The Vexing Problem of Limited Award Seats

“I’ve had 200,000 miles for several years but can’t seem to find a decent place to go to that I could use them for. Sure if you want to go to Omaha, I’m sure you can get a free seat. But Florida, Arizona, California, New York, or God forbid Hawaii—you can forget it.” (Craig)

“I find that I can use the miles only if I use the rule breaker where you have to use double the miles.” (Jan)

“I recently tried to book two round-trip tickets from Portland, OR, to Providence, RI, four months in advance and could not get the tickets EXCEPT if I paid the premium mileage rate. This is not exactly a highly sought-after route. What is going on?” (Kathy)

The above are just a few of the many such complaints I receive regularly from readers about their inability to book frequent flyer awards. And the numbers are growing. In more than 20 years of involvement with the travel industry, first as a marketing executive, then as a journalist, I have never seen so many consumers so upset about a single issue. A frequent flyer myself, I confess that I, too, have come to share their outrage. So it’s our outrage.

But how do we get an accurate sense of the scope of this problem? And to the extent that it can be shown to be a problem, how do we fix it? Because what the airlines don’t yet realize is that without a fix, this problem could grow into a monster that brings about the fall of frequent flyer programs as we know them, and potentially even the airlines themselves.

How big is the problem?

Clearly there is a problem. And it’s getting worse. But how pervasive is it? Is it industry-wide? Or are a few bad actors fouling the reputations of the many?

I have my suspicions that it’s the latter. For example, based on the feedback I’ve received, American does a particularly good job of delivering awards, while Delta generates a disproportionate number of complaints. But lacking a scientifically designed survey with a statistically significant sample, it’s difficult to point fingers of blame at apparent culprits or single out high-performers for praise.

So, not only are we kept ignorant of the odds of earning an award in our own program, but we are also prevented from making meaningful comparisons among programs and granting and withholding our loyalty accordingly.

The fix: Let there be light

Although frequent flyer experts have proposed various solutions, such as mandating that airlines dedicate a flat 10 percent of their seats to mileage awards, my approach relies on market forces to pressure the airlines to straighten up and fly right. Those forces would be unleashed by insisting that the airlines fully disclose the operational details of their programs.

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By full disclosure, I mean that each frequent flyer program operator would be required, by the DOT or FTC, since voluntary participation is unlikely, to publish answers to the following questions, or questions along these same lines, broken down by route and time period:

• How many award seats, both restricted and unrestricted, are available on each route?
• For every 10 attempted award bookings, how many are fulfilled outright?
• How often are program members forced to alter their plans to accommodate award availability?
• In how many cases are members forced to spend up to twice as many miles for an unrestricted award because the airline unilaterally decided to zero out restricted award inventory?

These are the questions that go to the heart of the user experience. And consumers benefit two ways by having the answers at hand. First, they can calibrate their mileage-redemption expectations against reality, giving them a general sense of the odds of obtaining a restricted award ticket for travel from specific cities in a certain month. And second, the transparency would force the airlines to compete for customers’ loyalty based on their programs’ actual performance, rather than vague promises.

Simply stated, we achieve two goals with one action. Consumers would have a basis for informed decisions about which carrier they should fly, and the new competition would squeeze better award availability from the program operators.

When loyalty programs lose their luster

There’s more at stake here than the health and welfare of a peripheral marketing program. If frequent flyer programs fail, their unraveling will be historic and painful.

The first domino to fall, and it’s already begun teetering, is consumers’ conviction that the programs are worth their participation. The uncertainty that is poisoning the programs’ award side is calling into question the very value of frequent flyer miles.

But the erosion of consumers’ investment in the programs is just the beginning of an insidious cycle that the airlines can ill afford to withstand.

On the strength of the programs’ hold on the hearts and minds of consumers, the airlines collectively sell miles worth approximately $2 billion to their program partners’ credit card issuers, hoteliers, other airlines, etc. Will Citibank, Hilton, Hertz, and more than a thousand other companies continue marketing through airline programs if consumer sentiment turns negative?

They won’t. And as the partners redirect their marketing budgets elsewhere, the programs’ partner rosters will shrink, leaving members with increasingly fewer options for earning miles. The value of the programs will be further diminished. And even more marketing partners will jump ship, further reducing revenues from the sale of miles.

Ironically, since the industry began hemorrhaging red ink three years ago, the sale of frequent flyer miles has been one of the few profitable endeavors for the major carriers. So the repercussions of that revenue stream drying up cannot be overstated.

What should the airlines do? The choice seems obvious to me.