‘Airline Loyalty Programs Should Encourage Real Loyalty’: Really?

A new frequent-flyer study from Deloitte and Touche, claiming that airline programs aren’t as effective as they could be, has generated a lot of ink and pixels. Set aside the truism that nothing is ever quite as good as it could be, the conclusions seem pretty skewed from reality, as shown by a few examples.

“Airline loyalty programs fail to engage,” says Deloitte, and a “remarkable” 72 percent of high-frequency business travelers belong to more than one airline program. Zounds! When I was a high-frequency business traveler, I belonged to four: American, PanAm, TWA, and United. (Yes, I used United when I could, but often flew others for better schedules or fares.) Now, I still belong to the programs of all three network lines that serve my home airport in Medford, Oregon—Alaska, Delta, and United—as well as a few others I joined for access to some information.

“Only 44 percent of all travelers and 40 percent of business travelers fly at least three quarters of their miles on their preferred airline.” Again, this is a tell-me-something-I-don’t-know conclusion. Often, your choice of airline is determined by the route you’re flying. If I want to fly to San Francisco, for example, I can fly nonstop on United, which takes a bit over an hour, on Alaska (Horizon) via Portland, which takes several hours, or on Delta via Salt Lake City, which takes all day. Even if I preferred Alaska or Delta miles, I would obviously select United for that route.

Overall, Deloitte seems to have overcomplicated a straightforward situation. Basic consumer guidelines remain pretty simple:

• If you travel a lot, you already know that the most important loyalty-program objective is elite status, not miles. The holy grail of elite status is getting high enough to score no-cost upgrades a fair amount of the time. And you also enjoy a bunch of other benefits on baggage check, seat assignments, and such. Nothing else comes close. That means trying very hard to fly at least 25,000 miles a year, and preferably more, on your primary airline. Interestingly, I couldn’t find a single reference to complimentary upgrades in the Deloitte study’s list of preference factors.

• The miles element of frequent-flyer programs is as much a cash cow for the airlines as it is a loyalty lure. Airlines rake in billions of dollars a year by selling miles to third parties—mainly banks that issue credit cards—and they can make it very tough when you try to use those miles to score a “free” seat.

• Even infrequent flyers should concentrate flying and miles with one airline as much as possible. A few thousand miles in each of several programs are essentially worthless. But belonging to multiple programs doesn’t have anything to do with remaining loyal to any one line; membership doesn’t cost anything, and members receive useful information and a little bit of an occasional bump in treatment even if they fly a given line only occasionally. Moreover, credit is worth only about 1 cent per mile, so paying more than a few dollars extra to seldom fly a preferred airline makes sense when some other line has a lower fare or better schedule.

• If you earn most of your credit through a credit card, you’re better off with a card that gives a generous cash or cash-equivalent payout, such as Capital One’s Venture cards, which give you up to two cents per dollar charged in travel benefits.

• Airline miles are only more valuable than cash back when you use them for upgrades or premium-class seats.

Although the airline business would make anyone cynical, I try not to become totally jaundiced. But it’s difficult not to conclude that the main objective of the Deloitte study is to generate business for Deloitte’s loyalty program consultants. As the overview points out, “We are available to assist clients in implementing these strategies.” No kidding.

Ed Perkins on Travel is copyright (c) 2012 Tribune Media Services, Inc.

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