The year in review: 2003, a frequent flyer odyssey

The year 2003 was anything but dull for frequent flyers and loyalty programs. Airlines formed new alliances and broke up with long-time partners, elite programs underwent major changes, award costs went up and sometimes came down, and miles generally continued to lose some of the value they once had. As the New Year approaches, we’ve decided to recap the highlights—and lowlights—of 2003, and make some predictions for the year to come.

Click on each topic to revisit the highlights of the year:
Airline alliances | Increased award costs | Miles devalued | Elite program changes | Full-fare economy perks | New technology | Outlook for 2004

Grab your partner, do-si-do

The partner changes among the various airlines this year were a square dance gone wild. It began with United and US airways hooking up, and US Airways gaining admittance into the Star Alliance, a move that will be finalized in June 2004. Midwest Express renamed itself Midwest Airlines and acquired new partners American and Air Jamaica.

Next, Continental, Delta, and Northwest formed a three-way alliance, causing industry experts and travelers alike to wonder if this triple threat would benefit anyone other than the airlines. These two alliances caused United and Delta to split, in order for both airlines to focus attention on their new partnerships.

Continental and Virgin Atlantic got together as well, and in the fall, [% 5607 | deal | Air France and KLM %] announced a merger, strengthening the SkyTeam Alliance, along with respective partners, Delta and Northwest.

Award costs on the rise

Although not every change to mileage requirements for travel awards was bad for frequent flyers, more announcements were met with groans than applause. With a few exceptions, award travel became more expensive this year, and many travelers have reported increasing difficulties in actually booking the cheaper, restricted awards.

Hawaii awards were the biggest casualty in the airlines’ revamped award levels. American started the trend by raising its premium-, business-, and first-class Hawaii awards by 15,000 miles for restricted awards, and 30,000 miles for unrestricted awards. It also increased the mileage needed for certain types of U.S. and Canada award travel: premium- and economy-class unrestricted tickets, and premium-class restricted tickets.

In June, Continental and Northwest also increased their mileage requirements for business- and first-class travel to Hawaii, from 60,000 to 75,000 miles for a standard award, and from 120,000 to 150,000 miles for an unrestricted award. New partner [% 5675 | advice | Delta %] could not be left behind, and announced that on March 16, 2004, it would raise its Hawaii award costs, as well. Not stopping there, the airline also announced changes to many of its business- and first-class awards.

The airlines have also made other changes to their mileage redemption levels this year. Alaska has increased the number of miles needed for a one-way first-class upgrade from 5,000 to 10,000 miles, and for first-class travel in the U.S. and Canada from 60,000 to 80,000 miles. Continental has upped the price of a one-way, one-class upgrade from select economy fares from 10,000 miles to 15,000 miles. Also, BusinessFirst upgrades from K fares, as well as BusinessFirst upgrades from H fares on Hawaii flights, will now include a nonrefundable service fee of $200 each way, in addition to the cost in miles.

Even the smaller airlines increased the cost of award travel this year. Southwest announced the end of its seven-year-old [% 5691 | advice | double credit bonus %] for flights booked online, and on January 1, 2004, will end the era of a free ticket after four round-trips. In June, America West raised the cost of award travel for restricted first-class awards and for trips to Mexico, as well as for award travel on partner Northwest. More recently, it announced that it would split its U.S. award flights into short- and long-haul flights, with prices for flights over 750 miles increasing by 5,000 to 10,000 miles.

Not all the changes were bad, however, and there was good news for America West flyers. At 15,000 miles, its short-haul U.S. restricted awards match the cheapest in the business. Plus, two other awards became 5,000 miles cheaper: an unrestricted coach ticket between the U.S. or Canada and Mexico on America West, and the same ticket between the U.S. or Canada and Mexico or the Caribbean on Northwest. Non-elite members can now upgrade K, V, and M-class fares for 15,000 miles one-way or 30,000 miles round-trip; previously, only elite members could upgrade these fare classes.

Miles begin to lose their value

Not only has 2003 seen award seats becoming more unattainable, but miles themselves have begun to decrease in value, and elite status has become more exclusive. Changes to the number of miles and/or elite-qualifying miles earned on discounted tickets may prevent budget travelers from ever obtaining those coveted elite perks or awards.

First, Delta ruled that only 50 percent of the miles earned on deeply discounted economy tickets (L, U, and T fares) will count toward achieving elite status. Partner Continental soon instituted the same policy on its cheapest tickets (Q, S, T, and L fares). However, due to the hostile reaction to this announcement, the airline backed down and allowed deeply discounted tickets purchased online through December 31, 2004, to continue to earn 100 percent elite qualification miles.

Alaska took the opposite approach, and increased the number of miles needed to earn elite status. You now need 20,000 miles, rather than 15,000, to qualify for MVP status, and 40,000, up from 35,000, to reach MVP Gold.

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Several airlines have decreased the number of actual miles earned on the lowest fares, pushing both elite status and award travel farther out of reach. In May, Air Canada renamed its booking classes and restructured the way each fare class earns miles. The cheapest tickets will earn only 50 percent of miles flown, while first-class travelers will earn even more miles than before. And as of July 1, British Airways adopted a program similar to Air Canada?s, with premium classes earning more miles than discount economy. Its discount economy (G, K, L, M, N, Q, S, V) fares earn a mere 25 percent of miles flown.

Elite perks get a new look

Some airlines chose simply to revamp their elite programs, eliciting cheers and boos from both elite members and wannabes. Delta started off the year with the introduction of Medallion Qualification Miles. SkyMiles members now qualify for Medallion elite status based on a formula that combines distance traveled and fare classes purchased in one calendar year, rather than the previous method of calculating base miles and flight segments. In addition, all existing 800-Mile Segment Upgrade (MSU) points have now been converted to 500-mile upgrade points.

To keep Platinum members happy, Delta decided to award extra Platinum Medallion Upgrade certificates when elites reach a year-end mileage total of 125,000 or 150,000. Platinum members will also have the option to award elite status to a friend, or apply the qualifying miles above 100,000 toward their own elite status for the following year.

Northwest also rolled out elite program changes in 2003. WorldPerks members continue to qualify for elite status based on miles flown, but members can now earn elite status based on the number of elite-qualifying flight segments in first (P or F fares), business (C, J, or Z fares), or full-fare economy classes (B or Y fares) flown within a calendar year. In addition, non-elite WorldPerks members are no longer able to redeem miles for upgrades on domestic itineraries when purchasing Northwest tickets in full-fare (K) or discounted economy (V) classes, or Continental tickets in discounted economy classes (V, Q, or T fares).

In the latest elite program changes, United kept elites happy without disenchanting budget travelers. Effective January 1, 2004, class-of-service bonus miles will count toward elite status. In addition, Mileage Plus members can now earn class-of-service bonus segments; you’ll earn a 50-percent segment bonus in first class and a 25-percent bonus in business class. Travelers who reach elite status in 2003 will receive special perks, such as bonus miles and upgrades, and frequent flyers who reach the 125,000 or 150,000-mile mark will earn even more upgrades.

Also as of January 1, 2004, America West will discontinue its Platinum Reduced Top Value Awards and decrease its elite mileage bonuses to 100 percent for Platinum members, 50 percent for Gold, and 25 percent for Silver.

Full-fare economy: The elite of coach class

This year has seen a push toward rewarding money spent rather than miles flown, and travelers who fly in full-fare economy classes have reaped the benefits. Several airlines have awarded perks to elites and non-elites alike who purchase the most expensive seats in coach.

Continental recently revamped its elite privileges to include travelers flying on full-fare economy-class tickets, in addition to elite members and first- and business-class ticketholders. Eligible travelers will also be added to the standby list for a complimentary upgrade to first class. Similarly, United and Alaska are offering their elite members complimentary upgrades to first or business class when they book a full-fare economy-class ticket. Eligible travelers include United’s Premier, Premier Executive, and Premier Executive 1K members, and Alaska’s MVP Gold flyers.

On Delta, Platinum Medallion members can earn unlimited, complimentary 500-mile upgrades when they book a Y, B, or M economy fare. Gold and Silver Medallion members can earn unlimited, complimentary upgrades on Y and B fares.

New technology makes travel easier and earns miles

New technology has transformed the flight reservations and check-in processes this year. Most of the major airlines have installed check-in kiosks in airport terminals and have set up websites to enable travelers to check in online.

To encourage flyers to use new online tools and technology, many airlines offered bonus miles for booking paid tickets and award travel online, as well as checking in via kiosks or online tools. With signup bonuses for registering for frequent flyer programs online or subscribing to e-mails, travelers earned thousands of miles with a few clicks of their mouse.

A look into the frequent flyer crystal ball

Looking back, 2003 saw bonuses for big spenders and technophiles, setbacks for budget travelers, a mixed bag for elite members, and new opportunities for the airlines as they formed new partnerships and revamped their policies in an effort to remain competitive.

Given the mindset of loyalty programs, 2004 will most likely see the continuation of two of this year’s most important trends: rewarding travelers flying on the most expensive tickets, and making it more difficult for budget travelers to book award seats and earn elite status. However, if the airlines’ new outlook on loyalty helps keep them in business through 2004, every frequent flyer will be rewarded with a more stable travel industry. Happy new year!