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The world of airline loyalty programs is contracting this year, making it harder for travelers to both earn and spend their frequent flyer miles.
At the core of the big changes is a movement towards revenue-based mileage earning. Delta and United changed their programs last year, and American is changing earnings in its program in the second half of this year.
With revenue-based earning, travelers earn frequent flyer miles as a function of how expensive their tickets are rather than how many miles they fly. As a result, by the end of 2016, most travelers will earn fewer miles for the same distance traveled. The average one-way fare between Los Angeles and New York in Q1 of 2015, for example, according to the Department of Transportation, costs $375. In 2015, that 2,510 mile journey would have earned 2,510 frequent flyer miles for non-elite members. Revenue based programs at American, Delta and United, however, will give non-elite passengers only 5 miles per dollar spent, yielding 1,875 miles — a 25% reduction in earnings.
Budget travelers will earn even fewer miles. That same routing with a $300 sale fare would only earn 750 miles per direction, a 70% reduction in earnings.
The only passengers who will earn a respite from the mileage cuts will be elite passengers and those who purchase expensive tickets. Elite members can earn as many as 11 miles per dollar spent, pushing that $375, 2,510 mile journey up to 4,125 miles earned. But most passengers neither have elite status nor buy expensive tickets. View from the Wing, for example, estimates that only about 2.5% of members in United’s MileagePlus program have elite status.
On top of lower mileage earnings for the traveling public, the price of award tickets is also steadily going up. American Airlines, which retooled its loyalty program in late 2015, is increasing the cost of award tickets on a variety of routes including many in premium cabins as of March 22. As a result of the upcoming changes, many in the community are “burning” their award balances and booking as many tickets as possible.
Airlines, for their part, are looking forward to the changes. “Weeding out low-revenue fliers is entirely the point of the new revenue-based programs,” says Henry Harteveldt, the founder of Atmosphere Research Group. “For one thing, as airlines have consolidated, their loyalty program membership numbers have swelled, and with them, the number of elites. That means more pressure on airlines to match elite perks with their product supply, while also finding ways to earn profits. Airlines needed a strategy to ensure the elite perks go to the travelers who literally earn them — not who know how to best game the system.”
Most travelers in 2016 can thus look forward to fewer miles earned and more expensive award tickets — all by the design of the airlines’ revenue departments. The good news is that for the 2.5% of elite flyers, perks are about to get a lot more exclusive. But if general economy passengers want their cut, they’re going to have to pay up.