Skift Take

Spend-based airline loyalty programs may sound more fair in theory than using miles flown but PwC's research show it's basically 50/50 in terms of which passengers benefit and which ones lose out.

Now that all three major U.S. carriers’ loyalty programs place more emphasis on amount spent on airfares than number of miles flown, following American Airlines AAdvantage program changes this week, it’s worth looking at the benefits and setbacks of this new era of airline loyalty.

A PwC report from earlier this year lays out just how impactful these changes are: more than 300 million people in the U.S. and abroad are members of U.S. airline loyalty programs, with seven percent of all miles flown on these carriers paid for using loyalty miles or points.

The report analyzes points awarded to passengers under two program types: miles flown (legacy model) and fares paid (the new model now adopted by American, Delta and United). Nearly 40 percent of all domestic passengers benefit in a spend-based program, 15 percent break even and 45 percent are worse off, according to the report.

“People who travel on last-minute or business fares will generally do far better under the new, spend-based programs, while those who fly on advanced purchase, reduced-fare tickets will generally earn fewer award points,” the report states. “Nearly 45 percent of the flying population falls into these two categories. For most other customers, the changes on average are much less dramatic, with a loss of 45 award points on a one-way trip.”

The largest impacts include 20 percent of passengers gaining more than 500 points on a one-way trip and 25 percent losing more than 500 points on a one-way trip, on average, and on the whole passengers lose about 45 award points on a one-way trip. The charts below outline these impacts and compare others for low-cost versus legacy carriers and short-haul versus long-haul flights.

Chart 1: A slightly higher number of passengers are negatively impacted by 100 to 500 points or more when part of a spend-based program.

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Chart 2: On average, passengers flying low cost carriers, non-aligned carriers or
itineraries with multiple stops are worse off in spend-based programs than they are in miles-based programs. Passengers flying on high cost fares and passengers flying on short-distance flights are on average better off in spend-based programs.

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Chart 3: Passengers on major U.S. airlines or non-stop itineraries do better because they pay higher than average fares, but only fly marginally longer distances than average. For example, passengers flying non-stop on a U.S. major carrier on average gain 154 points per one-way trip.

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Chart 4: The big winners in spend-based programs are passengers that pay high fares for short-distance itineraries. The big losers are passengers who fly long-distance itineraries on low-cost fares. While these passengers earn fewer award points in spend-based programs, they also contribute far less revenue to the airline per trip.

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Chart 5: A spend-based program awards on average twice as many points per mile flown on a 500-mile flight as on a 1,000-mile flight because average fares are comparable. The chart below is based on non-stop itineraries and doesn’t include 500-mile minimums in-order to isolate the relationship between miles flown and fares paid.

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Source: PwC

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Photo credit: A credit card user displays her cards in Washington. Kevin Lamarque / Reuters

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