United Airlines is upending its frequent-flier program, basing MileagePlus awards on dollars spent rather than miles flown in a shift that rewards big-spending corporate travelers, its most profitable customers.
The decision, announced Tuesday, mirrors a move by Delta Air Lines earlier this year. Carrier-imposed surcharges, such as those for fuel, will be included in the base fare for award-purposes, while taxes and airport charges will not. The switch takes effect March 1 and applies to flights on United, United Express and most United-issued tickets for flights on the company’s airline partners.
Airlines reward experts say the new program could change the way travelers, particularly business fliers, book flights and risks alienating some frequent fliers, already grumpy about United’s poor performance and customer service in recent years.
“It’s a risky move given United’s current underperformance versus Delta on both operating and financial measures,” said Brian Karimzad, director of MileCards.com. “Many of United’s most frequent fliers are frustrated with the airline right now.”
Years ago, fares correlated more closely with miles traveled, so miles were a good gauge for money spent with the airline. That's no longer true. Flights of the same number of miles could cost $200 or $1,000, depending on the destination, when a flight is booked and a host of other factors.
Karimzad said American Airlines, the only network carrier to continue to base awards on miles flown, will likely follow suit by switching to a dollar-based award system, although it probably won’t announce a change until its merger with US Airways is further along next year, with changes potentially taking effect in 2016. Southwest Airlines, the biggest carrier at Chicago Midway, and JetBlue Airways already base awards on spending, rather than miles.
However, Brian Kelly, of ThePointsGuy.com, said American might continue with miles-based awards to differentiate itself from the competition.
American on Tuesday wasn’t commenting directly on speculation about changes to its AAdvantage frequent-flier program. “We are always watching the competitive environment, and we’ll make sure AAdvantage is positioned as an industry-leading loyalty program fitting for the world’s greatest airline,” a spokeswoman said, adding the first priority is to integrate the loyalty programs of American and US Airways.
Kelly called United’s change “brazen” and a “cut-and-paste” of Delta’s reward program announced in February. “United is still stumbling from their merger,” he said, referring to the 2010 combination with Continental Airlines. “Their customer service is terrible, and they’re losing money…to throw this curveball at customers is bold move.”
United fliers overall are likely to earn fewer awards with the new program, he said.
Under United’s plan for next year, frequent fliers will earn five miles for every dollar spent, while those with premier status will earn accelerated rewards. For example, Premier Silver fliers, the lowest premier tier, will earn seven miles per dollar, while Premier 1K fliers, the highest tier, will earn 11 miles per dollar.
“These changes are designed to more directly recognize the value of our members when they fly United,” Thomas F. O’Toole, president of MileagePlus, said in a statement.
The clear winners are fliers who often buy pricey tickets for short flights. For example, a $1,000 flight from Chicago to Kansas City will earn 5,000 miles under the new program, compared with just 800 miles under the current one, Karimzad said. And international fliers who buy first-class or business class tickets will do well. For example, a $7,000 ticket from New York to London will earn 35,000 loyalty miles, compared with 10,500 today.
Losers are business travelers who fly long distances in coach and leisure travelers, he said.
The change amounts to a mixed bag for most business travelers who fly on a variety of fare types, he said. And those who earn most of their miles on the ground -- through an airline credit card, for example -- won’t be affected.
United’s change could affect how business travelers book travel, providing an incentive to buy pricey tickets so they can accumulate more award miles, Kelly said. Many business travelers keep their frequent-flier awards even though the company pays for the flight.
Starting next year, United plans to offer members new ways to use award miles, including for single-flight purchases of extra legroom and to buy subscriptions that include extra legroom and checked baggage. That change is likely aimed at infrequent fliers who will have something to spend awards on because they won’t rack up enough miles under the new plan to pay for a roundtrip ticket, Karimzad said.
The new earning structure will not affect the way members qualify for premier status in 2015, the airline said.
Overall, United’s change, along with its new dollars-spent requirements to achieve elite status, might affect which airlines Chicagoans fly.
“This is a point when you reevaluate your loyalty,” Kelly said. “Instead of hustling to get elite status on United, maybe you start flying an airline you actually enjoy flying or one that gives you better perks.”