O N S I T E

Online Rewards Programs: the Shakeout
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After several years of robust growth, tracking the growth of the Internet itself, online rewards programs are, we've been predicting, ready for contraction. Or, to use the 'S' word, a shakeout.

In recent weeks, we've seen the demise of AllAdvantage. The Alta Vista Rewards program has been terminated. And both CompuBank and LookSmartLive stopped awarding ClickMiles. On the other hand, just this week (see below), Travelocity launched its new credit card-based Rewards program.

It's too soon to predict what the online rewards landscape will look like when the dust settles. But it WILL look different. And the changes will be downright painful for consumers (and investors) who have placed big bets on those programs which don't survive the shakeout.

> More: Online Rewards Shakeout

M I L E S & P O I N T S

Miles-for-Tax-Payments, Year 2
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Last year was the first year that consumers had the option of paying their tax bills with a credit card.

Doing so, the story went, benefits consumers 2 ways: 1) paying by credit card allows you to avoid a single budget-busting payment by stretching out your card payments over time; and 2) the payment earns whatever miles or points your card offers. Neither of these propositions is particularly compelling. The interest charges incurred for deferred card payments are typically just short of usurious. And even if you pay off the charge before interest accrues, the "convenience fee" (see below) means you're effectively paying between $0.025 and $0.10 for every mile earned.

The miles-for-taxes option is available again this year, with 2 new wrinkles.

> New Player

First, this year you have a choice of 3rd-party companies to handle the transaction. (Because the tax authorities are prohibited from paying merchant fees, you pay an intermediary company, which in turns pays the tax bill on your behalf. To make it worth their while, the intermediary company charges you, the credit card user, a "convenience fee.") Last year, there was only 1 company facilitating these payments, Official Payments. Now there's a second, PhoneCharge, Inc. Here's how the 2 companies' convenience fees compare:

                                Convenience Fee/%
  Tax                    Official
  Payment                Payments         PhoneCharge

     $10                $1.00/10%          $1.00/10%
    $100                $2.50/2.5%         $3.33/3.3%
    $500               $12.50/2.5%        $13.65/2.7%
  $1,000               $25.00/2.5%        $26.55/2.7%
  $5,000              $125.00/2.5%       $129.75/2.6%

> Double SkyMiles for Tax Payments

Delta and Amex have come up with a way of making the convenience fee a bit less financially, er, inconvenient--double miles for tax payments.

Use your Classic, Gold or Platinum Delta SkyMiles credit card to pay your taxes between Feb. 15 and Apr. 16, 2001, and earn double miles for the charge. The double-miles promotion does not apply to use of SkyMiles Options or Corporate cards.

Earning 2 miles per $1 in tax payments effectively cuts the cost-per-mile in half, viz. to $0.0125 for most Official Payments transactions.

Travelocity Launches Card-Based Rewards Program
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Travelocity this week began offering a co-branded Mastercard which rewards users with Travelocity Rewards points redeemable for any travel product sold on the Travelocity.com website.

As a getting-started bonus, new cardholders receive 4,000 points with their first purchase or balance transfer. Cardholders earn 1 point for every $1 charged to the Travelocity.com World MasterCard and an additional 3 points for every $1 accumulated in finance charges. Rewards points do not expire.

On the reward side, 8,000 points can be redeemed for a $100 reward certificate, which can be used toward the purchase of any product or service available on Travelocity.com.

To quantify the value proposition, charging $8,000 to get a $100 rebate amounts to a 1.25% discount. Or, putting it in slightly different terms, a Rewards point is worth $0.0125. That's less than the $0.02 value we normally assign to a mile earned in an airline program. But the ability to redeem a Rewards point for flights on most any airline, with no date or capacity restrictions, sweetens the reward proposition considerably.

The bonus for finance charges is an interesting variation on the usual bonus scheme. Conspicuously missing however--and something the Travelocity marketing folks should consider--is a bonus for charging airline tickets or other products through Travelocity.com.

The card is issued by Citibank and carries an annual fee of $50. The annual percentage rate (variable) is currently 17.4%.

> More: Travelocity

Charge Dollar Rentals to Earn FlightFund Bonus
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Through May 31, FlightFund members receive 250 bonus miles when using their FlightFund Visa at Dollar Rent A Car. Use the card to charge a qualifying Dollar rental of 1 day or longer and receive 250 bonus miles in addition to the standard FlightFund miles.

Offer CAN be combined with rate promotions and other advertised America West FlightFund bonus mile promotions.

> More: America West

Swissair, Sabena Offer Bonuses in 3 Programs
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> Offer #1: AAdvantage Bonus Through Mar. 31

AAdvantage members who fly Swissair or Sabena transatlantic through Mar. 31, 2001 can earn double Advantage miles. Offer valid with purchase of full fare first, business or economy class tickets from Atlanta, Boston, Los Angeles, Miami, Newark, JFK, San Francisco, Washington, D.C., and Montreal.

To qualify for this offer, register Promotion Code SRSN1.

> Offer #2: AAdvantage Bonus Apr. 1 - June 30

Advantage members who fly Swissair or Sabena transatlantic Apr. 1 - June 30, 2001, can receive escalating bonus miles for their first and second trips. Offer valid with purchase of any eligible published first, business or economy class ticket. Valid on Swissair routes Atlanta-Zurich, Washington-Zurich, Montreal-Zurich, and Sabena routes Washington-Brussels, and Montreal-Brussels.

For the first trip, purchase a roundtrip economy class ticket and earn 5,000 bonus miles. Take a second trip and earn another 15,000 bonus miles. First and second trips must be completed between Apr. 1 and June 30.

Purchase a first or business class roundtrip ticket and earn 10,000 bonus miles. Take a second trip and earn an additional 30,000 bonus miles. Both trips must be completed between Apr. 1 and June 30. Register Promotion Code SRSPR.

> Offer #3: Midwest Express Bonus Through Mar. 31, 2001

Fly Swissair or Sabena now through Mar. 31, 2001 and earn double Frequent Flyer miles. Offer valid with purchase of full fare first, business or any published economy class ticket from any U.S. gateway to Zurich or Brussels.

> Offer #4: US Airways Dividend Miles Bonus May 1 - June 30

Fly Swissair or Sabena transatlantic May 1 through June 30, 2001 and receive double Dividend Miles when traveling in business and economy class. Offer valid with purchase of published business or economy class tickets from any U.S. gateway.

MyPoints Gets New Top Exec
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MyPoints, which has been beaten up by Wall Street and abandoned by its 2 highest-ranking executives, named a new chairman and CEO this week, John H. Fullmer. Fullmer is a longtime offline direct marketer, whose resume includes stints at R.L. Polk and Cendant.

The move apparently underwhelmed investors as MyPoints stock closed at $1.31 in today's trading, off 12.5%. The stock's 52-week high: $70.50.

S T E A L S & D E A L S

Deal Alert from SmarterLiving.com
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This week's hot deals from SmarterLiving.com...

Domestic and International Sale from United
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United Airlines has released a sale on spring travel. Domestic and Canadian travel is valid through June 14 and international travel is valid through Apr. 22.

For more details, go here.

Savings to/from the Southeast
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Northwest Airlines is offering savings on travel between cities throughout the U.S. and select cities in the Southeastern U.S. Travel is valid from Mar. 7 through May 24.

For more details, go here.

I N D U S T R Y N E W S B I T E S

The TWA Saga (Continued)
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Earlier this week, an Appeals Court judge rejected Continental's request that the bidding for TWA's assets be delayed.

Continental, which has expressed interest in selected TWA routes and airport gates, has characterized the auction process as unfair and biased in favor of American's buyout proposal.

The Lighter Side of Frequent Flying
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Ea> Aussie Airport Overrun by 'Roos

According to a report in the ABC Rural Bush Telegraph, the Ingham, North Queensland, airport has been shut down by hordes of wallabies. The marauding marsupials were apparently driven to seek higher ground (the airport is on a hill) when heavy rains flooded their usual low-down hopping grounds. (In case you're wondering, a wallaby is, according to Webster's: Any one of numerous species of kangaroos belonging to the genus Halmaturus, native of Australia and Tasmania, especially the smaller species, as the brush kangaroo (H. Bennettii) and the pademelon (H. thetidis).)

> $24.95 to Paris... Bon (and Cheap) Voyage

Anyone with a yen for bargains surely heard about United Airlines' website typo, offering international flights for next-to-nothing. United initially disavowed the mis-pricing and refused to honor the fares. But this week, following a public outcry, United reversed itself and gave its blessing to those lucky few who booked the bargain fares.

Until next week...