Twenty-five years after the first frequent-flier program was launched, airlines and travelers find themselves caught in a clinch over how to redeem the awards.
Started as a way to reward airlines’ best customers, those programs now have millions of members who hold billions of frequent-flier miles. The programs no longer have the same cachet – or perceived value.
To preserve seats for paying customers, airlines have made it harder to redeem the awards for free tickets, to the chagrin of travelers.
“Consumers are having a devil of a time redeeming their miles for free flights, and that not only creates a lot of negative consumer feeling about these programs, but it also results in a situation where that liability continues to grow because people end up sitting on their miles,” said Tim Winship, publisher of the website frequentflyer.com.
American Airlines launched the country’s first frequent-flier program May 1, 1981, naming it the AAdvantage Travel Rewards Program.
“The industry was becoming very competitive with a lot of new entrants,” said AAdvantage marketing-programs president Kurt Stache. “At the time, American began to think about, ‘How will we differentiate ourselves and keep our customers loyal?”‘
Other airlines, including United Airlines, quickly followed by introducing their own programs. Frontier Airlines started its program five years ago.
American now has 54 million AAdvantage members. United has nearly 48 million Mileage Plus members, and Frontier has more than 1 million EarlyReturns members.
Mileage programs are “tremendously profitable,” Winship said.
Airlines sell miles to partners such as credit-card companies that distribute them to cardholders.
Airlines still use frequent-flier miles to attract customers, although their appeal may be waning. Experts say consumers are driven first by price, then by schedule and then by frequent-flier programs.
“The mileage programs kind of become a tiebreaker,” Winship said.
United touts its worldwide flight network as one of the perks of its frequent-flier program, while Frontier Airlines highlights its relatively low redemption rate – 15,000 miles for a flight anywhere it flies in the United States. Many others require at least 25,000 miles.
At the same time, airlines are protecting themselves against a growing backlog of unused miles by changing their reward and redemption programs.
United Airlines announced a major change Monday to its Mileage Plus program that is retroactive to Jan. 1. Mileage Plus Visa cardholders will get a new form of currency called “Choices” for their purchases with the card, instead of miles. Travelers who fly will still earn miles for their flights.
While the number of seats on each flight available for mile holders is limited, all seats on all flights can be purchased with “Choices” at a rate based on the ticket price – 30,000 “Choices” for a $300 ticket, for example.
The “Choices” are good for other benefits, including hotel or car-rental bookings on United’s website.
Last month, United also announced new fees of $50 or $75 for using miles to book travel miles less than seven days in advance or less than 14 days in advance.
Airlines have also begun offering other ways to use miles, including online shopping and auctions.
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
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