A Holiday Wish for Frequent Flyer Program Transparency

As a frequent flyer and an advocate for the traveling public, my Christmas wish list can be summed up in a single word: transparency.

No, that’s not the sort of transparency associated with frilly lingerie. The transparency I desire is a ready availability of information to guide shoppers’ purchase decisions. I use the term the way economists do when they say that efficient markets depend on consumers being fully informed regarding their options.

Because when it comes to frequent flyer programs, the situation right now looks pretty opaque.

Airline transparency

Transparency is not unknown in the airline industry. In fact, it plays a large role in airline ticket purchases. Prices can be compared not only among airlines but among competing ticket distributors. The product itself can be sliced and diced multiple ways: Nonstop, direct, or connecting flights? First class or coach? Wide-body jumbo or regional jet? More or less legroom? In-flight meal or bag of peanuts?

The airlines’ on-time departure and arrival performances also can be compared, as can their safety records. In theory at least, travelers are in a position to make rigorously rational choices, opting for whatever combination of price, comfort, convenience, and service meets their individual needs.

The situation is markedly different when it comes to choosing a frequent flyer program.

Consider the key benefit of participating in an airline mileage program: free flights. In an efficient market, travelers would be able to choose a program based largely on which one does the best job of delivering free trips. But the airlines offer no guidance on this or any other salient aspect of their programs. Choosing a program is like flying blind.

The ideal future

So if my Christmas wish were granted, what would mileage program transparency look like? In the most general terms, airlines would have to make available, and easily accessible, data that allowed prospective members to rank programs according to their proven willingness to make seats available for frequent flyer awards.

Specifically, in order to evaluate programs’ performance, consumers require answers to the following questions:

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• What percentage of an airline’s total available seats is given to frequent flyers redeeming miles?
• On the airline’s most popular 10 routes, what percentage of available seats is given to frequent flyers?
• Of award tickets issued, what is the breakdown between restricted (cheaper) and unrestricted (more expensive) awards? (This consideration is critical since most program participants’ baseline expectation is that they will be able to obtain a restricted award, cashing in 25,000 miles for a free domestic coach ticket.)
• How many would-be travelers were unable to book award flights due to capacity controls on award seats?
• For those airlines offering upgrades to their elite members, how often are eligible members able to upgrade? How often are their upgrade requests denied?

Only with answers to the above questions—with transparency in other words—can travelers choose frequent flyer programs without taking a gamble.

Note that such transparency would benefit consumers in two ways. First and most obviously, it would enable them to make educated decisions when choosing among competing programs. Just as important, disclosure would force the airlines to actively compete to place better in the rankings. The result would have to be an increase in the supply of award seats.

The DOT weighs in

I’m not alone in pressing the airlines for complete disclosure. In a 55-page report issued in late November, the Department of Transportation’s Office of Inspector General graded the airlines on their compliance with their own published performance standards.

The report, entitled Follow-up Review: Performance of U.S. Airlines in Implementing Selected Provisions of the Airline Customer Service Commitment, finds the airlines have failed to deliver on their own promises in a number of key areas. These include their commitment to provide consumers with frequent flyer program performance data that could be used to make meaningful comparisons among competing programs.

The customer service commitment alluded to in the report’s title harkens back to 1999. At the time, prompted by a groundswell of outrage and complaints about airline service lapses, Congress was contemplating a “Passenger Bill of Rights.” In exchange for a reprieve from such federally mandated benchmarks, the airlines promised to address their shortcomings, and issued their own self-imposed guidelines, now posted on the airlines’ websites under names such as “Customer Commitment,” “Customers First,” and the like.

Notwithstanding the airlines’ promises to the contrary, the DOT report found that it is “nearly impossible to obtain comparable data across the airlines to determine the relative value of the award points earned in each airline’s frequent flyer program.”

The report concludes with a recommendation very much like my own: “The airlines should make available information that allows consumers to determine which frequent flyer program would provide the greatest benefit based on availability of awards at the standard level, awards requiring the least number of points, or seat availability to top markets.”

Not all Christmas wishes are granted, of course. Santa’s not likely to deploy his elves on a mission to change a major industry’s entrenched practices. But perhaps with the DOT’s goading, backed up by the threat of a renewed call for a toothsome Passenger Bill of Rights, there’s hope for transparency in our future, if not under the tree.