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Published: Wednesday, 10/19/2011

Frequent fliers aren’t the focus

Airlines revamp perks programs to favor those who pay most

NEW YORK TIMES

Airlines have been making changes in their frequent flier programs, increasingly giving their best rewards not just to passengers who fly the most but who also pay the highest fares.

United Airlines, for instance, has downgraded benefits offered to the lowest tier of its elite frequent fliers.

Last March, Southwest made an even more fundamental change in its loyalty program, moving from a system that awarded participants credits for flights, regardless of distance flown or fare paid, to one that gives participants points based on the types of fares they purchase. So someone who paid $349 for a Business Select fare on a flight from Chicago to Denver would earn 4,188 points, while a traveler buying a $195 Wanna Get Away fare on the same flight would earn just 1,170 points.

JetBlue and Virgin America also reward passengers who spend more.

Loyalty programs today are “all about the airlines’ bottom line,” said Henry Harteveldt, co-founder of the Atmosphere Research Group, a market research company.

“Business travelers have to understand that the benefits of the past three decades probably will not be part of the game going forward,” Mr. Harteveldt said. “Airlines want to make sure the financial benefits they offer elite travelers are commensurate with the revenues and profitability that traveler generates.”

Last month, United Airlines revealed details of its new loyalty program, which goes into effect next year when its system is merged with that of Continental Airlines. The new program will offer four tiers to what it calls “premier,” or elite, participants — 1K (for travelers with 100,000 qualifying miles), platinum (75,000 miles), gold (50,000 miles), and silver (25,000 miles) — rather than the three elite tiers the two airlines’ programs had before. But the silver elite travelers will lose some of their perks.

Silver participants, for instance, will no longer be able to reserve seats with extra legroom, in Economy Plus, when they book their flights. Instead, they will be able to reserve those seats only when they check in 24 hours before departure.

United officials said they expected the silver-elite fliers still would generally be able to get this upgrade. But the other levels of elite participants will get access to the seats first, because they still can reserve them when they book.

Southwest does not reveal how many participants it has in its Rapid Rewards program, which will absorb AirTran’s program sometime in the future. (AirTran became a wholly owned subsidiary of Southwest in May.)

United says it has 58 million members in its MileagePlus program, while Continental says it has 41 million members of its OnePass program.

Randy Petersen, publisher of InsideFlyer, a magazine on travel loyalty programs, estimated that there was a 15 percent overlap in the two programs’ memberships.

Mr. Harteveldt said that when American Airlines introduced its AAdvantage frequent-flier program — the industry’s first — in 1981, 26 airlines that flew jets operated in the United States.

That number now has shrunk to four network carriers — American, Delta, United, and USAirways — which, he said, controlled 56 percent of domestic capacity; four large, low-cost airlines — Frontier, JetBlue, Virgin America, and Southwest — which together control another 24 percent, and a handful of niche airlines and regional carriers.

In a report Mr. Harteveldt wrote last month for Forrester Research, when he was still its travel analyst, he said that the business model employed by the airline industry when frequent-flier programs were in their infancy used “a then-relevant approach: The longer the flight, the more expensive the fare.”

He added, “But just like with hairstyles, what worked in 1981 isn’t necessarily relevant in 2011.”



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