Travel&Vacation

The subject line of yesterday’s email from United may as well have been intentionally designed to send a chill up the spines of millions of members of the airline’s frequent flyer program: “Mileage Plus announces 2009 program changes.” Recent history suggests that any changes to an airline mileage program are almost certain to be bad news. And while these three from United are a mixed bag, the overall impact is unquestionably negative. 1. Minimum Miles for Elites First, let’s consider what United is characterizing as the good news. According to the email, “The 500-mile minimum accrual on United flights will be restored for elite members effective January 1, 2009.” And it will be reinstated retroactively, so elite members’ flights for the entire year will be recalculated to earn the 500-mile minimum. Note the word “restore” here. That’s because all Mileage Plus members routinely received a minimum of 500 miles for short flights until, beginning July 1, United changed their policy to award only actual flown miles. Now, United is reversing that policy change—a reverse flip-flop—albeit only for elite members of its program. So it qualifies as good news that United is fixing what it now obviously recognizes as a mistake—a sad commentary on what passes for good news in these consumer-unfriendly times. 2. Cash Surcharges for Upgrade Awards Remember when frequent flyer awards were, almost by definition, free? With these new changes, United takes its place as the latest carrier to undermine that assumption. Beginning on July 1, 2009, Mileage Plus members will pay cash in addition to the miles they redeem for most upgrades from coach to business or first class. The surcharges will vary, according to the length of the flight and the type of coach ticket being upgraded. In some cases—presumably when upgrading full-fare coach tickets—there will be no cash collected. United has provided an overview of the new upgrade awards, but not a detailed chart showing every surcharge for every fare and route. Overall, the upgrade surcharges closely resemble those imposed by American. So, for example, upgrading on a domestic flight from a discounted coach fare will cost 15,000 miles plus a $50 surcharge each way. And upgrading from a discounted coach ticket on a flight to Europe will cost 20,000 miles plus a surcharge of $250 - $500. So a round-trip upgrade could cost as much as 40,000 miles, plus a $1,000 surcharge, plus the cost of the purchased coach ticket. There is a modest upside to this change. When the new policy takes effect, Mileage Plus members will be able to upgrade from all coach fares rather than being limited to upgrading from the few expensive coach fares currently permitted. 3. Award Price Increases And finally, there will be price increases for a number of awards booked on or after January 1, 2009. While United stresses that prices of the two most popular awards—the restricted and unrestricted domestic coach awards, at 25,000 and 50,000 miles, respectively—will remain untouched, there are plenty of increases throughout the award chart. Some examples (all Saver awards, unless otherwise noted): Domestic first-class awards will increase from 60,000 to 70,000 miles. Hawaii coach and first class will increase from 35,000 and 90,000 to 40,000 and 100,000 miles, respectively. Europe coach and first class will increase from 50,000 and 120,000 to 55,000 and 135,000 miles, respectively. South Asia coach and first class will increase from 60,000 and 120,000 to 65,000 and 145,000 miles, respectively. Those increases fall between 10 percent and 20 percent. Comparable increases apply to Standard (non-capacity controlled) awards. Mileage Plus, Post-Changes The upcoming changes will be a significant net negative for many Mileage Plus members. Elite members get their minimum miles back for short flights. But that just turns the clock back to June 30, before their minimum miles were confiscated in the first place. The net effect of the cash surcharges will be significantly higher overall costs for upgrades. And the increased prices for awards are exactly that: a price increase. Bottom line: United has devalued its loyalty program. Instead of Mileage Plus, some program members will feel they’re being rewarded with Mileage Minus.

Coming to Your Inbox: Frequent Flyer Award Alerts It’s never been easier to accumulate thousands upon thousands of frequent flyer miles. Finding a free seat to redeem them for? Not so easy. The process of locating and booking an award seat remains an exasperating one. Because airlines continually add and delete award seats from inventory—from 330 days before the departure date until the flight pushes back from the gate—finding a frequent flyer seat is a hit-and-miss process at best. While there’s no seat available at this moment, one may turn up later today, or tomorrow, or next week. The only way to know is to keep checking back with the airline, day in and day out. Most people have better things to do with their time. Generally, where there’s a problem, there’s a business opportunity. And this is no exception. Last week, Yapta.com extended its airfare alert service to include frequent flyer award seats. Sign up to receive an email notification when the price drops for tickets on a chosen flight, check “include award tickets,” and you’ll receive an email letting you know when an award seat becomes available for booking. For now—the service is still in beta—Yapta only provides frequent flyer alerts for five airlines: Alaska, Continental, Delta, United, and US Airways. Monitoring of more airlines is promised. There’s no charge to use the service. Before there was Yapta, there was ExpertFlyer, a significantly more robust award alert service that tracks not just award availability but upgrades, and for 21 airlines rather than just five. There’s a price to be paid for the added functionality: $9.99 a month, or $99.99 for an annual subscription. Is it worthwhile paying the fee? Maybe. Of the 21 airlines monitored by ExpertFlyer, only six are U.S. carriers: Alaska, American, Delta, Frontier, Northwest, and United. So for those who are focused on domestic carriers, and are looking for free tickets rather than upgrades, Yapta’s free service may be all they need. For those with more complex needs, ExpertFlyer is worth a look. While any service that shines a light on award availability is welcome, Yapta and ExpertFlyer raise a question that I have yet to see posed: Why don’t the airlines themselves provide award alerts? They are clearly in the best position to monitor their own seat availability, and they certainly have the technology to send email advisories to members of their programs who are waiting for a flight to open up. To do anything less amounts to shirking their responsibility to their best customers.

Southwest Puts Miles-for-Dining on the Menu Southwest announced that Rapid Rewards members can earn credits by dining at more than 9,000 restaurants participating in the Rapid Rewards Dining program. To participate, Rapid Rewards members register up to five credit cards on the Rapid Rewards Dining website. Thereafter, whenever they use a registered card to charge a meal at a participating restaurant, they will earn a quarter credit every time their cumulative expenditure reaches $100. There’s also a quarter credit enrollment bonus awarded after the first $25. Miles-for-dining has been a standard feature of larger airline programs for years. In most programs, the miles-for-dining feature awards five miles for every $1 spent. That means you’d spend $5,000 to earn the 25,000 miles required for a free round-trip domestic ticket. With the Southwest earning rate, you’ll have to spend $6,400—28 percent more—to earn the 16 Rapid Rewards credits needed for a free ticket. That’s not the only negative feature of Rapid Rewards Dining. Southwest has also elected to impose a consumer-unfriendly expiration policy on the earnings: “The dollar amount for each transaction expires 365 days after the date the transaction is processed and will no longer be applied toward earning credits.” The policy is poorly communicated, as well, buried in the fine print where it’s not likely to be read. This is another example of Southwest’s split personality. The discount carrier has taken the high road in some areas. In particular, their refusal to follow other airlines’ lead in the current fee-for-all is laudable. But in its loyalty marketing, Southwest has consistently made decisions that show it views Rapid Rewards more as an expense than an investment. For years, Southwest expired Rapid Rewards credit after just one year. The current two-year expiration policy is still among the industry’s harshest. And it was implemented to soften the blow of imposing capacity controls on awards. There are reasons to be loyal to Southwest. Ironically, its loyalty program isn’t one of them.

Concerned about the price of your next airline ticket? Then make like an economist—consider supply and demand. In this case, supply is the number of flights operated by the airlines and available to travelers for booking. And demand is a measure of consumer interest in purchasing seats on those flights, at the prices currently in effect. How the airlines manage the balance between supply and demand has real world implications. If demand falls faster than flights can be cut, the airlines will find themselves with a surfeit of empty seats and be forced to discount ticket prices to attract a shrinking pool of increasingly price-conscious travelers. Alternatively, if the airlines can reduce capacity more or less in lockstep with slowing demand, they will be able to maintain full planes and higher prices, even as the number of flyers declines. We can reasonably expect consumer demand to fall off significantly in the coming months, as the worldwide financial meltdown forces them to think twice about such discretionary purchases as travel. And we know that the airlines are in the process of reducing the number of flights they operate. The question is, how much will demand and capacity fall? A newly released report from OAG provides detailed insight into the extent to which the airlines are cutting back. According to OAG, “Continuing problems within the U.S. economy are impacting airline operations with worse than expected declines in airline capacity this winter, as the number of domestic flights is set to fall by almost 11 percent and capacity by 9 percent in the 4th quarter of 2008 compared to a year ago.” That translates into 21.4 million fewer seats, and 265,000 fewer flights, over the three-month period. Worldwide, OAG reports that airlines will operate 451,000 fewer flights, representing 46.3 million seats. Those are sobering numbers, to be sure. But they’re only meaningful in predicting ticket prices when viewed in the context of consumer demand. Is demand for travel falling faster than the airlines can reduce their flying? It’s too soon to predict that with any confidence, but we are seeing some signs of discounting for holiday travel. That could signal that the airlines’ advance bookings are weak enough to push them, reluctantly, into widespread discounting. While low airfares would be bad news for the airlines, it would bring holiday cheer to many would-be travelers waiting to see which way airfares are headed.

When American announced, on June 20, that the next day it would begin collecting a $5 fee for issuing most AAdvantage award tickets, it seemed like the beginning of the end for airline mileage programs. It wasn’t the dollar amount—$5 isn’t a deal-breaker for most travelers. What was shocking and dispiriting was that American had blithely compromised one of the core principles of loyalty programs. As I opined at the time, “The new policy marks the end of widely available, truly free travel awards at the industry’s first and largest mileage program.” Here we are, four months later, and the fee has unaccountably disappeared. The original announcement on American’s website now reads: “We’re sorry, but the page you have requested could not be found. It may have expired.” The charge is no longer listed among the airline’s many nuisance fees. There was no press release announcing the rollback. AAdvantage members received no notice of a policy change. Nothing. It’s as though it never happened. But it did. American imposed a fee, apparently reconsidered, and then canceled it. When I queried American on the matter, a spokesperson replied as follows: “It is correct that American did recently remove the $5 award processing fee for booking award tickets on AA.com. We did not issue a formal announcement for this.” So why the silence? One can only guess at the real reason, but the natural assumption is that American was simply too embarrassed to admit its own mistake. It’s also likely that American was on the receiving end of complaints from customers. How many complaints? We don’t know, and American’s not telling. While the policy change is an obvious plus for consumers, American’s handling of it is troubling. It’s another example of the lack of honesty and transparency that pervades the airline industry generally, and frequent flyer programs particularly. The airlines tell consumers what they choose to tell them, when they choose to tell them, if they choose to tell them. So where do things stand now as far as truly free award tickets go? Delta and Northwest still have fuel surcharges in effect for award tickets, despite the fact that fuel prices have dropped by half since their July highs. And US Airways’ award ticketing fees—$25 for domestic, $50 for international—remain in place as well. Perhaps they’ll discontinue those fees. Perhaps not. Perhaps they tell us when they do. But perhaps not.

When is a dining-for-miles promotion blog-worthy? We routinely see offers for double dining miles—pretty good since most frequent flyer program members normally earn five miles per $1 spent. Upping that to 10 miles, for doing something you’d do anyway, is a solid deal. But because such offers are relatively common, they don’t typically merit special mention. Today’s featured deal does. Members of the Delta SkyMiles Dining program who spend at least $200 at participating restaurants by December 15 will earn 1,000 bonus miles. (To qualify, you must register and agree to receive marketing emails.) So far, that’s an extra five miles per $1, double the normal earning rate. Good, but not exceptional. What makes this offer noteworthy is the type of miles earned: They’re elite-qualifying miles (EQMs). EQMs are generally awarded only for actually flying—they’re reserved for the best customers of the airline itself. Occasionally, EQMs are offered by airline-affiliated credit cards. But such non-airline offers are few and far between. And this is the first time I can remember seeing a dining promotion that featured EQMs. Of course, EQMs only have real value to those who have a realistic chance of reaching elite status. So if you’re not on track to earn 25,000 EQMs by the end of the year—the threshold for earning elite status—this offer amounts to double miles for spending $200. Either way, this is an offer worth considering.

Frequent travelers are no strangers to the slippery use of language. Surcharges that have nothing to do with service or convenience are labeled “service fees” and “convenience fees.” Advertised prices fail to disclose the full price. The friendly skies are anything but. So let’s begin with what I take to be a simple truth. To most travelers, “No Blackout Dates” means restriction-free. In the realm of travel loyalty programs, where that promise most often appears, it means there are no barriers to booking an award flight or a free room night. Technically, it can be argued that it’s a lesser claim—namely, that there are no pre-established days, as in a published list of blacked-out days, on which awards are not offered. Capacity controls may remain in place, limiting access to awards—they simply aren’t communicated in advance. Given the common understanding of blackout-free awards, making the claim in the second, narrower sense borders on misleading. I made the same point several years ago when the airlines abandoned their published blackout dates, promoting the change as though it were a new consumer benefit. In fact, there were no more awards available. When I received today’s news release from Marriott touting its upcoming “No Blackout Dates” policy, effective January 15, 2009, I naturally wondered whether this will amount to a substantive improvement for Marriott Rewards members, or just a new label on an old bottle. The answer is to be found on the Marriott website: “Hotels may limit the number of standard rooms available for redemption on a limited number of days.” In other words, capacity controls remain in place. And some Marriott, JW Marriott, and Marriott Conference Centers properties are exempt from the new policy altogether. Having worked for Hilton’s program more than a decade ago, I can personally attest to the difficulty of convincing all hotels in a major chain—many of which are independently owned and operated—to agree to a meaningful award availability commitment. Giving a room to an award customer that could have been sold at rack rate is a painful business decision, especially for hotels that routinely operate at or close to capacity. But Hilton now offers its members awards with both no blackouts and no capacity controls. It can be done. Marriott Rewards members may indeed find more award rooms available on more nights at more hotels. Unfortunately, it apparently still remains very much at the discretion of individual hotels how accommodating they will be when program members choose to book a free stay at their properties. And that means that award availability will remain a question mark. So in this case, “No Blackout Dates” is more a catchy tagline than a concrete promise. Perhaps it’s time for the travel industry to finally commit to a tagline without asterisks: “No More Empty Promises.”

Here’s the policy change announcement from American’s website: Effective for travel beginning January 1, 2009, non-elite status members traveling on flights currently governed by a minimum mileage guarantee will accrue the actual base miles flown or the applicable percentage* of base miles flown, and any associated bonuses will be calculated accordingly. A few sentences later, readers are treated to a more intelligible formulation of the new policy: “Members will no longer receive a minimum of 500 points for each eligible flight.” Non-elite members, that is—elite members will continue earning 500 miles, plus the associated elite bonuses, for short-haul flights. This is hardly an industry first. Nor is it the harshest version of the no-minimum-miles policy. US Airways—the first airline to scrap its minimum miles policy, effective this past May 1—denies minimum miles to all Dividend Miles members, making no exceptions for elites. United followed US Airways’ lead, effective July 1. Continental initially announced a similar policy, effective January 1, 2009, but later reconsidered and modified the modification, reinstating minimum miles for its elite members. The old industry standard among full-service carriers was to award 500 miles or the actual number of miles flown, whichever was greater. While it was never explained as such, I always understood the 500-mile minimum as recognition that anything less just wasn’t a meaningful incentive. Plus, it implicitly acknowledged that shorter flights are often disproportionately more profitable than longer ones. And besides, how much more expensive could it possibly be for the airlines to give away a few extra frequent flyer miles? Thinking along those lines clearly has not carried the day, with just two of the largest airlines, Delta and Northwest, now retaining their 500-mile minimums. But with Delta and Northwest on course to merge before the end of the year, that will leave just one holdout, and no compelling competitive reason not to follow the others in abandoning the minimum-mile policy. Under the circumstances, AAdvantage members should perhaps be grateful that American has at least spared its elite customers the pain of losing the minimum. But more broadly, this is yet another setback for AAdvantage. With its $5 charge to issue award tickets, its cash co-payment for upgrades, and now this, American has proven to be more focused on increasing revenues and reducing costs in the short term than increasing long-term loyalty.

Today, Delta’s new three-tier award chart takes effect, giving SkyMiles members a choice of three combinations of price and availability. The low-price award (as it’s called on Delta’s award booking widget) requires the fewest miles but also offers the fewest available award seats; the medium-price award is more expensive and gives the program member expanded seat availability; and the high-price award requires the most miles but also guarantees access to any unsold seat. Award bookings can mix and match award types, combining more and less expensive awards for a round-trip as availability dictates. So, for example, the most popular award, a domestic coach ticket, is now priced at 12,500 miles each way at the lowest price level, 20,000 miles for medium, and 30,000 for high. Compared to the previous two-tiered award chart, the low price award is the same as the old restricted award; but the new high-price award costs 5,000 extra miles each way compared to the old unrestricted level. This has been a long time coming. As long as a year ago, Delta signaled that the change was in the works. Then, late last year, Delta terminated last-seat availability for unrestricted awards, intimating that a new policy was in the pipeline that would restore unrestricted access. Delta claims that the new scheme affords additional flexibility. It’s hard to argue with that. The real issues are whether, on balance, SkyMiles members will now be able to find available award seats more often, and whether the average number of miles redeemed will increase or decrease. We won’t know until the new chart has been in place long enough for a meaningful before-and-after comparison. And, because we won’t have access to detailed program data, that comparison will only be anecdotal. The airline, however, will be able to precisely judge whether the change has had a positive or negative effect on consumers’ ability to cash in their miles, and the price they pay for award tickets. I hereby challenge Delta to make that data available after, say, the change has been in place for a full six months. Marketing claims are one thing; real world results are another. In the meantime, if you have an opinion on Delta’s new award scheme—and in particular, if you’re a SkyMiles member who can share your redemption experience—please use the comments field below to do so.

More than a year after launching its frequent flyer program, Virgin America is finally allowing its 500,000-plus Elevate members to cash in their points for free flights. That’s certainly a milestone for Elevate members. Is it a milestone for airline loyalty programs, as Virgin America claims? The program has two features which make it a potential game-changer. First and foremost, awards are free of the blackout dates and other capacity controls that so frustrate members of other programs. If there’s an unsold seat, an Elevate member has as much chance of booking it for points as a paying passenger has of purchasing it. Secondly, rather than earning miles according to the distance flown, Elevate members earn points that reflect the price paid for their tickets: five points for every $1 spent. And the number of points required for award tickets rises and falls with the ticket prices for the same flight, reflecting supply and demand. The combination of unrestricted awards and value-based earning and redemption is undoubtedly a welcome step in the direction of fairness and transparency. Virgin America also gets high marks for its award booking application. Would-be travelers enter their desired itinerary and can simply toggle back and forth between screens showing the price in points and in dollars. So there’s a lot to like about the innovative approach and easy-to-use booking app. How does Elevate perform in terms of actual value delivered to consumers? Since award prices are dynamic, reflecting supply and demand at the time a booking is made, the program’s return on investment is variable. Test-booking a flight between LAX and JFK in early November, for example, showed coach seats available for 6,930 points each way. The coach fare for the dates in question was $149 each way, so, with an earning rate of five miles per $1 spent, it would take 9.3 round-trip flights to earn the 13,860 points required for a round-trip award ticket. That’s decent if unspectacular value, enhanced to some extent by the no-blackout availability. To snag a first-class seat on the same flights would cost either 48,558 or 56,930 points each way, depending on the flight departure time, for seats that sell for $1,044 or $1,224 each way. Once again, that amounts to getting a free flight after buying 9.3 tickets. The situation turns decidedly negative when considering the program’s lack of earning opportunities and points that expire after just 18 months. While an affiliated credit card is in the works, for now members can only earn points for flights on Virgin America’s very limited network. How many travelers can realistically expect to fly on Virgin America more than nine times within 18 months? Very few. So it’s misleading to promote this program to average travelers, most of whom have no chance of ever earning a free ticket before their points expire. The analogy that comes to mind is from the automotive world: Terminating Elevate points after just 18 months is like putting a two-barrel carburetor on a Ferrari. It looks great on the surface, and boasts some desirable components under the hood. But its performance is degraded by a single bad design choice. The good news is that it’s a fixable problem. Moreover, it’s a program worth fixing. But until Virgin America addresses the expiration issue, Elevate won’t live up to its name.