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Rumor this week among the aviation blogs is that United Airlines is considering a new type of award pricing that could drastically effect the way you book award tickets. This comes after news that Delta Air Lines may be considering the same strategy.
The term “dynamic,” of course, could mean anything in the land of unregulated loyalty programs, but in this case, the community seems most concerned about revenue-based award tickets.
With revenue-based award tickets, the old formula of “25,000 miles = one cheap domestic award ticket” no longer applies. Instead, miles are assigned a value by the airline, say $0.01, and that’s used to pay off a ticket. So if you were considering a $400 ticket from New York to San Francisco and your miles were valued at $0.01 each, you would need 40,000 miles to fly across the country.
Some airlines like Southwest already operate their loyalty programs like this. The problem with this model, through, is that the point values are set by the airline and can arbitrarily change. Indeed, Southwest picked up a fair share of flak earlier this year by effectively changing the value of their miles $0.017 to $0.014 — a significant shift for budget travelers.
There are, of course, shinier sides of the coin. If the flight that you’re looking at is only $150 and your points are worth $0.014, you’re only going to need to burn 10,714 miles for your trip. But situations like that are few and far between — and the value of those 10,714 miles is also changing based on new earning charts coming into play from United and Delta.
In short, moving towards dynamic pricing puts a lot more power into the hands of the airlines and takes it away from consumers. And that is why you should be concerned.
Rumors on both United and Delta moving towards dynamic pricing seem to suggest that the change may come later this year, though both airlines are remaining tight lipped on the process. In the meantime, you can read more on the speculation over at Flyertalk or View from the Wing.