How frequent flyer programs are changing in a changed world
By Julie Weed
The pandemic made an oxymoron of the term “frequent flyer,” as the number of airline passengers plummeted in the early days of the lockdown. Leisure travel has recovered somewhat, but the more lucrative business travel market is still way off, with recovery not expected until 2023 and perhaps not even then.
It’s a challenging time to keep flyers loyal. Many are not traveling because of coronavirus concerns, and those who are can be enticed to try out other airlines because they are not flying enough to earn status. Others may be disenchanted with airline loyalty programs, which, in the years leading up to the pandemic, had made upgrades and free tickets more elusive.
In the meantime, airlines are also facing pressure on the climate front, and while evidence suggests loyalty programs aren’t large contributors to climate change, they do encourage flying, which feels out of step with the current moment.
Here are some ways airlines are changing their loyalty programs in the face of the new realities presented by the pandemic and the pressures of climate change.
Airlines Make It Easier to Stick With the Program
Over the past 18 months, each airline has taken a different approach to hanging on to its biggest spenders, but their goal is the same: to make it easier for customers who have achieved status to keep it. Alaska Airlines, for example, is giving a 50% mileage bonus to its customers for all flights they take in 2021. United Airlines has lowered the required number of flights and spending needed to get to each level of its loyalty program. For instance, Premier Silver, the lowest tier, can be reached with 12 flights, along with 3,000 points (related to dollars spent) rather than 16 flights and 4,000 points.
United has also been hosting dinners with Premier flyers to understand their priorities as they return to flying. “We’re committed to being flexible,” said Michael Covey, managing director of United’s MileagePlus program. “We are monitoring demand and making adjustments.”
American Airlines has reduced its minimum requirements for 2021 and vastly streamlined its program for 2022. Currently, Gold, the lowest level, can be had for 20,000 miles or 20 flight segments, along with $2,000 in spending, down from 25,000 miles or 30 flight segments, plus $3,000 in spending. Beginning in 2022, the airline recently announced, it will simplify its AAdvantage program so that branded credit card spending and flights would contribute to a single sum of “Loyalty Points,” rather than asking flyers to reach separate spending and flying thresholds.
Delta Air Lines is extending all frequent flyers’ status an additional year, through January 2023, and counting any miles flown in 2021 or 2022 toward status in 2023. Travelers get bonus miles when they fly, and for the first time, earn miles on “award” flights — those purchased with miles. Travelers who flew and spent enough to meet status requirements will be prioritized ahead of those flyers who kept their status through an extension, when it comes to free upgrades.
Earning and Spending More Points on the Ground
All major airlines offer branded credit cards that allow customers to accrue points or miles that can be used to buy flights, and during the pandemic, they continued the practice of dangling tens of thousands of points as incentives to buy in. Alaska Airlines offers 50,000 bonus miles and a low-priced companion fare ticket after the credit card holder makes $2,000 of purchases in the first three months of use. A recent Delta Sky Miles Platinum American Express Card offer promised 90,000 miles that could be used to purchase flights and 10,000 Medallion Qualification Miles that could be used to reach status levels after $3,000 of spending in the first three months, and with an annual card fee of $250.
“Branded credit cards are of extreme importance to airlines” both as sources of revenue and because they increase interactions between the brand and the customer, said Alex Miller, founder of the travel blog Upgraded Points.
As consumers shifted their spending in response to pandemic conditions, airlines followed with special offers linked to their branded credit cards. When lockdowns started lifting, for example, Alaska offered promotional bonus miles on restaurant spending. Points earned can be redeemed for things like rental cars and hotels.
Partnering with other companies offers “quick wins to keep customers interested,” said Gilbert Ott, founder of the travel blog God Save The Points. So in addition to awarding status to a flyer who racks up tens of thousands of points or dollars spent, airlines are rewarding customers more frequently for specific actions, Ott said.
Mileage Runs and Climate Change
Aviation contributes to global climate change, and to help combat it, the major U.S. airlines, along with other companies, like FedEx and UPS, announced in March that they were committed to achieving net-zero carbon emissions by 2050. Changing frequent flyer programs to de-emphasize the number of miles flown is one way to discourage unnecessary flights.
That change in focus dovetails with a trend set in motion before the pandemic: American, United and Delta had begun rewarding program members based on a combination of their yearly spending and their flights, rather than just flights. The shift allowed them to prioritize those customers — including first-class ticket buyers and business travelers — who generated the most profit.
More recently, United has changed its status-tier goals to tally “segments” (number of flights flown) rather than how far those flights go. “We don’t want a plane full of people flying to Singapore just to get the miles,” said United’s Covey. “That’s not good for us or the environment.”
Rejiggering incentives can help squelch the practice of taking an unnecessary flight at the end of the year, a so-called “mileage run,” just to make it to a status threshold.
It’s difficult to estimate the number of mileage runs taken each year, according to Miller of Upgraded Points, but he notes that they are a tiny part of reducing carbon emissions. The biggest lever is using more sustainable fuel, according to the global industry association IATA. Gains in operations and infrastructure efficiency — for example, making planes lighter so they use less fuel and flying the most direct air traffic control routes — are the next important areas for improvement.
Airlines must examine what travelers need now, said Dr. John Niser, director of the International School of Hospitality, Sports, and Tourism Management at Fairleigh Dickinson University. What new offerings might their flyers value? How can they show customers that they are trying to minimize their environmental impact? The industry is going to have to look beyond just updating their loyalty programs, he said, to succeed in the new normal.