The Extra Mile

Airline Mileage Programs Continue Downward Spiral

For frequent flyers, it's bad news all the time

November 21, 2007 - In the early years of the 21st century, many of the country's largest airlines were either in bankruptcy or teetering on the edge. Some carriers were less fortunate: National, Midway, TWA, Independence Air, and Southeast shut down completely. The sky seemed to be truly falling.

So when the airlines degraded their mileage programs -- adding fees, increasing award levels, reducing benefits -- travelers were disappointed but sympathetic. The changes, they reasoned, were necessary to insure the airlines' very survival. Better times were just a business cycle away.

The pendulum has swung. After a wrenching period of restructuring and right-sizing, the airlines have been flying at 80% and more of capacity -- effectively full. And recent quarterly reports have been not only profitable but robustly so.

But the hoped-for reversal in the erosion of value in travel rewards programs has not materialized.

In fact, notwithstanding their return to financial health, the airlines have embarked on yet another round of program cut-backs, further compromising the value of their mileage schemes in a number of critical areas.

The declining life of miles

In recent months, consumers have watched as the life expectancy of frequent flyer miles has been cut from three years to between 18 months and two years.

Alaska Airlines was the latest to join the policy change parade, announcing that, effective April 1, 2008, accounts with no mileage activity for the previous two years will become inactive and the miles will be removed from the account.

Similar policy changes had already been made by American, United, and US Airways, which adopted 18-month expiration policies, and Delta, which reduced the life of miles from three years to two. Continental reserves the right to terminate accounts with no activity for 18 months.

Northwest is left as the only major carrier still allowing program members to extend the life of their miles with account activity every three years. And since there's no competitive pressure to remain extra-generous, it's likely that Northwest will change its policy before the end of the year.

The higher price of awards

While airlines have stopped short of tampering with their cornerstone award -- 25,000 miles for a domestic coach ticket in most programs -- they've been increasing prices elsewhere in their award catalogs.

Continental, for example, in October notified members of its program that, beginning February 1, 2008, mileage requirements for several types of awards will increase, including first-class award flights within or between the contiguous U.S., Alaska and Canada.

In addition, Continental's capacity-controlled SaverPass awards will increase in price from 45,000 to 50,000 miles. The price of unrestricted EasyPass awards will rise from 90,000 to 100,000 miles. BusinessFirst award flights between North America and Asia, India, Africa or the Mideast will increase from 250,000 to 300,000 miles. And award flights between North America and Southern South America will rise in price from 180,000 to 250,000 miles.

The decrease in award seats

Historically, airlines' stock response to consumer complaints about the difficulty in obtaining award seats has been that unless the flight is sold out, seats are always available for mileage redemption if program members are willing to pay the price of a rule-buster award -- generally twice the number of miles required for capacity-controlled awards.

But beginning in December, Delta's rule-buster SkyChoice awards will no longer guarantee last seat availability on all flights, as they currently do. Delta's move could provide cover for a similar move by other airlines, leading to an industry-wide erosion to one of the programs' bedrock benefits.

Bye-bye, online booking bonuses

Remember when airlines routinely awarded bonus miles for flights booked on their own websites?

Delta discontinued their online booking bonus in August. And, effective December 1, the longstanding 500-mile bonus for booking online at continental.com will be discontinued.

More fees, higher fees

A free ticket? That seems like an increasingly quaint notion as airlines impose new fees and increase others.

As an example, Delta recently raised the price for award tickets issued within 20 days of travel from $50 to $75. The airline also upped the fee for same-day changes to award itineraries from $25 to $50. They raised the fee to redeposit miles into an account from $50 to $75. And they bumped the fee to book by phone instead of online to $20, up from $10 previously.

The diminishing rights of flyers

In addition to what the airlines have actually done, there's ominous news lurking in new policies which dictate how far in advance they must warn consumers of impending changes.

Continental just reserved the right to make changes to the OnePass program with just 30 days' notice. Previously the program's terms and conditions promised 60 days' advance notice.

And this in a similar vein from Southwest: "Effective December 8, 2007, Southwest Airlines reserves the right to amend, suspend, or terminate the Rapid Rewards program at any time, with 30 days notice. This constitutes a revision of Rapid Rewards rule #27, which currently states: Southwest Airlines reserves the right to amend, suspend, or terminate this program at any time, with six (6) months notice."

Bad news, all the time

When the airlines were on the ropes, travelers could only hope that the value stripped from loyalty programs would be restored when financial stability was regained. But the airlines, now flush with profits and full planes, dashed such hopes, leaving their customers to wonder whether better times might be around the next corner. Or the one beyond that.

But the recent past provides no reason for optimism, suggesting instead that where mileage programs are concerned, the only realistic expectation is more change, and not change for the better.