Mileage Programs Continue Downward Spiral

In the early years of the 21st century, many of the country’s largest airlines were either in bankruptcy or teetering on the edge. Some carriers were less fortunate: National, Midway, TWA, Independence Air, and Southeast shut down completely. The sky seemed to be truly falling.

So when the remaining airlines degraded their mileage programs —adding fees, increasing award levels, reducing benefits—travelers were disappointed but sympathetic. The changes, they reasoned, were necessary to insure the airlines’ survival. Better times were just a business cycle away.

The pendulum has swung. After a wrenching period of restructuring and resizing, the airlines have been flying full at 80 percent capacity or more. Recent quarterly reports have been not only profitable but robustly so.

But the hoped-for reversal in the erosion of value in travel rewards programs has not materialized. In fact, the airlines have embarked on yet another round of program cutbacks, further compromising the value of their mileage schemes in a number of critical areas.

The declining life of miles

In recent months, consumers have watched as the life expectancy of frequent flyer miles dropped from three years to between 18 months and two years.

Alaska Airlines was the latest to join the policy change parade when it declared that miles would be removed from accounts with no activity for the previous two years. The new rule will take effect on April 1, 2008.

Similar policy changes had already been made by American, United, and US Airways, which adopted 18-month expiration policies, and Delta, which reduced the life of miles from three years to two. Continental reserves the right to terminate accounts with no activity for 18 months, but may choose not to do so.

Northwest is left as the only major carrier still allowing program members to extend the life of their miles with account activity every three years. Since there’s no competitive pressure to remain extra-generous, it’s likely that Northwest will change its policy before the end of the year.

The higher price of awards

While airlines have stopped short of tampering with their cornerstone award—25,000 miles for a domestic coach ticket in most programs—they’ve increased prices elsewhere in their award catalogs.

Continental, for example, notified program members in October that, beginning in February, mileage requirements for several types of awards would [% 2457569 | | increase %]. Affected awards include first-class flights within or between the contiguous U.S., Alaska, and Canada.

In addition, Continental’s capacity-controlled SaverPass awards will increase in price from 45,000 to 50,000 miles. The price of unrestricted EasyPass awards will rise from 90,000 to 100,000 miles. BusinessFirst award flights between North America and Asia, India, Africa, or the Middle East will increase from 250,000 to 300,000 miles. And award flights between North America and southern South America will rise in price from 180,000 to 250,000 miles.

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The decrease in award seats

Historically, when consumers complained about their difficulty obtaining award seats, the airlines gave a stock response: Unless a flight is sold out, seats are always available for mileage redemption through a rule-buster award, which generally costs twice the number of miles required for capacity-controlled awards.

But beginning in December, Delta’s rule-buster SkyChoice award no longer guarantees last-seat availability on all flights, as they used to do. [% 2448063 | | Delta’s change %] could provide cover for a similar move by other airlines, leading to an industry-wide erosion to one of the programs’ bedrock benefits.

Bye-bye, online booking bonuses

Remember when airlines routinely awarded bonus miles for flights booked on their own websites?

Delta discontinued its [% 2414699 | | online booking bonus %] in August. Effective December 1, Continental’s longstanding 500-mile bonus for booking online was also [% 2457569 | | discontinued %].

More fees, higher fees

A free ticket? That seems like an increasingly quaint notion as airlines impose new fees and increase others.

As an example, Delta recently raised the price for award tickets issued within 20 days of travel from $50 to $75. The airline also upped the fee for same-day changes to award itineraries from $25 to $50. It raised the fee to redeposit miles into an account from $50 to $75, and bumped the fee to book by phone to $20, up from $10 previously.

The diminishing rights of flyers

In addition to what the airlines have actually done, there’s ominous news related to what they could do. Specifically, several airlines have instituted new policies that dictate how far in advance they’re required to warn consumers of impending changes.

Continental recently reserved the right to make changes to the OnePass program with just [% 2457569 | | 30 days’ notice %]. Previously the program’s terms and conditions promised 60 days’ advance notice.

And in a similar vein, Southwest declared it can now change or terminate its Rapid Rewards program with only 30 days’ notice. The change, which takes effect on December 8, is a far cry from its current policy, which promises six months of advance notice.

Bad news, all the time

When the airlines were on the ropes, travelers could only hope that the value stripped from loyalty programs would be restored when financial stability was regained. But the airlines, now flush with profits and full planes, dashed such hopes, leaving their customers to wonder whether better times really could be around the next corner.

The recent past provides no reason for optimism. Where mileage programs are concerned, the only realistic expectation is more change, and not change for the better.