Frequent-Flyer Programs: More Changes Coming

Just because Delta, United, and Southwest have announced their 2015 frequent-flyer-program details doesn’t mean you won’t see any more changes. You will—and soon. Here’s my take on what’s coming:

Dollar-Based Earning: JetBlue and Virgin America based credit earning on what you pay for your ticket from the beginning, Southwest adopted that model several years ago, and, this year, Delta and United adopted dollar-based earning formulas as well. It’s an odds-on bet that American will go to some sort of dollar-based earning formula within a few months, but the formula isn’t set:

• American may well mount a carbon copy of what United is doing, or maybe Delta. That’s what it usually does.

• But it may also copy its near-merger partner British Airways and adopt a formula of keeping miles flown as the earning base but cutting the number of miles earned to 25 percent of miles flown on the cheapest fares. I suspect that most of the industry is betting on the copy-United mode, but I’m not sure.

That leaves Alaska and Hawaiian as the two remaining lines that so far have followed the traditional pattern: Earn a mile for each mile flown. I haven’t seen any speculation about how either line might respond to the big three lines’ changes. Alaska, in particular, is faced with a decision because of Delta’s aggressive expansion in Seattle. Will it want to differentiate its program from Delta’s, or will it feel compelled to match Delta’s? Either way, you can expect some sort of decision before the end of the year.

Dollar-Based Redemption: My guess is that the next major change by the big three will be in linking redemption to ticket price. JetBlue, Southwest, and Virgin America have done that since day one, and it solves the big problem of insufficient award seats to meet demand. Here’s an example of how it works at JetBlue: Start with a trip from New York to San Francisco in mid-May. The lowest available fare is $192. If you buy your ticket on JetBlue’s website, you earn six points per dollar spent, or 1,152 points. Buying that same flight with JetBlue frequent-flyer credit costs 13,200 points. In effect, fare-for-fare, you get one “free” flight after 11 paid flights. Southwest’s formula works in about the same way.

That 13,200-point flight is the lowest-point seat two months in advance. As your departure date approaches, that figure can grow to double or triple the original value. So the dollar-based redemption model means JetBlue can claim award travel is available on every flight; hiking the point requirement takes care of limiting use. By dropping its “award chart” entirely from Delta.com, Delta appears to be moving quietly in this same direction.

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It’s hard to see how the other giant lines can avoid doing the same. Currently, for example, charging the same number of miles for a flight from Boston to Chicago and a flight from Boston to San Francisco makes no sense. Some lines have introduced short-haul awards for less than the traditional 25,000 miles round-trip, but those apply only to extremely short flights. I expect that American and United will soon either start using mileage zones to a greater extent or emulate Delta with a “movable” award chart.

Miles for Stuff: Airlines keep pushing you to use your miles for something other than air travel. IdeaWorks, the outfit that provides such great data on awards, just issued a bulletin describing the “Wild, Weird, and Wonderful Rewards” airlines around the world are offering their frequent flyers. “Wild” and “weird,” I’ll agree, but “wonderful,” not so much. Almost all of the examples in the report show that you get a really bad exchange rate for your miles when you use them for anything other than an award flight—typically a half cent or less. As long as the airlines don’t devalue miles, stick with using them to fly. But keep checking; you never know when an airline will sandbag you.

Ed Perkins on Travel is copyright (c) 2015 Tribune Media Services, Inc.

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