Frequent Flyer Programs Now Reward Expensive Flights, Not Long Ones – BuzzFeed News
United and Delta have both changed their loyalty programs to reward dollars spent, not miles traveled.
Gary Hershorn / Reuters / Reuters
The frequent flier miles system has historically been popular among travelers, even casual ones who could never compete with corporate jetsetters who bounce from Chicago to Boston the way regular people catch a bus. Even those of us without an expense account could save up the miles from the occasional cross-country trip or visit to London, and eventually cash them in for something.
But the system is changing, and not surprisingly, big spenders are the big winners. Amid mounting competition from international carriers and the the mass consolidation of the industry, two of the country’s largest airlines, Delta and United, have fundamentally changed the frequent flyer game in the recent months, rewarding those who spend the most, rather than cover the most miles.
In short, the new systems aren’t about how far you fly, but how much your flight cost.
“The benefit is to the people who are business travelers spending money on more expensive tickets,” Adam Weissenberg, the Global Sector Leader for travel, hospitality, and leisure at Deloitte, told BuzzFeed News. “The infrequent leisure traveler, the small-business owners, the person looking to get the cheapest ticket possible, they will be losing from this. All you’re going to get rewarded for is how much you spend.”
The changes underscore the two airlines’ affinity for their most valuable customer, or the kind of traveler who stands to make them the most money, said Roland Rust, a professor at University of Maryland’s Robert H. Smith School of Business who focuses on marketing and loyalty programs in the airline industry.
“What they really care about is who the valuable customers are,” Rust told BuzzFeed News. “So what they care about is money.”
And while it’s too early to fully understand the fallout from Delta and United’s changes, industry experts like Weissenberg, Rust, and others, along with auditor studies and an increasingly vocal opposition on travel and points blogs, have said they are not a good deal for casual flyers.
A representative for United Airlines told BuzzFeed News that the changes “are about providing additional value to our most loyal customers, which is something that we learned over time that they were looking for.” The company provides a “variety of ways for customers to earn miles, be it through hotel stays, car rentals, shopping, dining — in addition to air travel,” they said.
Delta Air Lines did not respond to a request for comment.
Under the new United Mileage Plus and Delta SkyMiles programs, which took effect on March 1 and Jan. 1 respectively, the lowest class of frequent flyers — ones yet to reach the first “Silver” status tier in each program — will earn five miles for every dollar spent on a ticket. So a $400 roundtrip ticket from New York to Los Angeles would earn just 2,000 miles, or less than half of the total number of miles flown on a trip.
According to a recent PriceWaterhouseCoopers study, more customers will be negatively affected by programs that favor dollars spent rather than miles flown, with 45% of the flying population earning fewer miles, while 15% would see no change. It’s the remaining 40%, mostly frequent business travelers, who will see mileage increase. It’s those people who United and Delta are banking on to make the new system pay off.
“It’s not the largest percentage of the flying population, but it’s the most profitable,” Weissenberg said. “These are the travelers they want, because it makes it much easier to manage their demand and their routes. That’s much better business than relying on some random traveler who is just going to go based on price.”
Obviously United and Delta’s random travelers — folks on the bottom and middle rungs of the status ladder — are far from pleased.
“There’s definitely a lot of backlash online on the biggest frequent flyer discussion boards,” said Ryan Lile, a mileage consultant and founder of The Savvy Traveler, which helps consumers navigate frequent flyer programs to get the most out of their airline miles. “Just one change was bad enough, but it’s the fact that they stacked negative change on top of negative change, and it’s just a really bad deal for most travelers. They’ve cut really hard not only at the low end, but the middle end; people who are flying around 50,000 miles per year are really taking a hit. A fairly large cross section of those people, if they get really fed up, they’re going to switch.”
Rewarding big-dollar flights could also lead to headaches in the travel and expenses departments at big companies. Frequent business travelers, chasing status and out to get the most miles from their company-purchased flights, will have an incentive to opt for more expensive tickets.
“Businesses are worried that now their travelers will spend more money to keep their status,” Deloitte’s Weissenberg said. “It’s going to put the onus on companies to monitor their travel spend a little more closely.”
However, Rust believes United and Delta might lose out on potential future big spenders if they cater solely to the most frequent business travelers of today.
“Everybody has their own self-interest in this,” Rust added. “Some might spend more to get the more expensive ticket, especially if it’s on someone else’s dollar. But this could alienate the leisure traveler who has the potential to become a high-value customer, someone lower in the business world, and what matters is a customer’s potential lifetime value.”
Jim Young / Reuters
Delta and United’s policy changes coincides with changes the airlines have made to the value of accumulated frequent flier miles.
Both have increased the number of miles needed to earn a reward flight, drastically and arbitrarily. Delta even added a layer of opacity, removing charts showing the value of mileage award flights from its website in early February.
One big question is how American Airlines will react to the changes made by its competitors. It could fall in line with United and Delta, or stay the course with an old-fashioned miles program, potentially reaping the benefits of dejected defectors seeking the frequent flyer programs of a now bygone era.
“Evaluate your loyalty,” said Brian Kelly, an airline mileage program expert also known as The Points Guy, and founder of the eponymous blog. “If you fly to coach to Asia, you can get a ton more miles on American than Delta and United. Leisure travelers are still a huge business, and that’s why American is not slashing miles across the board from leisure travelers. United and Delta are taking the bet that it’s paying off with their higher-spending customers and that will offset any negative effects of attrition. You have to do the math before you buy a flight, and customers are going to vote with their wallets.”
Kelly told BuzzFeed News he does not think American will make similar changes to its frequent flyer program, and Lile agrees.
“Right now, it’s really is an issue of competition,” Lile said. “Just because Delta and United do something, doesn’t mean American Airlines will do it too, and I’m hoping they’re going to start to see it as a competitive advantage to not follow Delta and United down the path of devaluation.”
But Weissenberg predicts that United and Delta’s new systems will become an industry standard, and Rust believes American’s loyalty program, AAdvantage, will fall in line.
Right now, American is busy completing its merger with U.S. Airways, and part of that means integrating the two airlines’ reward programs, something planned for the second quarter of 2015.
“We are always watching the competitive environment and we’ll make sure AAdvantage is positioned as an industry-leading loyalty program fitting for the world’s greatest airline,” a representative for American Airlines told BuzzFeed News. “Our first priority is to integrate the two loyalty programs to provide our customers a more seamless travel experience and greater opportunities to earn and redeem miles on our expanded network.”
Regardless of whether American joins the miles for dollars fray, the changes at United and Delta will almost certainly mean a shift in the status quo for loyalty program members not armed with an expense account and a weekly travel schedule.
“What they’re creating is disloyalty with all these negative changes,” Kelly told BuzzFeed News. “Across the board, all flyers are getting hit by devaluation for their miles. Budget travelers with Delta and United, good luck. The airlines are cutting back so much to the bone that at a certain point people are going to start ignoring loyalty programs and just go with the cheapest ticket.”