It has been very clear for about the last 3 years that the US airlines’ (think American Airlines, United, US Air, and Delta) generosity with their frequent flyer programs will have to change (and become less generous). I’m pretty sure that US frequent flyer programs will be quite different in the next 3 to 5 years if not sooner.
I’m not the only one predicting this change. Miles and points guru, Steve Belkin, has been saying this for a long time (often to an unreceptive audience at miles and points conferences).
I don’t see this change as a bad thing and I understand why airline management will want to make these changes. I’m not forecasting the END of frequent flyer awards or first class trips from US airlines. But I am predicting that it will become tougher and tougher to get business class and first class awards. And that airline elite status will become harder to achieve and will reward folks who truly spend a lot of money with an airline.
Airlines like Southwest or Virgin America, or Jet Blue already have sustainable frequent flyer programs, so it isn’t likely that they will change dramatically. But other airlines will have to change.
But it will still be possible to get something for (almost) nothing. Credit cards will still (at least up to 2016/17) offer an easy way to get airline miles without flying. I’m not looking forward to the changes, but I won’t whine about them either. After all, I shouldn’t complain if instead of finding $10 bills outside my house, I now only find $5 bills!
Why Frequent Flyer Programs Worked
At the Randy Petersen Executive Travel Conference, Bob Crandall who created the American Airlines frequent flyer program, explained very simply why frequent flyer programs worked so well back when he created the program after airline deregulation in the US.
He said that there were lots of airlines and lots of competition. And that airlines wanted to drive market share at all costs. This resulted in lots of excess capacity on planes which meant that it was a lot easier to “give away” the empty seats to members of the airline frequent flyer programs.
The times have changed
There have been a lot of mergers in the airline industry which means fewer airlines. Fewer airlines means that there are more chances that if one airline increases a fare, other airlines will also increase fares. As Bob Crandall noted there is reduced “willingness of dumb competitors to under cut” prices (translation: airlines are more reluctant to start price wars where all the airlines eventually lose).
Airlines have fewer empty seats, so award availability will get tougher. I’d also argue that less competition also means that airlines don’t have to offer as many benefits as they once used to.
More importantly, most business passengers do NOT choose a frequent flyer program based on which one makes it easier to redeem for First Class awards. Most business travelers either have no choice because they want to fly non-stop and only 1 airline flies non-stop from their airport. Or because their corporate travel department requires them to use only 1 airline. Or because it is the cheapest flight.
Unfortunately, the average business traveler does not read miles and points blogs. He or she has lots of other work to keep busy with! If you’re reading this post, you are NOT an average traveler.
I know countless real business executives from many companies who choose their airline based on convenience and habit. And once they have elite status with one airline, they usually don’t think of earning it on another airline.
Like Mark who takes 4 around-the-world trips on paid United business class. Or George who flies at least once every three weeks on international business class trips using Delta because Delta flights get him home to his family quicker than other airlines. Or Tina who flies every week, and doesn’t care which airline she flies as long as it matches her schedule.
The actual customer experience matters much more to the average business traveler than the ability to redeem miles for flights.
Delta & Revenue Based Programs
Delta is often mocked by many folks who collect miles and points as having the worst frequent flyer program in the US. It is hard to find standard award availability using their flights and they have made changes to their program that aren’t liked by even the stoic sensible types.
American Airlines and United can (usually) do no wrong.
But I’d argue that Delta is the much smarter run airline. Delta has good public perception (It ranks as number #4 on the Airline Quality Rating, which the media usually reports as a list of best and worst airlines, while United ranks last and American Airlines brings up the bottom).
Delta flight attendants seem to be friendlier than those on American Airlines and United, and the average traveler cares about more about friendly service than award availability at the low level.
You could even say that Delta has done a wonderful job at scaring away even the most savvy miles and points collectors – the folks who usually know how to really extract the most value from a frequent flyer program! Brilliant, isn’t it!
Delta will soon require folks to earn a certain base amount of miles as well as meet certain dollar thresholds in spending to get elite status. I see these requirements as quite reasonable, and I’m only surprised that it took a major airline so long to experiment with minimum spending requirements for elite status.
At the Randy Petersen Executive Travel Conference, Jeff Robertson from Delta mentioned that certain customers receive more benefits than they should and certain customer receive less benefits that they should. And he suggested that a change would eventually occur.
The writing has been on the wall for a long time that airline elite status will be changing in the US. I don’t see the addition of a revenue component to elite status qualification as a bad thing.
I also wouldn’t be surprised to see a change in how one of the legacy airlines approaches award redemptions. Perhaps there will be fuel surcharges on business or first class flights, just like there are everywhere else in the world?
To be clear, miles, points, and credit cards aren’t disappearing and there will still be ways to travel for less. But there will be changes over the next few years.