Lucky passes on some pretty specific speculation about the combined United-Continental frequent flyer program for next year.
I’ll quote substantially from his post, and though while I don’t claim to be entirely in the know on this my understanding has been that the details of next year’s program aren’t final or fully decided and wouldn’t be until after Labor Day — so this may not be completely right. Although it certainly resonated with some things I’ve heard about in terms of the direction they’re going.
Let’s start with the good news (and trust me, there’s not a whole lot of it for most of us).
Class of service bonuses:
Class of service bonuses for full fare tickets and paid premium cabin tickets will go up substantially, ranging anywhere from 125% for Y, B, and M fares, to 250% for F and A fares.
And now the bad news (get some popcorn, folks):
Status level names and qualification criteria:
Premier Silver:
(a) 25,000 elite qualifying miles AND $2,000 revenue AND 4 United segments,
OR
(b) 30 elite qualifying segments AND $2,000 revenue AND 4 United segments,
OR
(c) $5,000 revenue AND 4 United segmentsPremier Gold:
(a) 50,000 elite qualifying miles AND $4,000 revenue AND 4 United segments,
OR
(b) 60 elite qualifying segments AND $4,000 revenue AND 4 United segments,
OR
(c) $10,000 revenue AND 4 United segmentsPremier Platinum:
(a) 75,000 elite qualifying miles AND $6,000 revenue AND 4 United segments,
OR
(b) 90 elite qualifying segments AND $6,000 revenue AND 4 United segments,
OR
(c) $15,000 revenue AND 4 United segmentsPremier Diamond:
(a) 100,000 elite qualifying miles AND $8,000 revenue AND 4 United segments,
OR
(b) 120 elite qualifying segments AND $8,000 revenue AND 4 United segments,
OR
(c) $20,000 revenue AND 4 United segmentsChange in status benefits:
Premier Silver:
– Economy Plus can only be selected at time of check-in
– Only one free checked bag weighing up to 50 pounds per passenger on reservation
– Upgrade window goes from 48 hours to 24 hours before departurePremier Gold:
– Mileage bonus goes from 100% to 50%
– Upgrade window goes from 72 hours to 48 hours before departurePremier Platinum:
– Mileage bonus goes from 100% to 75%
– Upgrade window remains 72 hours before departure
– M fares no longer offer instant upgrades for Platinum membersPremier Diamond:
– Upgrade window goes from 100 hours to 96 hours before departureChange in upgrade priority:
I’ll leave the exact details for another time, though the idea is that with the exception of Global Services members, full fare tickets clear first (so a Silver on a full fare ticket outranks a Diamond on a lower fare) and mileage upgrades with co-pays outrank systemwide/confirmed regional upgrades, which outrank complimentary upgrades. With this, there’s a possibility that fare restrictions will be eliminated on systemwide upgrades.
Let’s assume for a moment that this is roughly correct.
My biggest problem is the timing of the announcement, that it hasn’t been made yet. Customers fly all year based on the value proposition offered by the mileage program, if they give their loyalty there’s a suite of benefits they can expect. But it sounds like the program could be pulling the rug out from under a large number of customers who have been giving United-Continental their flying in good faith. I’ve always maintained major changes should have substantial notice, or else they’re basically a bait-and-switch.
Now, I do like substantially bonusing premium cabin fares. Several international programs offer generous bonuses for paid first class, from 300% to as much as 625% (with british midland for a gold that has already requalified). I’ve never understood the pittance that most US programs award for premium fares.
What I don’t like are:
- Economy Plus at check-in only for Premiers. Ouch. Again, they make it harder to get premier and then devalue the one true benefit of premier. (Ben mentions one free checked bag only for Premiers, but that’s not a new change, it actually went into effect several months ago.)
- Full fare upgrade priority. This was a huge pet peeve of mine against flying Delta. As a Northwest Platinum flying Washington National – Salt Lake City shortly after the merger I remember being around 30th on the upgrade list three times in a row at the gate. I’ve assumed plenty of government fare silvers for instance trumping me.In many markets it won’t matter a great deal (though not suprising they’re shortening the upgrade windows, so that last minute higher fare purchasers will jump to the top of the queue). But depending on how they treat government fares as full fares this could kill Mileage Plus from the perspective of a non-federal DC-based flyer. And Dulles is a hub.This change, I believe, is the most concerning of all. We need to shout from the rooftops, I am not my rate or my fare!
A customer is the same person every time they board one of your planes or check into one of your hotels. We’re either valued or we’re not, loyal or we’re not. Setting a minimum spend for benefits defines what you see as loyal, though I grate at punishing people who buy the lower fares that you offer — taking seats that you think would otherwise have gone empty, and providing true revenue at the margin.
But once you’ve done that, you decide who you want to consider loyal and worth treating well, treat them just as well every single time whether on a leisure fare vacationing for the weekend or on a last minute full fare business trip, when the plane is nearly sold out and is going to go out full either way.
United even implicitly understands this. The launch of the new Explorer credit card from Chase brings with it upgrades on award tickets, a valued, loyal customer is the same important person to the airline whether buying tickets and earning miles, and on those times when they spend the miles they’ve earned.
Prioritizing full fare bottom tier elites over mid-fare top tier elites is, I believe, a mistake. Though I’m unlikely to convince the powers that be at Mileage Plus.
For myself, as a DC-based flyer and if government fares are treated as full fare in this scheme for jumping the upgrade queue, it will make the program very unattractive.
- Dropping mileage bonuses below industry standard. Ouch. And when you’re making the status levels harder to qualify for?
- Mileage upgrades with co-pay outrank certificate upgrades outrank complimentary upgrades. The upgrade process is already too complicated, it’s now insanely more so if the upgrade instrument matters first, and then status, and then fare, and then perhaps time in the queue? A non-status member spending miles would trump a 100,000-mile flyer (who has met minimum spend criteria for status!) when looking for an international upgrade? That totally inverts the entire upgrade process for the airline, it devalues the benefits given to their top tier elites making confirmed upgrade instruments highly risky.
Taken together, the changes restrict elite status to higher spenders, but then they tell elite members that their loyalty isn’t as important as someone spending more money on a given trip.
The upgrade changes push the airline further towards the transactional “how much is this one flight worth to the airline?” when an upgrade co-pay from a once every three years flyer beats an upgrade certificate given to their most loyal flyers.
But that’s consistent with the theme of giving upgrades to full fare 25,000 mile flyers over mid-tier 100,000-mile flyers.
It seems to make little sense to me to do both, to say that you only award status with a minimum spend but then to say that we value the spend on an individual trip most. Do one or the other (though I’d argue for neither). But do not do both.
Of course, these changes are still just speculation and may not be exactly how it all turns out. Since the changes haven’t been announced yet (again, hardly fair to folks flying based on a promise of what they can expect to get next year!) there’s still an opportunity to shift direction.
The key takeaways for any program here are:
Treat your members with respect. Don’t bait and switch. Offer them a value proposition, stick to it, and give plenty of notice before changing the value proposition.
Reward customers to give you incremental business that you wouldn’t otherwise get, filling seats or beds that would otherwise go empty. Incentivize at the margin. Rewarding high spend that you would get anyway doesn’t actually help your bottom line.
Treat your customers just as well, every time they walk in the door or onto the plane. Because they’re the same person, and won’t understand why they’re suddenly less important when they’re spending their hard earned miles or taking a trip with a spouse on their favorite airline and want to introduce the person they care about most to the airline or hotel chain they care about most. Don’t laugh, for many people on the road a lot and loyal to a brand, it’s an intensely personal relationship. Remember: I am not my rate!
I want to congratulate American Airlines. They finally have put an end to my desire to go back to UA.
Although I honestly do not see this as a true.
I bet Jeff Robertson can’t wait to implement these new elements of UA’s (rumored) program!
I have been a loyal user of the chase presidential plus card and have accumulated 100,000 flexible eqms through the program. I usually get to silver status and spend $3500 per year to get there. I use my flexible eqms to get to platinum status. These changed effectively render my eqms worthless if I don’t have the accompanying spend. This is enough to make me cancel my presidential plus card!
OMG this is depressing. I really feel I am locked into CO/UA as an EWR based flyer. The places I fly are all non stop on CO/UA vs connections on AA or DL. I need an excel spreadsheet to figure out what is going to happen to potential upgrades. I will be at 112K on CO this year and its been a lot of Intl in J or B but I dont know how much I’ve spent. Why dont they bring back that little tidbit of info we had on CO last year that showed our spend. If I purchase two tkts in J on the same PNR do they count the value of only my tkt? This should be interesting.
In addition to the excellent points you’ve made, I’d like to point out that it’s also about Load Factors. As Southwest has demonstrated, if you fill the bus it’s much easier to run a profitable airline. A change like this will drive Customers who currently have a reason to fly UA/CO to other airlines. In this kind of economy, I don’t think any of the airlines can afford to alienate passengers of any kind.
UA/CO should focus on building Loyalty program that is better than the other guys and offers more perceived value to the end user. There’s not a change outlined above that increases the value of UA/CO’s Brand or trade long term loyalty for short term profits.
Gary – very well thought out post. It’s this level of intellectual analysis that separates your blog from all the rest. On the surface I like the idea of a revenue based model as I spend a fair bit of my own cash on flights each year, but there is a lot of devil in the detail of these proposed changes. Maybe this was a strategic leak to gauge responses to changes under consideration.
One other point is if they go this route with 4 levels only AA will remain at 3 levels. I suspect AA will follow suit. Offering a level above EXP would given them the opportunity to dilute the lifetime Platinum benefit liability they have created with their miles from all sources concept. I am sure they’d be very happy to do that
I simply can’t believe these numbers. the mileage AND the spend numbers for one don’t seem to justify the levels. I have been 1K or 1P for the past 20 years and can’t remember a year when I actually spent 4000$ on tickets, maybe about 3000$ tops for 1K, or less for 1P.
If all these come in to effect, it WILL be pretty depressing indeed for the decades long loyal traveller (especially one close to 1MM status at the moment – i GOTTA get on a plane soon)
Regarding the “short notice” on this, they’re talking about the rules for earning next year, not this year. There are still 3.5 months before the next qualification year begins. I’d say that’s plenty of advance warning.
As for rewarding the fare over status, I completely disagree with you at the full-fare levels. Maybe the government fares skewed things a bit out of Washington but in general there is value in rewarding both long-term loyalty (elite status) AND short-term loyalty (high fares). A relatively frequent (enough to get status), high yield customer is worth more to the company than a very frequent but lower-yield customer. And there is a balance to be found somewhere along the way, but I don’t think the Y/B threshold is that far off.
@bsmnasr- Not sure what you’re getting at with the load factor numbers but historically Southwest’s load factors have been LOWER than the legacy carriers and they’ve still made money. Part of that was the fuel hedges, to be certain, but a big part of it is also rational yield management. Selling fewer cheap seats, leaving a few empties to better handle IRROPS and rewarding the elites stuck in coach with an empty middle seat is actually a pretty decent way to get to a profitable place.
There’s no way this is correct. There will be a mass revolt if they make these changes, and while the UA/CO management team is greedy, they’re not stupid. I would expect them to make some small, gradual changes in this direction, but there’s no way they’d go this far this fast.
While I agree with the larger theme of this I do have to say there are plenty of instances when “I AM my rate.” When I go to do a last minute booking I know I’m going to pay out the nose. I accept that as part of the business I am in. What I am sick to death of on all the complementary upgrade airlines is paying $1500 for a middle seat in coach from Denver to Roanoke. For that price I want to be my rate. Bump one of the whiny elites from their first class seat and let me BUY the seat. Or at least let me buy the seats “reserved” for elites in the coach cabin. I have 1 seat out of 4 flights assigned because of this nonsense.
I’ve long argued that airlines regret the creation of FFPs and this is more evidence that it is true: UACO is trying to kill theirs.
Am I the only one here who thinks the revenue requirements are not high at all? I mean, unless you’re flying to a cheapo market like Orlando every week, I don’t see how you can’t hit those revenue numbers.
@Seth as I posted over on your blog in the comments, the biggest problem with rumored changes isn’t the minimum spend requirements for status.
It’s the transactional nature of prioritizing upgrades, etc. trumping status.
If we take a certain minimum spend as necessary to achieve status, then at least treat members who achieve it consistently regardless of the fare they happen to be flying on any given day.
Continental already has full fare trumping status of course. And so does Delta. Continental also sells upgrades on day of departure, even to elites, before processing elite upgrades. Anyone with $100 bucks isn’t more important to someone giving the airline 100,000 miles of travel and a minimum of spend, the bulk of their travel wallet share.
I don’t think they should do this, their PRASM is already higher than other airlines… Now they are basically just giving corporate customers priority. Most companies now do not allow business class at all but they do allow economy purchased only a day or two before. I am certainly not going to go all out for 1K if SWU’s not given priority though.
@Gary
Thanks for making the point so well. I am not my rate!
If UA wants to treat each of my flights as a one-off transaction to be maximized to their benefit, rather than consistently rewarding me for the business I consistently bring to them, then my attitude towards flying UA will change. Dramatically.
@Seth regarding timing, remember that they still haven’t announced this, so no they haven’t given plenty of warning. Besides, we’re 2/3rds through the year, members have done 2/3rds of their flying, they’ve given their loyalty for 8 months so far on the expectation that they would reap the published benefits of the program. And those look like they may be changed dramatically. That’s still a bait and switch. I know I’m tilting at windmills but a revamp this significant ought to be announced before members start flying for the year to accrue status.
This leak may be part of their rollout strategy. Spread rumors of absolutely horrifying changes to the program, then announce a slightly less painful version. Many customers will be relieved the changes were not as bad as feared and be less likely to leave.
@Gary – my UA government fares are normally not Y or B. My trip to Dulles later this month are V and W and my trip to Asia is H. While a few years ago they were Y fares, that is no longer the case as the norm, only the exception. YMMV.
With that said, it looks pretty clear that UA will go to the CO model of prioritizing upgrades by Y/B, rather than elite status. I can’t imagine them doing otherwise. I agree with your analysis, but Jeff has shown no flexibility thus far and has gone out of his way to show his 1K passengers the door.
@MS – I have a feeling that you’re likely right. This is to scare the bejeezus out of most of us, then they’ll only implement a part of these changes so we don’t think it’s all that bad. Lovely tactic.
This should discourage most mileage runs. I also wonder if those meeting 2012 spend requirements this year will get the status next year.
I was on way to 1k this year. I will be very pissed if they change the promised awards for 2012. Looking now to hedging. Will make Made 1P next weekend. Considering switching all flights for rest of year to AA and building up there. If need to I can drop UA next year if the SWU aren’t worth it and become 1k equiv on AA.
Also, looking into shifting credit card use from Chase to Citi. Made my 25k to get 10k miles. If not being respected by UA will drop the chase cards.
@Carl thanks for the data point on United gov’t fares.
I am AA EXP and was considering moving to United… No longer! American Airlines, as long as you stay the same, I am with you! 😉
I wonder about those of us who are Million Milers. Will we get “lifetime” Premier Exec in the case that there is no more Premier Exec?
I don’t see how this can be implemented for 2012 qualification. UAL.com shows me my: “Progress toward 2012 1K status and 6 Systemwide Upgrades as of Aug 12, 2011.” There is no way they can say “Sorry, you have flown all year and now you won’t re-qualify for 1K (or its equivalent)”
However, I can see this happening starting in 2012 for 2013 status. They would need to provide a way to measure your “spend” to make this effective. If I knew I had a minimum spend threshold, it would have changed how I travel in 2011. But I know I won’t rush to buy a $4000 ticket in Q4 just to qualify.
@Jeff B this will not be how you qualify for status in 2012. This is meant to apply to qualifying in 2012 for travel in 2013. My point about being late in giving notice is about what the benefits will be (bonus miles) and how upgrades will be processed (full fare trumps status, miles + copay trumps other upgrade instruments).
good to know that it now makes no sense absolutely to overpay for UA flights, now I can finally get internet, a real video system, and a new airplane for less money…
actually kind of glad to be rid of the old run down stuff they fly too.
Should be good time to burn those miles too as they are most likely looking at FF program devaluations