Airlines switching to fare-based frequent flyer programs
Monday, March 23, 2015
Earlier this year, Delta Air Lines and United quietly switched from a distance-based reward program to a fare-based frequent flyer program. What does that mean to travelers? And how much will such change affect travelers' ability of earning miles toward an upgrade or free flight?
Using United Airlines as an example, before March 2015, travelers could earn miles based on the distance in which they flew with United or a partnered airline. Depending on the booking classes, travelers would then earn 0-200 percent of the distance in which the plane flew from one destination to another.
Under the newly introduced fare-based frequent flyer program, travelers are now earning miles based on how much they paid for the ticket (1 dollar = 1 mile), excluding any government-imposed taxes and surcharges. Depending on the travelers' elite status, they can earn five to 11 times the fare, with a maximum of 75,000 miles per ticket (ranging from five times for nonelite members to 11 times for Premier 1K members).
So how does this change play out for travelers?
I flew from LAX to Narita, Japan, with United in March. I paid about $900 for the round-trip ticket, including fees and surcharges. Because I was earning miles based on the amount I paid on the ticket and because I was a nonelite member of United, I earned a total of 2,050 miles each way instead of 5,440 miles — the amount I could have earned if I were still able to collect miles based on the flight distance between LAX and NRT.
Does that mean travelers will be earning fewer miles in the future, as what was illustrated above?
Unfortunately, that will be the case for most travelers without elite status, especially when they fly long haul. Otherwise, airlines would not have come up with this new fare-based frequent flyer program in the first place, right?
In some rare cases, however, travelers could possibly earn more miles now than before, especially when they fly short haul or pay a high price for the ticket.
For instance, if a traveler without elite status pays $80 for a one-way ticket from LA to San Francisco, then she could possibly earn 400 miles for this trip (five times $80), giving the traveler 60 more reward miles than what she could possibly earn in a distance-based program (338 miles from LAX and SFO).
At this point, a frequent flyer member of United can still earn distance-based miles from United's partner airlines that have not adopted a fare-based frequent flyer program (except for the tickets issued by United). Likewise, those frequent-flyer members of United's partner airlines can still earn miles from the flights operated by United based on the actual miles flown between two destinations.
From a business standpoint, I can see at least two advantages of adopting this kind of fare-based frequent flyer programs. First, airlines will be able to honor fewer reward miles to most frequent flyers, which means fewer upgrades and fewer free flights. In addition, airlines will be able to reward more miles to those travelers who spend more and thus motivate people to pay more to fly.
As a result, I expect more airlines will adopt this fare-based frequent flyer program in the future, until one day when the airfares increase so much that the airlines would be giving out even more miles using the fare-based method in calculations than they would do with the distance-based method.
What can travelers do to possibly earn "more" miles in a fare-based frequent flyer program? Honestly, not much except for the following:
- Stick to one airline for all travel needs if possible and try to earn higher elite status with the airline. A Premier Silver member of United, for example, would earn seven times instead of five times the base fare of a ticket. A Premier 1K member would earn 11 times the base fare.
- Sign up for a credit card that ties with a frequent flyer program, allowing a traveler to earn one mile per dollar spent on the credit card.
- When taking a long-haul flight with a reasonable price, consider flying with a partner airline that still calculates reward miles based on distance rather than the amount paid on the ticket.
- When paying a high price for an air ticket, select the airlines that offer a fare-based frequent flyer program.
Comparing the newly introduced fare-based frequent flyer program with the traditional distance-based program, do you think the new program work for (or against) your benefits? How do you code with such changes?
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