers credit on TWA, five miles per dollar spent. For members of TWA’s very-frequent flier program, the credit is seven miles per dollar. The TWA mileage has no expiration.

The Travel Letter rates AT&T;’s program as the most flexible but says Sprint’s offers the highest payoff.