Yesterday I wrote about revenue-based programs and how I think it’s likely that Delta will change it’s frequent flyer program to align both earning miles and the cost of redemption with the price of airline tickets — and how I think that revenue-based programs are bad for both travelers and for the frequent flyer programs themselves.
Joe Brancatelli also expects to see a revenue-based program next year — on one or more of Delta, US Airways, and Alaska Airlines.
I had written about the speculation of US Airways in addition to that of Delta in the past. I hadn’t seen it written about Alaska Airlines previously, although now that I’ve seen that speculation it resonates as at least plausible (more so than if the speculation were about, say, American AAdvantage for sure). I’d have put Frontier into that category as well, by the way, although I haven’t heard recent rumblings in that direction out of Denver.
Joe echoes advice that I give all the time: that you should earn and burn miles in close proximity, not save your miles for some far off future trips. Miles will never be worth more in the future than they are now. Airlines devalue award charts. Rules change.
And he gives another reason unique to new developments in the space: the conversion from the current award charts to the new revenue-based ones will not be generous.
A year from now, at least one and possibly two of the traditional carriers—Delta Air Lines (NYSE:DAL), United Airlines, American Airlines, US Airways (NYSE: LCC), Alaska Airlines (NYSE: ALK)—will have scrapped their decades-old mileage plans and adopted a revenue-based scheme.
This isn’t conjecture on my part. I’ve been shown the so-called “earn and burn” structure one carrier may introduce and been informed by another that they will switch next year. The change is coming, and it’s coming next year.
Joe actually thinks this will be good for business travelers.
Unlike some talking-head experts, whose financial and psychic interests are tied to the status quo, I think a switch to revenue-based programs will be good for genuine, live-their-lives-on-the-road frequent fliers. We spend the most for our airline tickets and are the biggest spenders on the credit cards and other products aligned to our frequency programs. In revenue-based plans, our spending patterns will guarantee we earn the most new scrip and, logically, be the biggest beneficiaries of a reward chart tied the real-time dollar cost of an airline ticket.
I wonder if I’m the sort of talking head he has in mind here? (Although perhaps not because among the two “things you can do immediately” to protect yourself is to contact my award booking service.)
We don’t really know what will happen to current miles in terms of conversion, or in terms of their usability under old charts…
I’m much less sanguine about the conversion value of any existing miles you have in your woebegone frequent-flier bank, however. Some of the models I’ve been shown are distressing, to say the least. Other models grandfather the existing miles and existing award charts,..
But the fact that conversion could occur won’t be good for folks trying to make the most of their points for aspirational awards.
That said, I think Joe is right that plenty of business travelers will like the revenue model. I got emails yesterday from folks saying it’s great ‘because I accumulate all of these miles and then can’t get 4 first class awards to fly with my wife and kids to Orlando for Christmas.’
I’m not sure that many folks will like the award charts for premium cabins, even domestically, but this idea certainly resonates — ease of redemption, you can always use your points (although you can now in most programs at a higher rate than saver awards).
But the honeymoons to Thailand, the anniversary trips to Australia, the stuff that dreams and lifelong loyalty — the stuff that really connects you to a brand — will come at a more unattainable cost.
I do get the pressure that the programs feel to deliver on awards. There are too many miles chasing too few seats, they’ve printed the miles and planes are full, the current model is that saver seats should only be released when there are seats that would otherwise go empty. That leads to many disappointed members and the worry is that’s unsustainable. Though Delta is quite poor in offering awards on its own flights, the Skymiles program itself would no doubt want to offer more saver inventory if the airline’s revenue management would make that available.
At the same time, there are plenty of award seats out there, the problem is just as much technology that doesn’t do a good job searching and finding all of the available flights and routings and agents who are not well trained and don’t work particularly hard to find seats for members. Folks often go to an airline website thinking that whatever they see there is what’s available, or they believe phone agents who tell them nothing is available, when in fact there are seats out there.
With all of those unredeemed miles, we get expiring miles and we inevitably get award chart inflation. The major programs are due for a devaluation — it’s been 3 years since we’ve seen one with United or US Airways. Much longer for American (though for the most part their awards are already priced competitively or a bit higher than their competitors and it’s unthinkable that the devaluation would come while the airline is still in bankruptcy). Airlines don’t want to touch the 25,000 mile domestic coach award level, but they’ve been disappointing more and more members at that level. It isn’t really business class to Asia that’s the problem.
Still, it boggles my mind that businesses making huge margins on billions of dollars of sales would consider walking away from their entire business model having convinced themselves it’s unsustainable. Reminds me of Coca Cola ditching their golden formula for New Coke out of fear of Pepsi and taste tests.
Which is why, if it were me, I’d offer the revenue choice alongside the current award chart model. I’d make any ultimate change or phase out gradual over a series of years as I tested and got feedback.
We’ll know soon enough. I don’t see all of the programs switching right away, I don’t see them all offering only revenue-based redemptions instead of award charts. Someone will go there, my hunch is it won’t be American, so while I’m trying to keep my account balances below seven figures across the board (and not in all cases doing a great job of that) I’m not walking away from the programs by any means.