Why Airline Loyalty May No Longer Pay Off
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Sorry, frequent fliers: Airlines that once expressed their appreciation for you with free upgrades and miles to spend on freebie flights have turned tepid on the relationship. Frequency, in fact, may be out of style, as airlines shift their devotion to cold, hard, calculable dollars.
Reward programs have been eroding over the last 10 years as airlines boosted mileage thresholds for the purchase of upgrades and flights. But in the past year, several companies took relatively radical steps by raising requirements for high status levels, reducing rewards and generally devaluing points.
United Airlines no longer grants miles on its Star Alliance partner flights unless fliers buy those code-share flights through United itself; even then the airline often awards only partial credit. In 2015, Delta Air Lines will begin rewarding travelers based on the amount of money they spend on their tickets, rather than the distance flown. American Airlines recently overhauled its AAdvantage program, reducing the number of free bags from two to one for lower-level elites, and increasing some mileage levels for free flights.
Given the shifting landscape, does it still pay to be loyal?
"For some, a spend-based model, as opposed to a distance-based model, will be great, especially [for] business travelers, who tend to book last-minute, expensive airline tickets," says Charles Tran, founder of CreditDonkey.com, a credit-card-comparison and financial-education site.
For constant fliers, another potential upside is better service. "There is still a lot of value in having status with an airline," says Brian Kelly (aka "The Points Guy"), a reward-programs expert. "They are cutting some of the cheaper elites out, but hard-core travelers may have better service. When there are flight cancellations, elite members get instantly rebooked over other people. Getting service when things go awry is important, and that may improve for elite travelers."
But for those who travel less than four times per month, the recent loyalty program changes suggest it may be time for a breakup. The is it worth it? figure depends on the number of flight options at your home airport and the value you place on smaller perks like elite-grade security lines weighed against the difference in cost with the cheapest ticket.
Staying loyal may seem irrational, but losing status often inflicts disproportional hurt. "Psychology tells us that losses loom larger than gains, so taking away benefits or making them less good actually hurts more than [not] getting the benefits in the first place," says Roland Rust, a marketing professor in the Robert H. Smith School of Business at the University of Maryland who has researched airline-industry customer service.
Partially filling the void of vanished perks are airline credit card programs, offering early boarding and free checked bags for annual fees (usually $50 to $80)--costs that can pay for themselves in bag fees alone on a round-trip flight. Kelly juggles more than 20 credit cards at any time and calculates their benefits on a cost-reward basis on ThePointsGuy.com. For travel benefits apart from bag fees and early boarding, he recommends Chase Sapphire Preferred, which offers two points for every dollar spent on travel--including airfare, hotels, car rentals and parking and restaurants--and easy redemption with partners like United, at $95 per year.
If anything, the airline industry's clumsy management of loyalty programs highlights one of the sector's biggest operating flaws: It doesn't understand its own customers. Unlike Amazon and Netflix--companies that mine consumer data to make recommendations based on past purchases--airlines have not individualized their sales pitch to fliers, relying instead on outdated loyalty tiers. As Rust puts it, "The airline industry in general is marketing-challenged."