The New Meaning of Miles
Published: May 2009
By Andrea Bennett
As the major airlines continue to struggle, the rules—and benefits—of frequent-flier programs are being redefined. <b>Andrea Bennett</b> charts the latest changes
In December 2002, Delta Air Lines management sent its SkyMiles Medallion members a letter detailing the company's revised qualifications for earning elite status. Beginning in January 2003, the letter said, the program would "...better align loyalty benefits and rewards with the fares customers pay." The bottom line: Delta would now reward customers paying full fares with extra points toward elite status and penalize, it seemed, Medallion members buying discounted tickets by giving them fewer points.
Medallion members felt betrayed. In a full-page ad in USA Today's Georgia edition, Save SkyMiles—an organization comprising 5,700 Medallion members and representing more than 4 billion Delta miles—publicly bade farewell to Atlanta-based Delta. "The SkyMiles program, once the best in the industry, is now more an insult than a benefit," it said. By fall, Continental had followed Delta's lead, awarding extra credit toward elite status to those who bought full-fare tickets, and decreasing the earning power of a discounted ticket. Suddenly being "elite" meant paying more, not flying more, said those who stood to lose their status.
The critics agreed that, given such changes, along with new rules for redeeming awards and upgrades, the mile was being "devalued" like a volatile currency. But have travelers really been stiffed by the very programs that were created to reward their loyalty?Is it time to cut up your mileage cards and send them—as some SkyMiles members have—back to the airline?The short answer is no. In fact, some bright spots have been obscured by this juggernaut of bad feelings.
Cutbacks: What's Going on Here? In the go-go years of the late 1990's, nearly 20 years after American Airlines introduced the first airline loyalty program, earning and using frequent-flier miles became a cornerstone of the traveler's experience. Double- and triple-mile deals waited around every corner, and, for some, collecting miles became a favorite pastime. The status quo changed, however, following September 11, 2001, when the airlines began to reel from losses because of passenger shortfalls and new competition from lower-fare, single-class carriers.
Indeed, as the majors stripped away food service and other amenities, generous frequent-flier programs became their only real point of difference with the discounters. Although the upstarts have loyalty programs, too, theirs tend to revolve only around earning free trips, while the majors' programs emphasize a perk that has become ever more important to travelers, especially those who travel frequently for business, and internationally: elite status that leads to more sympathetic treatment and the coveted upgrade.
In an effort to get travelers back in the sky in late 2001, the airlines lowered their elite-status requirements and extended memberships to desirable customers. The strategy worked, but maybe too well. Airlines emerged with a glut of elite-level passengers in 2002, and many flying frequently on deeply discounted tickets achieved elite-level status before less-frequent travelers whose total spending on tickets was far more. Some of these customers, Delta SkyMiles program director Robert Borden admits, shouldn't have achieved elite level in the first place. "We had higher-revenue customers who didn't fly as often but should have been at the Platinum level, as well as Platinums whose revenue contribution was much lower." The airlines that had extended the biggest promotions were finding that having so many elite members, who were now competing for upgrades and other awards and had no natural attrition rate, had become a liability.
Thus, the recent crackdown on elite program membership—and the ensuing outcry from consumers. Randy Petersen, publisher of InsideFlyer magazine, prefers to look at the changes as an opportunity: "After at least a decade of sameness, savvy customers can assess the changes in the programs over the past year and make some choices," he notes.
Elite Status: Bad News—and Good What has certainly changed is that it will now be more difficult to earn elite status on some airlines. Continental OnePass members flying in higher-fare classes will have 150 percent of the miles they fly counted toward elite status and will earn two qualifying segments for each segment flown. Those flying on the lowest fares, on the other hand, will have just 50 percent of actual miles flown credited and will receive zero segments. The good news: Shortly after announcing the new rules, Continental extended its deadlines and will allow travelers who buy lower-priced tickets to earn full elite-status credit on travel through the end of this year.
Delta fliers will now earn elite status using something called Medallion Qualification Miles—a multiple of the miles flown and fare class purchased, replacing base miles and flight segments. Passengers will receive MQM's of twice the number of miles they fly when they buy First, BusinessElite, and Business class tickets at full fare. They will get 1.5 MQM's per mile flown in each of the three highest economy-fare classes (Y, B, and M), while discounted seats will earn only the number of miles flown.
Gaining elite status on Alaska Airlines will now require 20,000 qualifying miles, up from 15,000, but this is still less than the 25,000 miles required by most carriers.
On some airlines, however, there has actually never been a better time to be a discount seat-buyer with elite-status aspirations. Northwest WorldPerks members, for instance, will continue to have 100 percent of miles flown on discount fares credited toward elite status this year. Likewise, if you fly the carrier's alliance partner Delta, you'll also get 100 percent of miles flown, up from 50 percent. (But take note: WorldPerks members get only 50 percent of miles flown applied to elite status when they buy discounted tickets on alliance partner Continental.)
United and American have become more generous than they used to be. United now gives a 50 percent bonus toward elite status to those traveling in first class and 25 percent to those in business; American gives 50 percent extra to passengers in first, business, and full-fare economy. On both carriers, discounted seats still earn full credit.
Awards: Good News—and Bad Travelers who are more interested in accumulating miles for awards than in attaining elite status probably won't be affected too much by this most recent round of changes. On all the major carriers, passengers will continue to earn full mileage toward award travel when they buy discounted tickets.
That said, award tickets have become more expensive on some airlines. On Northwest, for example, first-class award travel from North and Central America to Hawaii has increased from 120,000 miles to 150,000 miles round-trip. While 20,000 miles used to get you a free coach ticket on America West, now tickets for flights of fewer than 750 miles will start at 15,000 miles, those over 750 miles will start at 25,000.
As for upgrades, some of the major carriers are making it easier for elite-level customers to reach the front of the cabin, while charging regular passengers more. Top-level elite fliers on Delta will get free upgrades when buying tickets in Y, B, and M classes; these upgrades, if available, can be confirmed when reserving. Second- and third-tier elite Delta fliers will get free upgrades for tickets in Y and B classes, but will have to wait until 100 or 72 hours before departure, respectively, to request the upgrade. Northwest and Continental passengers who want domestic upgrades from discounted coach fares will now have to part with 15,000 miles, up from 10,000, each way. On Alaska, one-way upgrades will double from 5,000 miles to 10,000; elite-level passengers, who are eligible for free upgrades, must wait until three days before departure to request one if they're flying on a discounted ticket.
Still Feeling Cheated? Although these new rules might appear to have reduced mileage benefits, it's worth noting that the value of the award mile has actually never been higher. To be sure, the elite-status component of frequent-flier programs is shifting to a revenue-based model from a frequency-based one, but it has also never been so easy to accumulate miles for awards. Even when you earn miles only by traveling—forget the miles you can earn by buying groceries on your credit card or paying your cell phone bill—adjusting for inflation, the cost of flying one mile is about half what it was in 1981, according to the Air Transport Association. To say that miles have been devalued would be to miss the obvious: the decreasing price of flying has outpaced the cost of redeeming award miles.
Delta expects that its total number of Medallion members will remain the same this year, since it will move some members up a level (based on their spending patterns) and won't drop any members more than one level a year. It's nearly impossible to project how many travelers will be affected by the latest changes, but considering that, on Delta, elite members don't constitute more than 2 or 3 percent of total passengers and that an average of 8 percent of a flight's seats are allocated to award redemption, on a percentage basis fewer people will be negatively affected than you might think.
Difficult as it is to quantify the people affected, it's even more difficult to figure out why so many people feel affected by these changes. The root cause may be that customers continue to think of miles as a bankable currency, even though the airlines reserve the right to change their loyalty programs at any time. "When people are given something over a long enough period of time, it becomes coded as a feature of the program, not as a perk," says Nicholas Epley, an assistant professor of psychology at Harvard. "It's basic human adaptation."
Especially when it comes to travel, we're particularly susceptible to feelings of loss. "Travel has great symbolic meaning for Americans," says George Loewenstein, a professor of economics and psychology at Carnegie Mellon University. "It's the image of the good life. If you ask someone what he'd do if he won the lottery or recovered from an illness, chances are he'll say he'd like to travel. And traveling with free miles is that most romantic activity without the accompanying pain of spending money."
The mile itself fulfills a complicated psychological function, Loewenstein says. Travel aside, miles have also become a way to alleviate the pain of spending money on other purchases. "When people buy a dinner that they think is a little too expensive, at least it's earning them frequent-flier miles," he says. So, regardless of whether you know the actual value of your miles—or ever intend to redeem them—when your program changes, suddenly that dinner seems just too expensive again.
Experts are divided on what this round of changes means for frequent-flier programs in the long term, but one thing is certain: as ever-expanding code-share agreements redefine the meaning of passenger loyalty, and airlines grapple with new competition, the age in which programs simply reward frequency of use is drawing to a close. At press time, some carriers indicated they wouldn't make more program changes this year, but we've never known any of the majors to sit still for long. So now's the time to get up to speed. As usual, the more you know about the system, the more you can use it to your advantage.
Do an audit
Decide what's more important to you: elite status or inexpensive fares. Then audit your accounts. This can be as simple as looking at the number of miles and segments you've accrued, determining whether you're on an elite track—or what you'll need to do to maintain your status—and checking the program's new rules to make sure you buy enough tickets in the correct fare class. If elite status is not in your future, concentrate on buying cheaper tickets and earning miles for free tickets and upgrades. If you maintain several accounts, Mileagemanager.com keeps track of them for you, collects updates, and tells you when you've earned enough miles for a free ticket; its "weblink" feature updates you on promotions via e-mail.
If you have a small account you rarely use, think about buying a ticket with a mixture of money and miles. American Airlines has a year-round program, called Reduced Mileage Awards, that allows AAdvantage members to buy coach-class tickets by redeeming AAdvantage points and making cash co-payments. For a $225 co-payment and 25,000 AAdvantage miles, you can travel from North America to Central America, Colombia, Ecuador, Peru, or Venezuela. For flights within the continental United States and to Alaska and Canada, the airline charges $125 plus 20,000 AAdvantage miles, $225 plus 15,000 miles, or $295 plus 10,000 miles, depending on the itinerary. Other airlines, such as Northwest, run periodic hybrid promotions on their Web sites. You can also exchange points from hotel and other loyalty programs to "top off" your frequent-flier miles, at Points.com. Alternatively, if you're just shy of an award ticket, most airlines will sell you a block of miles starting at about three cents each—up to 15,000 miles.
Take advantage of alliances
Each of the major U.S. airlines has many partners: United and US Airways are code-sharing partners, and Continental, Delta, and Northwest formed an alliance last year. Internationally, there's Star Alliance, headed by United, Air Canada, and Lufthansa; SkyTeam, led by Delta and Air France; and OneWorld, headed by American and British Airways. You can earn miles on your preferred airline when you fly any of its partners, but check alliance rules regarding elite qualifying miles, because there are some loopholes. Strangely, Northwest WorldPerks members, who used to get 50 percent of miles applied to elite status when they bought discount tickets on Delta, now earn 100 percent. Considering that Delta SkyMiles members earn only 50 percent for many of the same fares, this is an odd—though beneficial—rule for Northwest customers. Meanwhile, new ways to rack up miles are being added all the time: members of American AAdvantage now earn miles on British Airways flights from the United Kingdom to destinations throughout Europe, Africa, the Middle East, and Asia.
Play hopscotch with your status
A well-kept secret is that one carrier will sometimes match your elite status on another if you submit a request, says Matthew Bennett, publisher of First Class Flyer newsletter. Asking for elite status outside an alliance generally produces better results, since code-sharing airlines often have "no-poaching" rules. First Class Flyer publishes contact information, as well as instructions for submitting requests, for seven airlines on its Web site, Firstclassflyer.com.