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Why Some Airline Award Programs & Elite Status WILL Change

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Why Some Airline Award Programs & Elite Status WILL Change

Million Mile SecretsWhy Some Airline Award Programs & Elite Status WILL ChangeMillion Mile Secrets Team

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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).

Planes, Trains, and Automobiles Panel

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.

Bottom Line

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.

Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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I usually do not drop many remarks, however after looking at through some of the remarks here Why Some Airline Award Programs & Elite

Status WILL Change | Million Mile Secrets. I actually do have a couple of questions for you

if it’s okay. Could it be just me or does it appear like a few of these remarks come across like they are coming from brain dead folks? 😛 And, if you are posting at other sites, I would like to follow you. Could you post a list of every one of your public pages like your linkedin profile, Facebook page or twitter feed?

Robert Hanson

I’m skeptical about the idea that last minute high paying Corporate clients make all the money for the airline, and mileage runners are free-loaders. If airlines make it no longer worthwhile to low cost mileage run for status, they will start to have a lot more empty seats. But they will still have to pay airport fees, crew salaries, and nearly as much for fuel and maintenance. If they are going to fly the plane anyway, those discount tickets are almost total profit for them.

If not offering discount tickets made sense, there would be no sale fares, and no advance purchase fares. Once they drive off the discount “loyalty program” members, it will be hard to lure them back. Reminds me of the latest “hot” restaurant that only allows “A List” people to get a reservation. Then when it’s no longer considered “hot”, and the A Listers go elsewhere, they go out of business for lack of customers.

I’d think the major airlines would have learned this lesson from Southwest. The fares used to be sky-high for everyone, and Southwest was able to come in and undersell them. The majors still have most of the corporate travelers, but lots of Southwest regulars are not even considering flying them anymore.

Million Mile Secrets

@Robert Hanson – Good observation on the number of locations which Hilton has in comparision to Hyatt and Starwood. When I was traveling for business, you could almost always find a Hampton Inn or a Priority Club Holiday Inn, but Starwood and Hyatt hotels were only found in larger cities.

– The issue (if flown miles is the metric) is that you could fly, to say, Asia on a mileage run and earn the same amount of miles as someone who buys a last minute ticket for short distance US flight.

@WeddingSpend – It really depends on where those business travelers are going. In larger cities there are more choices, but often times there is nary a Hyatt or Starwood hotel in smaller cities. But I do agree that you have more choices with hotels than with airlines.

@Nic – I’d guess that newer planes isn’t much of a selling point to business or leisure travelers.

@Robert Hanson – Airlines will still need to fill up seats, because as you point out the fixed costs aren’t going away. But they don’t have to fill *as many* seats as they used to, which is why you’ll see the tightening on award availability and restrictions on elite status. I’m not saying they are going away – just that it will be harder.

Delta is cutting benefits too fast and people will get annoyed. Their product is good now but once other airlines start getting newer planes, Delta will not look so attractive.

Delta has an excellent product but a horrible awards program. But it is just impossible to serve all of these EXP or similar when you have lots of mileage runners and cheap fares. The EXP level should be reserved for those who truly add to the airline profitability. Just flying lots of miles is not enough and if your company makes you travel 52 weeks a year but just wants to spend on cheap travel fares then maybe you are working for the wrong company!

@MMS, yea I understand that, but I feel Hilton alienated their top customers in a way that Delta managed to avoid. Business travelers have a bit more flexibility when it comes to hotels versus planes.

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