Flier programs losing altitude


It's gotten this bad: The father of mileage awards, who created the first big U.S. program more than 25 years ago, says he's embarrassed by his business offspring.

Airlines today are "stingy and greedy" in handling frequent-flier programs, said Rolfe Shellenberger, former project manager of American Airlines' AAdvantage program, who now runs a consulting company in California.

Among the issues that raise his ire -- and that of many frequent fliers: the scarcity of award seats, hefty mileage requirements for awards, an array of booking fees and, now, moves to kill off your miles if you don't redeem or accrue any for 18 months. Industry experts say airlines are just trying to survive in a tough business climate.

It may be time to divorce your frequent-flier program. Or not.

True, the torrid romance with miles is cooling. They're getting so high-maintenance. And they seem to have commitment problems.

The malaise is even hitting mileage hounds such as Tim Winship, who for 10 years has published a frequent-flier newsletter, now online at frequentflier.com.

"I'm just not as emotionally engaged with the programs as I used to be," he said, adding that he'd even thought about cutting up his American Airlines credit card.

But miles are still free, and neither airlines nor consumers seem ready to call it quits. These programs promote loyalty, experts say, while generating modest but steady revenue for company coffers from the sale of miles to retail partners, who use them as bonuses for customers.

Rental-car companies, hotels, banks, grocers, restaurants and countless other businesses offer miles. With credit cards, branded by one airline or earning miles for many, nearly any purchase may qualify.

Mileage programs have become victims of their own success. They began as a way to induce customers to fly more often with a carrier. But today they are more like frequent-buyer than frequent-flier programs, Winship said, thanks to thousands of retailers that allow members to earn and redeem miles without stepping on a plane.

Frequent fliers have collectively accumulated billions of miles. No one really knows how many. But in a Securities and Exchange Commission filing last year, for instance, United Airlines estimated that its MileagePlus members held 495 billion miles. By my count, that entitles them to nearly 20 million round-trip domestic coach tickets, at 25,000 miles each, on an airline that last year flew about 67 million passengers.

That's the problem, of course. Demand for award seats has far outstripped supply.

So you can expect more tinkering with mileage programs. Here's a look at two of the biggest problems:

,9Award availabilityThis is the No. 1 complaint of frequent fliers, Winship said. They say they can't get seats for the dates and places they want. Winship didn't know of any statistics on this. But he said the scarcity was "as bad today as it's ever been in the history of the programs."

Shellenberger is among the frustrated.

"Every time I try to redeem a trip, it's unavailable," he said.

But Kurt Stache, president of the AAdvantage program, said that shouldn't be so. Although low-mileage awards can be hard to get at holidays, he said, at any given moment 7 percent to 10 percent of American's passengers are traveling on awards, most using free tickets, not upgrades.

To make it easier to book awards, the airline introduced a calendar last month on its Web site, aa.com, that shows which dates have award seats available. This feature is being phased in over several weeks.

Industrywide, thresholds for award travel, especially for first- and business-class seats, have gradually crept up, although some carriers, including United and American, award short-haul domestic coach tickets for 15,000 miles.

,9Expiring milesThe so-called "use it or lose it" deadline for miles, after bouncing around over the years, had more or less settled at three years. But recently Delta cut that life span to two years, and US Airways and United reduced it to 18 months.

You don't have to fly to keep miles alive. You just have to keep your account active; for instance, you might use 600 miles for a magazine subscription. (Check airlines' Web sites for offers.) But it's a nuisance to monitor, and less-vigilant fliers could lose thousands of miles.

Shellenberger views tighter deadlines as broken promises.

"Why deprive [program members] of something they had every reason to expect would be valuable to them in the future?" he asked.

But to Steve Casley, president of Back Aviation Solutions, a consulting firm in New Haven, Conn., these moves are "common sense," helping airlines clear miles off their books without alienating prized customers: those who fly frequently.

Billions of unredeemed miles make companies' balance sheets look bad to investors, experts say, because for every free seat they award, they may turn away a paying customer.

The experts I spoke with agreed on one thing: Mileage programs won't go away any time soon.

Twelve years ago, Ray Neidl, an airline analyst with Calyon Securities in New York, predicted the demise of these programs in a book he authored with James Ott called Airline Odyssey: The Industry's Turbulent Flight Into the Future.

Now Neidl says he was wrong. "I think airlines like the frequent-flier programs more than ever," he said, because they not only attract customers but also have become small profit centers.

As for the fliers, it's not a happy marriage anymore. But it's an enduring one.

Jane Engle writes for the Los Angeles Times.

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