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How United’s Loyalty Program Lets the Mileage Rich Get Richer

@denschaal

Jul 30, 2013 4:30 am

Skift Take

Anyone who boards a commercial airline sees that there are privileged and not-so privileged passengers in the eyes of the airline. United Mileage Plus reinforces and widens the great divide by providing more bang per mile for elite flyers on lucrative intercontinental routes.

— Dennis Schaal

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Not all rewards miles are created equally — not even within a single frequent flyer program.

That’s one of the conclusions that can be drawn from the latest IdeaWorksCompany study of frequent flyer programs.

The company focused on United MileagePlus, what it says is the largest loyalty program in the world, and made 170 queries on United.com to gauge fare values tied to economy, business, and first-class reward travel.

Among the findings:

  • Booking first-class travel to Hawaii, Europe or Asia provides the top values for frequent flyer mile redemption.
  • Mileage values in the United program range from $0.014 (1.4 cents) for standard rewards on U.S. domestic routes to a high of $0.054 (5.4 cents) for business class upgrades on intercontinental itineraries.
  • Flying first class to Hawaii, and redeeming miles at the Saver Rewards level, provides “great value” at $0.04 (4 cents) per mile.
  • MileagePlus Premier elite members reap superior value on merchandise rewards with discounts from 29% to 36%.

IdeaWorks notes that United realizes that elite members of its loyalty program will only remain loyal if they know their miles have premium value, and thus the program is designed to reinforce that feeling, and retain loyalty.

“United’s senior management knows MileagePlus must be rewarding to be worthwhile,” IdeaWorks states. “Members who have regular redemption events are more loyal to the airline, buy more travel, and spend more with program partners.

“This array of mercantile activity generates revenue from the sale of airline tickets along with the sale of miles to partners such as Allstate Insurance, Avis, Chase Bank, InterContinental Hotels, and Mercedes Benz. United disclosed mileage sales in excess of $2.8 billion for 2012, which represented more than 7.6 percent of the carrier’s annual revenue. Savvy airlines know this significant source of cash will only keep flowing if members believe miles have value as an attractive global currency.”

 

Here are some of IdeaWorks’ statistics on various mileage values by program level:

Screen Shot 2013-07-29 at 11.28.59 PM (2)

Here’s the full report:

Download (PDF, 1.28MB)

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