Travelers have been complaining more often about frequent flier programs — namely, the lack of award seats on desirable flights, escalating fees for ostensibly free tickets and quicker expiration dates for miles.
The airlines counter that they are giving away more awards than ever, despite generally fuller planes, and that most programs allow members to book any open seat on any flight, albeit in exchange for more miles.
In a sense, both sides are right. But this debate misses a fundamental change that has occurred in the economics of frequent flier programs in the last decade. What began 27 years ago as a way to win the loyalty of travelers has turned into a lucrative business for the airlines.
Many airlines now earn hundreds of millions of dollars a year by selling miles to partners like credit card companies and hotel chains. Those companies, in turn, give the miles to customers as sign-up bonuses or rewards for hotel stays. That revenue is critical for the airlines in an era of escalating fuel prices. But it has also changed frequent flier programs into more complex businesses, where fliers are just one of the constituencies carriers are trying to please.
“The real change over the years has been the evolution from being a loyalty program for the airline’s best customers to today being a currency program for anybody’s best customers,” said Randy Petersen, publisher of InsideFlyer.com, which tracks frequent flier programs.
The currency is measured in accumulated miles, which consumers value so highly that thousands of companies now purchase them at prices ranging from one to three cents a mile. (About half of all miles given out these days, in fact, do not involve flying.)
One way that carriers are trying to reduce the mileage backlog is by adopting stricter expiration policies. Miles now typically expire after 18 months or two years of account inactivity, instead of three years.
Airlines are also offering more ways for members to use their miles, like bidding for things like Broadway tickets at online auctions, trading miles for merchandise or using a combination of cash and miles for air travel. (via nytimes.com)
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Our reader Robert G. reports this interesting story.
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