Are Your Frequent-Flier Miles About To Lose Value? (#GotBitcoin?)
Savvy travelers fear the rise of basic-economy and premium-economy seats could cause rewards and upgrades to cost more points. Are Your Frequent-Flier Miles About To Lose Value? (#GotBitcoin?)
Brace yourself for what may turn out to be the next big devaluations of your frequent-flier miles.
Delta is testing basic-economy awards—letting frequent travelers use miles to pay for the carrier’s bare-bones, or basic-economy, tickets, which are a tier below the standard economy level. That includes no advance seat assignments, inability to change or upgrade and last-group boarding, so your carry-on likely will be gate-checked. Veteran travelers fear this change could easily lead to frequent fliers spending more miles for a regular economy ticket.
And as Delta, American and United roll out premium economy on international routes, changes are coming to upgrades. Premium economy typically costs $500 to $1,000 more than regular economy. You get an extra inch of width, more recline and legroom than standard economy and sometimes better food. Still, it’s a far cry from business class.
Right now, you can upgrade a coach ticket to business class if you spend enough miles or have top-tier status and an international upgrade certificate. But on many airlines outside the U.S., an upgrade goes up only one class of service—economy to premium economy, not business. So you’d need to buy a premium-economy seat to upgrade to business class. American’s rules suggest it’s headed in that direction.
Airlines say they are adding options for travelers and improving their loyalty programs by giving you more ways to use your frequent-flier miles. To road warriors, both moves make the seats they really want more expensive.
Economy and business-class award ticket prices have gone up and your ability to upgrade from economy to business has gone down, says Andrew Gold, a Tampa, Fla., university professor. “Now they are complicating things further so your baseline, instead of an economy fare, is going to be basic economy.”
American, Delta and United all reduced many travelers’ ability to earn miles when they switched to paying out miles based on fare rather than distance traveled about three years ago.
The best perks of loyalty programs lie in top-tier status, where you get early boarding, bag-fee waivers, better service and quicker rebooking. If you are in the very top tier of a program, you may get upgrades.
To many travelers, the Delta test of basic-economy awards is part of a pattern—reducing what’s included with the lowest price and forcing people to pay more to get what used to come standard. Basic-economy fares started as tests in select markets, originally pitched by airlines as a countermeasure to discount airlines, then spread world-wide. Since regular economy is about $60 round-trip more expensive than the lowest price, frequent travelers figure they’ll soon have to pay more in miles for regular award tickets, too.
“I have no doubt at all that this will become the standard. Once you lose something, they don’t give it back to you,” says Lucian Chen, a Delta platinum-level frequent flier and a New York-based attorney. “The systematic devaluing of miles is upsetting.”
Frequent travelers shun basic-economy tickets because of the restrictions and have little appetite for basic-economy award tickets, especially if they have lots of miles in their accounts. But for frugal travelers, those tickets can be an option to get an award when they otherwise might not have enough miles.
Delta says it is testing basic-economy awards on a handful of routes: between Minneapolis and Phoenix and routes out of Charleston, S.C. Basic economy is often priced about 5,000 miles or so less than standard. That’s consistent with the cash price being about $50 or $60 higher for standard economy over basic economy. If you don’t care about a seat assignment in advance and are willing to live with the other restrictions, a basic-economy award ticket can save you some miles.
Since Delta no longer publishes an award chart, the price in miles for trips varies significantly, following the cash price. It’s hard to compare different markets, since demand for seats changes rapidly. But a spot-check of flights roughly the same distance as trips from Charleston gives some credence to road-warrior fears.
A Charleston-Los Angeles round-trip for Feb. 8 to 15 priced out on Monday at 32,000 miles for basic economy. Delta requested fewer miles for standard-economy trips to Los Angeles from Charlotte, Columbia, S.C., and Orlando, Fla., suggesting the basic-economy price was no bargain.
Delta says since it ties its award price to the cash price of the ticket, basic-economy awards will be cheaper, in miles, than standard. “The price of a ticket isn’t changing, necessarily,” Delta spokeswoman Kate Modolo says. “The rollout of basic-economy awards is not designed to impact main-cabin pricing but instead to offer more reward options.”
Ms. Modolo also says that by giving customers more ways to use miles, “we are making them more valuable,” not devaluing them.
While Delta says basic-economy awards are something customers have asked for, United says it has had no such requests.
Premium-economy cabins haven’t yet degraded business-class upgrades on U.S. airlines. But some of their international partners have.
American doesn’t yet offer premium-economy upgrades and awards—a spokesman says the airline is “working on it.” American’s upgrade rules already say that “upgrades are valid to the next cabin of service.” Once premium economy becomes the “next cabin of service,” an upgrade from an economy ticket may get you only premium economy, not business class.
United started offering premium-economy awards on Dec. 3. Michael Covey, managing director of MileagePlus premier programs, says early sales have been good for premium-economy awards on longer routes, such as San Francisco-London.
Both United and Delta have started premium-economy upgrades with flexible policies that allow top-tier frequent fliers to use certificates to upgrade to business class or premium economy. On United, if a business-class seat isn’t available, the upgrade certificate gets you a premium-economy seat and on a wait-list for a business-class seat.
“We felt it was important to retain that benefit,” Mr. Covey says. “I don’t see, at this time, a future in which we put a system in where it’s only one cabin allowed. We’re really proud of the flexibility that we have.”
You can also use miles, or cash plus miles, to buy an upgrade as long as you’re not on the cheapest economy fares. Business class costs more miles than premium economy, but both are available on United and Delta. On United, if you buy a premium-economy ticket, you get priority over people with economy tickets for business-class upgrades.
Get Ready for New Rules on Your Frequent-Flier Program
The path to elite status is shifting, emphasizing spending over miles, and perks like airport-lounge access are getting more restricted.
New year, new rules. United Airlines is changing how you earn top-tier elite status in its frequent-flier program, making money more important than miles and top status harder to achieve. Other airlines are starting to copy the sometimes byzantine rules.
And those aren’t the only changes lately. Several carriers have limited access to their airport lounges for some travelers, even when they have a membership card. And JetBlue has removed a valuable perk for its top customers if they buy the airline’s cheapest fare.
Travelers complain the adjustments amount to a bait-and-switch. When the rules change, some benefits you bought or earned are no longer as valuable.
Bottom line: While you typically can’t change your plans with an airline without penalty, airlines reserve the right to make all the changes they want. And they do.
United has, without much irony, taken an unprecedented step among the biggest U.S. airlines: It has all but taken mileage out of its MileagePlus elite qualification. You still earn miles and redeem them for trips and other purchases. But the new qualification system for silver, gold, platinum and 1K status is based on how much you spend plus how many flights you take. You can even qualify solely on how much you spend.
United thinks the changes will thin out the ranks of its top tiers, which the airline says have become overcrowded. That should make it easier for top customers to land upgrades.
“It’s a fair bet that there will be a rebalancing of the top tiers in the program,” says Luc Bondar, United’s vice president of loyalty. While top tiers shrink, bottom tiers will get more populated, he says.
Previously you qualified for elite status based on meeting an annual spending requirement plus a flying requirement, either in qualifying miles or in flight segments. Silver, the lowest level, required 25,000 qualifying miles or 30 flight segments, plus spending $3,000 on tickets, for example.
Starting in 2020, the silver flying requirement drops to 12 flight segments, but the spending requirement increases to $4,000. But instead of using dollars as the measuring stick, United says it will require 4,000 qualifying points.
The airline is now measuring spending in points because you will get credit for spending on partner airlines and for things like upgrades. (One dollar spent with United gets one point, but that’s not the case with partner-airline spending.) Another way to qualify for silver status: 5,000 premier qualifying points. (United does require four paid flight segments on United for any elite status.)
The change rewards high-fare business travelers and makes it harder for cheap-ticket travelers to qualify. Premier 1K status, the top published elite level, will be reached with $24,000 in spending based solely on dollars, or 54 qualifying flights and $18,000 in spending.
United’s Mr. Bondar maintains that the new system is simpler and more logical. “It is designed to do a better job with lining up the value we see from a customer and the value we give to them,” he says.
The spending-only qualification may be particularly popular for business travelers. To match United quickly on that feature so customers didn’t shift allegiance, American sent an invitation to select customers offering a special qualification program based solely on spending for 2020, first reported by American customers on FlyerTalk. It will take—surprise!—$24,000 in spending to reach Executive Platinum, American’s top published tier.
Mr. Bondar argues that 30 years ago, when status was based on mileage, mileage was a pretty good proxy for how much you spent. But that’s no longer the case—there’s a wide range in price depending on whether you buy first class, business class, premium economy, regular economy or basic economy.
Some customers have complained that the new United rules are hard to understand—calling dollars “points,” for example. Also, basic economy tickets don’t count as flights, but the fare does count toward spending requirements. In addition, the new rules award points for tickets bought on some partners at a different rate than fares on others.
Mr. Bondar says United actually simplified qualification by eliminating qualifying miles and all the different ways they were calculated. In addition, previous rules didn’t recognize spending on partner airlines, unless the ticket was sold by United.
United isn’t the only airline messing with its perks.
JetBlue made a change in November that angered some of its top fliers. Previously, if you had Mosaic status, the top level of JetBlue’s frequent-flier program, you could change or cancel any reservation without a fee—a major perk. But when JetBlue introduced a bare-bones fare class called Basic Blue, it made those fares nonrefundable even for Mosaic members. Mosaics also can’t reserve a seat in advance with a Basic Blue fare unless they pay seat-assignment fees.
Basic-economy fares at other airlines have proven to separate business travelers from an airline’s cheapest fares. A JetBlue spokesman says the airline felt compelled to match basic-economy fares and believes that Mosaic members will prefer buying higher-priced coach fares without as many restrictions so they can continue to get all their benefits.
“Blue Basic is a completely different type of fare than we offer today, targeting customers who have firm plans and are looking for the absolute lowest fare,” spokesman Philip Stewart says. “This market segment has grown substantially over the past few years and it’s simply too large for us to ignore. By not offering a similar fare, JetBlue was no longer competitive.”
In November, United and American changed rules at their airport lounges so members would be admitted only if they had same-day travel on the airline running the club or one of its partners. Previously, members could use the club if they were traveling that day on any airline. Delta made the same change last January.
U.S. airlines have refurbished and fancied up their clubs, trying to keep up with international competition. The clubs are popular, which means they’re sometimes crowded. So airlines are taking steps to shrink crowds without shrinking membership revenue.
Richard Binzel, a Massachusetts Institute of Technology professor, was shocked when he was recently denied entry to one of American’s Admirals Clubs.
“Membership is no longer membership,’’ he says. “Admirals Club has been my second office for 30 years, whenever I am flying and there is a club accessible from the terminal I am in. Usually it is an American Airlines flight. But not always.”
Dave Certo bought a lifetime club pass from Continental for $5,000 and United honored the terms when it merged with Continental. But now the terms have changed.
“This seems like a big diminution of value for the membership I purchased,” he says. Mr. Certo notes that American, when it made the change, grandfathered in lifetime club members.
United says lifetime members have received lots of additional benefits since they signed on, such as more club locations as well as lounges available through partner airlines.
Why Airline Rewards Programs Are Trying Harder To Keep You Loyal
The major carriers are loosening their rules to ensure their most frequent fliers stay in the fold even when they haven’t been flying frequently.
Status matters: social, work, financial, health, legal or marital. This is a year when many people will be paying a lot of attention to another status: frequent-flier elite status.
Travelers—and airlines—are worried that they won’t requalify for top-tier frequent-flier status without frequent business trips and long international flying. So airlines are making big changes to keep loyalty to a particular carrier from breaking.
Most carriers extended status earned in 2019 through this year because of the pandemic. The concern now is whether people can requalify this year for 2022 with so many international borders closed and business travel still depressed.
United reduced qualification requirements by about 25% at the start of the year, added some bonuses and last week launched an additional welcome-back bonus giving even more qualifying points for your first three trips, or the chance for more bonus points from credit card spending. Other airlines have also made changes and say more are likely coming to make it easier to re-qualify:
* American has lowered qualification thresholds, rolled over earnings from the fourth quarter last year and waived some requirements for spending $30,000 on an airline co-branded credit card.
* Delta is offering bonuses toward qualification for buying premium tickets, from extra legroom to first-class seats, and is temporarily counting trips taken on frequent-flier award tickets toward elite status.
* Southwest gave all its A-List members a boost of points and flights that amounted to about 40% of what you need to earn this year to extend status next year.
“We’re doing all we can right now with our customers to help them retain their status,” says Michael Covey, managing director of United’s MileagePlus program.
The changes showcase a basic problem facing airlines: How do you keep customers loyal when they’re not flying? Many are expected to travel a lot more in 2022, but if elite status has expired, they’ll be free agents possibly open to moving their business to other airlines.
“I think that free-agent status begins now,” says Rick Elieson, president of American’s AAdvantage program, because elite status has already been extended for 2021 but remains uncertain for next year.
Fliers earn elite status at most airlines through a combination of flying and spending. The thresholds are significant: Typically the lowest tier requires 25,000 miles flown or 30 flights, plus $3,000 in spending a year. The highest tiers require more than 100,000 miles flown or at least 120 flights, plus $15,000 or more in spending.
For travelers, elite status can provide practical and psychological benefits. High status usually brings more perks and better treatment. Plus, you end up feeling recognized and even loved when so many travelers feel unheard and unappreciated.
For airlines, elite-level fliers are a key to profitability. Road warriors buy pricier tickets more often and account for a large share of airline revenue. And as travel has started to rebound, elite-level members have traveled more, on average, than regular customers. Mr. Covey says that over United’s most recent quarter, the percentage growth of trips by Premier members outpaced that of non-Premier members by double digits.
Of course, the magic of travel may have worn off for some grounded travelers who don’t want to resume the grind of being away from home constantly and enduring the delays and discomforts. Airlines worry about that. Some say, however, they have been buoyed by continued use of airline credit cards—an indicator that customers still covet miles and trips.
Rather than temporarily shrink thresholds, Delta has opted to provide accelerators to accommodate for reduced travel by top customers. An elite-level traveler who buys a first-class ticket can get a total of 75% additional qualifying points for that trip.
Like other airlines, Delta is counting more co-branded credit card spending toward elite qualification this year. And Delta has offered something unique among U.S. airlines: counting travel on award tickets toward elite qualification. Usually only purchased fares get counted.
Even with those offers, many fliers may not qualify or could see a downgrade in their status. And others taking advantage of the accelerators may find it easier to qualify for higher tiers.
“You’ll probably see redistribution in elite ranks,” says Dwight James, Delta’s senior vice president for customer engagement and loyalty.
Mr. James also says Delta will survey its Medallion members in the next couple of weeks to see if the changes made so far are satisfying top customers. More bonuses may be coming.
“We want to continue to ensure that customers feel that the loyalty currency is valuable,” he says.
That’s a fundamental issue for loyalty programs.
While top-tier travelers fervently covet their status, many travelers have found that status isn’t the golden goose it used to be, says Jay Sorensen, president of IdeaWorksCompany, a Shorewood, Wis.-based consulting firm specializing in loyalty programs.
Being in the lower or middle rungs of the status ladder no longer wins upgrades, since airlines are selling more first-class seats at discounted prices. You can earn early-boarding and baggage-fee waiver perks just by having an airline’s credit card.
In addition, the programs have become significantly more complex, with thresholds built around complicated measures like elite-qualifying points.
“I think these elite status programs are suffering under the weight of themselves,” Mr. Sorensen says.
“Airlines have learned how to sell all these things, and they would prefer to generate the cash rather than give them away. The cost of that is that you have significantly reduced the allure of the elite tiers.”
Southwest says even with the boost it gave top-tier customers at the beginning of the year and changes to its credit card program that allowed more elite-qualification with spending, frequent travelers are starting to worry that they likely won’t requalify for its popular Companion Pass or A-List statuses.
“I think that’s a valid concern,” says Jonathan Clarkson, Southwest’s managing director of marketing. “We want people to achieve status. It’s in our interest to make status achievable for people.”
More adjustments to help frequent travelers requalify are likely coming. “It won’t be a quiet year for us,” says Corbitt Burns, director of Southwest’s Rapid Rewards program.
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