United's new vice president of loyalty wants to bring more value to MileagePlus customers across a wider spectrum of travelers. He's starting that process by spearheading an overhaul of the company's co-branded credit card.
It’s been seven months since Luc Bondar, United’s vice president of loyalty, joined the company, and since his start, the public hasn’t heard much from him.
That’s all about to change, though, as Bondar gets comfortable in his role at the fourth largest U.S, carrier, and starts spending more time in the field. On Thursday, the executive was shaking hands at the Polaris Lounge opening at Newark International Airport.
And Friday, he’s leading the airline’s relaunch of the United Explorer Card, the airline’s co-branded Chase credit card.
But there’s much more on the horizon for the executive at United Airlines. Bondar joined the airline at a sensitive time. On November 1, the same day he started, United increased the price of many award seats and shook up the pricing on a slate of other routes, agitating many of the airline’s loyal customers. And in the last six months, a smattering of executives, from the CFO to the vice president of corporate communications, have left the airline (United’s Chief Commercial Officer left in early 2017). As things settle down, this summer may be the perfect time for Bondar to start launching some of the initiatives he’s quietly been working on.
The New United Explorer Credit Card
On Friday, Bondar is leading a joint effort by Chase and United to relaunch the airline’s co-branded credit card.
Like many airline credit cards, the United Explorer Credit Card has traditionally offered a typical range of benefits, including free checked bags and frequent flyer miles earned on every purchase. As new credit cards have entered the market in the last few years, however, many of those benefits have been overshadowed by other incentives – especially among premium credit cards such as the Chase Sapphire Reserve and the American Express Platinum. United’s MileagePlus Club Card is built to compete with its highest end competitors.
To stay competitive, United had to broaden the utility of the Explorer credit card. “We wanted to find a way to bring great day-of-travel benefits to customers and equally pump up the value of the card in the wallet as an everyday card to use across key categories,” Bondar said. To that end, beginning Friday,the card is adding a handful of benefits for new and existing members, including:
- Double miles on hotel and restaurant purchases;
- Up to $100 in Global Entry or TSA Pre-Check statement credit; and
- 25 percent awards on in-flight purchases placed on the card.
In adding these benefits, the Explorer Card essentially will become competitive with more contemporary cards like the Chase Sapphire Preferred card, which also offers double points on travel purchases and comes with a $95 annual fee.
On the other side of that equation, United and Chase are also taking away some benefits. In April, Nerd Wallet pointed out that trip cancellation coverage on the new card would drop from $10,000 per trip to only $1,500, while the card would remove the price protection benefit altogether.
Bondar defends those moves as decisions centered around bringing the most value to the highest percentage of customers. “What we found [in our research] was that less than half of a percent of the total portfolio – of the total number of cardholders – was actually getting value from price protection and trip cancellation,” he said.
Instead, United and Chase chose to focus on making the card much more valuable to everyday travelers who aren’t necessarily flying every week. Adding the hotel and dining bonuses plus the TSA/Global Entry credit made that happen.
New Acquisitions Paths
Most credit cards regularly offer an incentive to lure new customers. United’s Explorer Card is no different. To build momentum behind the new launch, United and Chase are waiving for new cardholders the first year of of annual fees, which are typically $95, plus 40,000 miles and $100 in statement credit after $2,000 in purchases.
Beyond the typical block and tackle customer acquisition, though, United seems to be interested in building out other acquisition channels as well.
One particular channel that has been a hot button issue for frequent flyers has been in-flight. Many frequent travelers on American Airlines have recently decried an uptick in credit-card pitches from flight attendants mid-flight – and though Delta and United also occasionally use that channel, their pitches have been less aggressive.
Asked whether United would lean more heavily on an in-flight approach with the new Explorer Card, Bondar demurred. “I think we’re going to continue to monitor how our customers respond,” he said. “[In-flight advertising] is a channel that we use today, and we’re going to continue to watch and monitor how that channel performs for us, as we do for every channel that we have. I think focusing on that effectiveness will be key, and we’ll continue to look at ways to refine it.”
dynamic and Revenue-Based Award Redemptions
Over the last several years, American, Delta and United have all moved their loyalty programs to models in which passengers earn award miles based on how much a ticket costs instead how many miles they fly.
As an extension of that, many wonder if the next logical step is to move the purchase of award tickets to a revenue-based model where a frequent flyer might redeem X points at a fixed rate for a ticket that costs Y dollars.
Already, Delta and United are starting to do this on a limited basis. On shorter flights, where fares are typically lower, both carriers have started offering lower-cost award tickets outside of the typical tiers that one might expect to see in an award chart. Instead of 12,500 miles for a one-way award ticket between Chicago and Minneapolis, for example, United now often offers those fares for 10,000 miles.
Those low-priced award tickets started at United the same day that Bondar did, and for his part, he sees that change as a success story. “We’ve seen about an 11 percent increase in availability over that six-month period across our saver and our everyday awards. Part of achieving that is bringing a more dynamic pricing model to bear,” he said. “You’ll continue to see more sophistication in the way we align customer award interest with seat availability with reward pricing.”
That doesn’t necessarily mean that United plans to turn MileagePlus into a program where travelers trade points directly for ticket value. But it does suggest that more creative award pricing may be on the horizon. “I’m a big fan of the dynamic model that allows for targeted value for different customers and allows customers to get the most value from their participation in the program – and then equally it works for everyone involved,” Bondar said.
adding value across all tiers of mileage plus
One theme of Bondar’s future plans seems to center around adding more value to the entire spectrum of Mileage Plus members, from casual flyers to top-tier elites.
“Historically, a lot of frequent flyer programs – and certainly United’s is one, but I’d say all the major carriers fall into this – have really concentrated on the premier or the elite flyers,” he said. “That’s great, and clearly those are very important customers, and we focus on how we can bring great value to them. But we can’t do so at the cost of not understanding or appreciating or providing for the value that our general members are looking for when they make those decisions to fly United once a year, twice or three times a year.”
Another big initiative that Bondar is undertaking is growing the bonds between MileagePlus and United’s partner airlines across the Star Alliance. “I’ve spoken with a lot of our key Star partners in looking for ways that we can continue to expand the value of that network for every Mileage Plus member today,” Bondar said, foreshadowing some interesting partnerships that may be around the corner.
As Bondar’s initiatives mature, his goals of bringing better value to the full spectrum of customers may encounter resistance from a weary MileagePlus base and a management team keen on expansion and profitability. But in the meantime, travelers on United have a strong new credit card to look forward to.
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Photo credit: Luc Bondar, United's vice president of loyalty, believes the relaunched United Explorer Card will be able to compete with more contemporary rivals. United Airlines