Now you see ‘em; now you don’t. That could describe what is fast becoming a disappearing act with airline mileage awards. Gone are the days when a mile flown was a point earned and a privilege gained. Those points would rack up quickly into an economy seat – one that you could actually reserve – on a cross-country flight on one of America’s legacy carriers, and bring loyalty bumps that would earn fliers love from the airlines.
Today that seat is a hard-earned affair of calling, guessing, hoping, losing, possibly purchasing and then more flying as airlines merge, perks vanish and programs morph into other programs and mileage charts fly out the window. Loyalty is less a concern for airlines as competition narrows and people, whether for business or pleasure, are flying more than ever. The question then becomes not how to win with the airlines but how to fly smart.
“The concept of loyalty has shifted dramatically. It’s a very different dynamic now than it was 30 or 35 years when the super carriers emerged and the markets were not so fragmented,” says Henry Harteveldt, a travel industry and consumer analyst, researcher and co-founder of Atmosphere Research Group. “When you have five airlines collectively controlling 80 percent of market, they don’t have to be as generous or as accommodating as they were in 1980 when each had maybe 4 percent of the US airline market. Since then [the legacy airlines] have become six times as large and all the other airlines have grown as well.”
The 1978 Airline Deregulation Act prompted airline marketers to find ways to reward repeat fliers. American was the first national carrier to launch a frequent flier program when it rolled out American AAdvantage in 1981. At the time, an economy seat earned a point per mile toward a 20,000-point roundtrip seat that could be earned in a few cross-country jaunts. Today, that seat costs 20,000 points one-way and soon it will be based not on the number of miles flown but on the amount of dollars paid. That means highly complicated new chart levels based on costs of a seat in hard dollars and awarded based on multipliers of those costs and the status tier level of the program member.
American as well as the other legacy carriers declined to comment on the changes in loyalty programs for this article. However, an example offered by Smart Spending columnist Gregory Karp posited that a ticket costing say, $1,894 for a 9,502-mile roundtrip flight from Dallas to London might ink out to 9,470 reward miles for a regular AAdvantage reward member (5x), 13,258 for a gold member (7x), 15,152 for a platinum member (8x) and 20,834 for executive platinum status (11x).
In this post-miles environment, the gold member will stand to earn a few more miles in the revenue system (about 12 percent) while platinum member points would be reduced by 20 percent. Current mileage redemption levels are expected to be reduced by around 40 percent to meet the new revenue-based tiers.
Delta and United changed their rules in 2015 and now keep bonus points pegged to the price of a ticket. Consequently, says Consumer Reports, SkyMiles and MileagePlus members earn less while elite members, who fly more frequently, earn more. Take for example this calculation: A 2,186 round-trip flight from New York’s JFK to Miami would have earned at least that many miles before. Now, however, a $300 Delta round-trip ticket price will bring a SkyMiles member only 1,500 miles, resulting in 31 percent devaluation.
What actual benefits you do have are getting harder to manage as well. Delta no longer publishes rewards charts and United’s is not easy to use, creating a labyrinthine world of mileage redemption for consumers. In many cases, fliers must search for fares within a search app the same way they would if they were making a regular online reservation: by dates, gateways and other filters without benefit of a transparent chart that would indicate point levels, best dates, destination tiers and other planning tools. As we go to press, American has just announced that its AAdvantage program is following suit, moving to a revenue model as of Aug. 1.
“Basically what is going on now is these programs each manage between 80 and 100 million members, so the airlines are saying benefits and perks should go to customers that earn them – the more you pay, the more you will get back,” says Harteveldt. “Many fliers are saying fare does not define my loyalty, my frequency does. But airlines are saying no, not so any more. And there is a huge rift out there with travelers who feel they have been loyal in sticking with [their chosen airlines] through downturns and bankruptcies and other changes, and feel the airlines have turned their back on them. And that is a legitimate emotion.”
The new revenue-based system – which is already in motion at United, Delta and Southwest – has already snagged some big losers. The occasional traveler can’t rack up enough points to get traction before points disappear, and the frequent business traveler who’s restricted to budget tier purchasing policies and whose elite or platinum perks on legacy carriers will no longer garner automatic upgrades and other benefits. Managing benefits is becoming a crapshoot that may be best left to apps like ExpertFlyer rather than the airlines.
ExpertFlyer taps into the global distribution systems that post airline inventory and alerts app enrollees when a rewards seat becomes available for their flight, or offers information on whether an upgrade is viable on the flight they want.
“Some airlines have been better than others [in working with frequent travelers]. Although Delta has adopted an attitude of if you don’t like it too bad,” says Chris Lopinto, president and co-founder of ExpertFlyer. “There have been too numerous to count changes in their SkyMiles program and they have managed to alienate a lot of their best customers by making it harder – if not disallowing altogether – elite status members to upgrade without having to pay a fare differential.”
Lopinto notes his data shows airlines not releasing rewards seats until close to time of flight, making it more difficult for fliers to plan and use their points. ExpertFlyer is able to watch for those seat releases and earns its value in alerting the flier, who can then snag the seat through the airline’s protocols.
In this uncertain climate where points should not be hoarded but “burned as they’re earned,” having help in monitoring the viability of using airline points cannot be underestimated.
“If there is one piece of advice that can be imparted here, it is don’t hoard your miles because the airlines will dilute them,” says Harteveldt. Paying for points is another no-go. The math never equals out to a savings.
However, Ramsey Qubein, a writer for Business Traveler and and an expert on frequent flier matters, believes the climate for working with airline rewards points is actually better these days due to the online tools, apps and websites that assist travelers in managing their accounts.
Qubein recently occupied a seat in the Etihad Penthouse to Abu Dhabi through points earned. He notes that the monitoring, the calling, the horse-trading that can be done between airlines, their partners and ancillary earning mechanisms are well worth the time, and he believes smart fliers can always gain the advantage.
“Alaska is a big favorite because it’s the only major US carrier to still award miles based on distance flown and it has a lot of partners like American, Delta, Emirates and Korean among others,” he says.
On the other hand companies like Delta are taking these programs and sending them in the opposite direction, says Qubein. “Delta is very challenging because they do not publish an award redemption chart and the website is tricky when it comes to pricing awards. Some can cost as much as 300,000 to 400,000 in points for a business class ticket or 150,000 for economy. Ridiculous.”
Qubein is a 30-something traveler who has been able to maintain elite status with his airline programs. However, this status may not be as important to fliers in years to come, and it may not be as critical to the wave of Millennial frequent fliers who are about to become the key market for the airlines.
“For me it is still paramount to maintain elite status but I travel constantly,” Qubein says. “The benefits that come with it are becoming less important to other Millennials because airlines are making their programs so difficult to understand and use. Might as well spend money on flights that fly when you want and at the price you want. I can see the argument that loyalty among younger travelers is going to be on price and convenience and no longer based on aspirational benefits and travel perks. Today’s loyalty program and elite status landscape is not as beneficial to fliers as it was a few years ago as airlines choose upsell opportunities over the loyalty of members.”
More Disappearing Acts
Mileage rewards consultant Gary Leff, a frequent contributor to Condé Nast Traveler and author of the column “View from the Wing,” sees a counterintuitive cycle being played out by the airlines in this economy.
“At the macro level, it’s counter cyclical – when times are tough the airlines are more generous,” says Leff. “But now, with consolidation, the airlines are making money, fuel prices are low and the pendulum has swung away from the consumer. Now only a third of those rewards miles are earned by flying. The balance in that total is coming in through banks, rental car companies, hotels, online shopping portals…”
In fact, if one were to ask, since airlines are so disinterested in their loyalty members, why don’t they just dissolve their programs altogether? The answer would be simple – they can’t. They make too much money from them.
For instance, American Express paid Delta $600 million for SkyMiles points in 2014. Those points, in turn, were kicked back to its Delta cardholders. “So when airlines change the way miles are earned for flying, it’s really only a small part of the equation,” says Leff. “But if you are looking for free trips down to Florida and you are earning points with an airline credit card you may be frustrated. You may be better off with a 2 percent cash back card from your bank and then buying those tickets,” he adds.
Premium seats on international flights is where the true value of frequent flier mileage accrual makes sense, Leff says. But those seats are getting harder to come by as airlines are selling those seats rather than giving them away. Plus programs are now beginning to require that international fliers use points native to the airline they intend to fly. “Or you may have to buy a full fare coach seat to qualify for a rewards upgrade,” he says.
And while airlines make it harder to maintain elite status, and harder to benefit from that status for now, business travelers may, indeed become beneficiaries of this system once again.
“Business travelers often have to buy the more expensive tickets as their planning takes place closer to departure. Those travelers tied to strict policies are usually able to find their way around those policies. Meanwhile, travelers can shop around, earn points in a variety of places on their credit card – parking at the airport, meals between flights.”
The next big change to expect, says Leff (beyond the roll out of American’s impending AAdvantage revenue-based formula), is something that consumers are seeing more and more – the “Spiritization” of the legacy carriers.
“Delta has already done this,” he says. “We will see that the cheapest fares will not include advance seat assignments or ability to make any changes or upgrade. These policies match carriers like Spirit Airlines – they want to compete on privilege so fliers that want what they want will have to pay for it. We expect to see Delta expand these policies to international routes and then United will come in on this a couple of years behind Delta and then we’ll probably see this happening on American. It might not be on every flight and the fare differential might not be so large. And buyers may not even be aware of these charges, although for now, Delta is making it clear so buyers can opt out.”
Will points devalue to the point of becoming something you redeem for extra luggage space? Upgrading to an aisle seat? For a hard-earned stab at flexibility? Possibly.
Feeling the Love
“The gap between payers and non-payers continues to narrow,” says Rick Garlick, global and travel and hospitality practice lead at J.D. Power.
Yet, the level of satisfaction in airline reward redemption remains high, according to a recently released study by J.D. Power. Although the report was commissioned by several airlines, it indicated an overall satisfaction by fliers despite the policies that require the dollar spend over miles earned.
Six factors were measured: ease of redeeming points/miles; reward program terms; account maintenance/management; ease of earning points/miles; variety of benefits available; and customer service. Satisfaction was measured on a 1,000-point scale. Most answers came out on the upper end of the scale: 650-882.
Highest on everyone’s list in the survey was Alaska Airlines, which for West Coast fliers, allows a miles formula and has strong partner programs. Other smaller carriers with a strong and loyal fan base include JetBlue, Virgin America and Southwest Airlines, although these airlines also operate programs that are revenue based.
“Alaska’s purchasing of Virgin America will mean a lot more utility as pieces come together,” says Harteveldt. “And as Alaska builds up more of a presence it could pose a very credible challenge to the other airlines. JetBlue has a presence in important markets for United and Delta and will no doubt grow. Travelers could move business in those directions,” he notes.
“I don’t fault airlines for trying to make money,” Harteveldt says. “But economies are cyclical and there are a lot of people out there reassessing their loyalties.”
By Lark Gould