It’s tempting to say that ‘going revenue-based’ and ‘rewarding premium cabin tickets more’ are two sides of the same coin. That’s actually wrong, for one simple reason.
Both United and Delta next year will be rewarding miles for flights based on the cost of a ticket, rather than the distance flown. To paraphrase comedian Steven Wright, one mile no longer equals one mile.
While Delta in particular talks about ‘rewarding hte right customers’ my contention is that this is really about planes are full, they don’t need (or in United’s case, don’t think they need) to spend much more to put butts into empty seats.
They’re printing fewer miles. The break-even point in both United’s and Delta’s program, where you earn as many miles in 2015 that you earned in 2014, is spending 20 cents in airfare per mile flown. But the average fare is much less than that.
Alaska Airlines’ approach to actually rewarding premium customers with more miles is to reward premium customers with more miles: bigger elite bonuses, and bigger class of service bonuses.
Let’s take a simplified example, though. An airline might:
- Award miles based on fare so that cheaper fares are earning fewer miles
- Keep award redemption prices the same.
Or it might:
- Award more miles for premium fares, while keeping earning the same for cheaper tickets.
- Since more miles are being awarded, the carrier increases the cost of awards.
In one version let’s say cheap tickets are worth 0.5, expensive tickets worth 1, and award tickets cost 1. In the other version cheap tickets are worth 1, expensive tickets worth 2, and award tickets cost 2.
Both of these accomplish the same thing, but they’re framed differently. One takes miles away, the other gives customers more miles. Is that what’s going on here?
Absolutely not, for several reasons.
- United, despite moving to revenue-based earning, just gutted their award chart. Delta went through multiple rounds of devaluations and they’re even restructuring their entire redemption system to become more complicated.
- The airlines not (at least at this time) going revenue-based are devaluing redemptions the least. Alaska’s award chart changes were almost meaningless and haven’t touched partner redemptions. American has committed not to make big changes to award charts while they’re combining programs with US Airways.
- Revenue-based redemption programs themselves even see devaluation
- Miles awarded for flying bears only a small relationship to the price an airline needs to charge on its reward chart, since only about a third of miles awarded come from flying. Changing how miles are awarded, such as based on fare, does nothing to change mileage-earning from things like credit card signup bonuses and spending. That’s the driver of total mileage earned, and thus award charts.
Taken together, it looks more like the programs going revenue-based are devaluing the most, on both the earning and the burning side of the equation.
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