Chris R. emailed me this morning to bring a Milepoint.com post to my attention where United announced changes to elite status qualification beginning in 2014.
The following revenue requirements — in addition to the standard mileage or segment flying to reach status — apply to accounts with addresses in the United States only.
- Silver: $2500 minimum qualifying revenue
- Gold: $5000 minimum qualifying revenue
- Platinum: $7500 minimum qualifying revenue
- 1K: $10,000 minimum qualifying revenue
In addition, you can’t earn status entirely on most of United’s partners. Earning status will require flying at least 4 qualifying segments operated by United, United Express, and/or Copa Airlines
U.S. members who charge $25,000 to a co-branded United Chase credit card during the calendar year are exempt from the revenue requirement for that year if qualifying for Silver, Gold, or Platinum status. But there’s no spending exemption or US members reaching 1K status.
So far they are only promising this exemption for earning status during 2014 (which is either because it’s a test period or there are contractual elements with Chase involved).
An alternative, just idle speculation, is that for 2014 the threshold is set at $25,000 regardless of elite tier. Perhaps future years they would tweak the threshold amount, or create a sliding scale for different elite tiers.
Although the $25,000 amount really is not a surprise — higher amounts feel unattainable, while lower amounts likely mean the co-brand product isn’t really top of wallet for the median elite frequent flyer.
This component of the new requirements reminds us that United is an airline that was at least once more or less in effect a wholly owned subsidiary of Chase, and flew through its bankruptcy in order to support the underlying credit card business.
What revenue counts?
You’ll earn credit for base fare and carrier-imposed surcharges. So fuel surcharges, which are really a part of the ticket price, count. But taxes do not.
This applies to all flights flown by United, United Express, and Copa Airlines — and to Star Alliance and United partner airlines when flying on a United ticket.
Like Delta, partner flights on partner-issued tickets won’t count. So a Lufthansa ticket across the Atlantic on a ticket purchased from Lufthansa won’t count — which in a way is odd considering United and Lufthansa are joint venture partners. So I have to assume that the reason here is technological, that United will get a report of miles from Lufthansa if crediting to a MileagePlus account. But they won’t see the revenue information, so the revenue can’t count.
Finally they’re letting economy plus purchases count, which in some way is a fare buy up but also underscores the importance of the revenue stream derived by their extra legroom seating. (Although existing elites won’t often pay for the privilege.)
When do these changes go into effect?
The change starts in January 2014. That means your flying in 2013 is how you qualify for 2014 status. It becomes a combination of flying and revenue you provide United in 2014 for 2015 status.
Who can get out of this requirement?
Anyone with an address outside of the 50 United States and the District of Columbia is exempt. Military and diplomatic (APO, DPO or FPO) addresses are exempt from the revenue requirement. I predict a mass exodus from the United States. Presumably United will then have some sort of account auditing, putting themselves in opposition to some of their elite members.
If your address subjects you to the revenue requirement, then you can become an elite still by:
- Spending the required money with United
- Spending $25,000 on a co-branded Chase United credit card — as long as you’re only looking to achieve Platinum status, this won’t help you with 1K.
- Legacy Presidential Plus cardmembers, regardless of how much they spend on their card — as long as they’re only looking to achieve Platinum status, this won’t help with 1K.
These exemptions only apply to the revenue requirements and do not apply to the four segment minimum flown on United (or COPA) requirement.
How onerous are the new requirements?
United has set the bar at spending a consistent 10 cents per mile minimum. That’s the same amount that Delta is using with its tiers (Delta’s top tier is earned at 125,000 miles and has set the bar for that at $12,500.)
Interestingly this is a higher amount per mile than when United was rumored to be looking at making similar changes two years ago. I wonder how much of that is based on the current ticket pricing environment, rather than looking at the value of a customer over a longer time horizon.
Roughly speaking tickets do cost that much for most people. A cross country ticket most of does run $500, for a little under 5000 miles earned. Which means — and even though most elites probably don’t really it or add it up — that I’d imagine most customers won’t be materially affected by the change. They’ll fly their miles, and by virtue of having done so they will have spent enough money with United to achieve their status.
Still, in an aviation market different than the one we’re currently in — in a pricing environment that’s more like what the airlines saw 3 and 4 years ago — ticket prices are lower and folks aren’t just hitting these minimums. So it could be a real future problem, although in that case if elite numbers drop I would expect to see “double premier qualifying dollar” promotions the same way we’ve seen double miles promotions.
I don’t like penalizing people for buying the very tickets an airline is offering. Ben Baldanza, who now runs Spirit, used to describe customers flying cheap fares — buying what his airline US Airways was selling — as not the kind of loyalty they were looking for. It took a decade, but the industry has begun to agree. And in the current environment that means not rewarding the customers who fly only cheap fares.
Getting $25,000 spend on a United co-brand credit card isn’t hard. If you need a spouse’s help to do it, that’s fine — get them an authorized user card on your credit card account and their spending will count towards the requirement. Two people sending $1000 a month back and forth on these two cards via Amazon Payments can generate $24,000 per year in spend if need be.
Since this new regime doesn’t begin until January, there’s reasonable notice in my opinion. People haven’t flown half the year only to find their benefits changed for next year. If United wants to do this, I don’t think they’re being unfair.
As I said when Delta announced similar changes in January, “Ultimately though I don’t think the requirements are that onerous, especially with the choice to spend with Delta or on the co-branded credit card.”
What should we ask of United in return?
If United is making elite status a more rarified thing, a higher value proposition for the airline, then I think it’s also reasonable to expect a better product in return.
MileagePlus is already a very good program, but I think they ought to respect status more. Currently they privilege full fare passengers over status for upgrades, so a Silver flying full fare trumps a 1K on a mid-tier fare. I didn’t like it (especially in DC with a huge concentration of YCA government fare flyers at the Silver level) but I at least saw the argument that higher revenue was more important than status which might be achieved cheaply. But now all elites with US addresses will have a high value. Treat them as such.
And at a minimum, invest some of this incremental revenue into the very broken IT infrastructure that can’t even manage to ticket partner awards correctly a not insignificant amount of the time.
What this will mean for interacting with United going forward
Thinning out some of the elite ranks makes those who remain a bit better off for upgrades. But that’s always true. They could say that upgrades are only available for customers flying full fare, and it would be true that those customers on those given days would have a better shot an upgrade. Ultimately this is a question of what loyalty is all about.
For now, the spend thresholds and the ability to buy out of them via a credit card relationship make this not a deal killer, but the architecture here certainly could change in the future.
It also means that Delta is unlikely to roll back their changes (not that they were going to), since United has effectively “matched.” It also increases the probability that the new American/US Airways program adopts some sort of revenue requirement for status.
Lifetime status also goes up in value, since lifetime elites are no longer on the spending treadmill (and they’ll be competing with marginally fewer folks for upgrades). It’s about time that Lifetime elites got some sort of a break from United!
And customers who aren’t going to make the spending threshold will probably be less loyal, at least on paid tickets, there’s no longer a loyalty program reason for them to stick with one airline.
In fact in some ways rather than doing away with gaming, these changes encourage it and with less revenue to the airline — it encourages members to do more manufactured spend, earn more miles by credit card, buy out of the requirements, and it encourages them to earn miles and redeem for free tickets instead of striving to earn elite qualifying miles through paid tickets.
And free tickets or using miles for confirmed upgrades actually cuts against the higher revenue flyers from getting complimentary domestic upgrades, at least given United’s current stance towards taking any revenue for a first class seat rather than offering that seat as a free upgrade. Perhaps that’s another thing that United’s high revenue elites should now demand change.
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