US Air trims dividend miles

The Baltimore Sun

As airlines look for ways to cut costs and increase revenue, US Airways is making it harder for passengers to earn frequent-flier miles that can be used for free plane tickets and seat upgrades.

The airline will no longer award a minimum of 500 miles for a flight, eliminating a long-held industry practice that has allowed frequent fliers to accumulate miles for award travel even on short trips.

The change in policy is the latest in what analysts said was a move by airlines to limit and restrict frequent-flier programs, including new fees and requirements, that make accruing miles and obtaining free tickets harder than before.

"What we've been seeing over the past seven years or so has been a continuing devaluation of frequent-flier programs, sort of like death by [a] thousand cuts," said Tim Winship, editor at large for Smartertravel.com, a travel advice Web site. "US Air is breaking new ground with this."

No major carrier followed the move Thursday, though several travel consultants said it may be only a matter of time as airlines look to cut expenses and generate additional revenue amid high fuel costs and a slowing economy.

American Airlines, which has the biggest frequent-flier program with 58 million members, said it was "watching" the development and its "impact on the industry," but declined to say whether it would consider a similar move.

In addition to cutting the 500-mile award, US Airways said it would also impose a $75 booking fee for redeeming miles within 14 days of award travel. That change takes effect with flights beginning May 1.

A passenger enrolled in the airlines' dividend miles program will receive only the actual miles flown, a policy change that will hit business travelers and commuters hardest.

US Airways said it was making the changes as a way to "offset record fuel prices," which could add $800 million to its fuel bill this year. The airline is the nation's fifth-largest, with headquarters in Tempe, Ariz.

"When you have this kind of operating reality, we have to look at all areas of the business to generate revenue," said Morgan Durrant , a US Airways spokesman, adding that a passenger flying on a free award ticket is taking a seat away from a paying customer.

Awarding at least 500 miles, even if the flight is far shorter, has been standard practice for airline frequent-flier programs since they were created in the early 1980s. It was seen as a way to boost passenger loyalty to a particular carrier no matter where it flew.

But over the past decade, airlines have steadily chipped away at their programs, increasing the number of miles needed to earn a free ticket from 20,000 miles to 25,000 miles, limiting when the free tickets could be used and shortening the time when the miles can be redeemed.

There has been no decline in consumers signing up for frequent-flier programs, though many in recent years have been joining through airline credit cards, which award a mile for each dollar charged on the card.

But Winship said that he was seeing "a gradual disengagement on the part of consumers" from these programs.

"The interesting question is how much further can the airlines go in the direction of stripping the value of these programs before we see a wholesale exodus," he said.

Peter Pae writes for the Los Angeles Times.

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