Why Consumers Used to Win When They’d Voice Objections to Changes, and Why You Won’t Win Today.

Back in April of last year, I wrote Five Times Consumers Won Against Frequent Flyer Program Changes.

In the aftermath of American’s elimination of stopovers on international awards at the international gateway city and elimination of distance-based awards, I wrote about when consumer uproar caused American to never implement an announced $5 award redemption fee. American’s $5 online award booking fee simply went quietly into that good night.

There are plenty more examples of where consumer outrage has led programs to roll back unpopular changes. Here are five:

  • United required a Saturday stay on a roundtrip ticket in order to redeem a saver award. They rolled back the change amidst consumer backlash (while Northwest slipped in their own version of the change – which stuck for many years).

  • United made systemwide upgrades redeemable only on nearly full fare (H and above) tickets in 2003. There was enough of an uproar that they even issued additional sweet spot certificates valid on nearly any fare for the same year, and had less restrictive international upgrades the following year (that still excluded the cheapest fares). That policy remains in force today.

  • US Airways planned to count only full fare tickets towards elite status. The public face of the airline explaining this change is now the CEO of Spirit Airlines. At the time he described customers buying the inexpensive tickets they offered as not having the kind of loyalty they were interested in. Ironically Baldanza only wanted the highest fare passengers, and now he only wants the highest fee ones!

  • US Airways announced the end to flight bonuses for elite members in 2008 and reversed course. And they even did so retroactively. At the end of 2008 elites all received the flight bonuses they would have earned while the change was in place (May 1 – November 19).

  • In December 2002 Delta announced they would stop giving full elite credit to discount fares. Two years later they rolled back the change and also rolled back award fee increases.

Several folks told me at the time: what’s different now is that there are only three major legacy airlines left in the U.S., so there’s no competition.

In fact, the airline industry is intensely competitive. Most routes have at least three options or more on a one-stop basis in the United States. Airline prices tend to converge with each other precisely because there’s no monopoly pricing power.

Nonetheless, we don’t see big consumer wins in these examples since 2008. Here’s why.

  • Consumers win when pushing back against changes when their position is strong relative to the company they’re pushing back on. The wins were happening around 2002, during a recession, and 2008 as the Great Recession starting coming upon us.

  • We didn’t see wins like this 2009 – 2012 is because companies weren’t making as many of these changes then. And those that did simply lost business, consumers moved over to competitors who were being much more generous.

  • What’s different now isn’t mergers, it’s the economy. Hotels are full, planes are full, companies don’t feel they need marginal consumers now.

  • When the economy turns, consumer action will matter more than it does now.

Although I hold out quite a bit of hope that when a change a program makes offends the sensibilities beyond the frequent flyer core — when programs do something that strikes the public as fundamentally unfair — members will be in a stronger position to voice their objections and convince programs to change… because the negative effects of the change on the company will be felt in their bottom line.

Competitive pressures do remain. United feels competitive pressure to do whatever Delta does, because MileagePlus lacks better ideas – or the confidence of those ideas – itself. American will merge its AAdvantage program with Dividend Miles, and evaluate what’s working in its program versus how well the competition is doing with different programs. Alaska sees a competitive advantage in not upending its frequent flyer program.

At some point economic fundamentals will change and an airline’s customers will matter (as Alaska suggests they do today), and at that it will be in the carrier’s interest to listen.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. I have a feeling the directive has been given to drain as much value as possible from these programs, and that the ONLY goal is to avoid “something that strikes the public as fundamentally unfair” and the bad PR that comes with it. Take away their pensions, I say.

  2. I am surprised by the level of loyalty some people still show these companies in the face of such devaluations. If there are better options out there please do everyone and yourself a favor and don’t just fly the regular old Delta and United and speak with your wallet.

  3. I disagree. In most markets it’s effectively a duopoly. Planes are FULL, so there is little motivation to increase passenger count with incentives. The major carriers follow each other’s program moves in lockstep. Loyalty is only for corporate travellers stuck with a company-chosen airline now.

  4. @ Vicente

    That only makes sense if airline income is limited to ticket sales (and ancillary income). But, Frequent Flyer programs are huge profit producers on their own, via the sale of miles/points to credit card companies. Depreciating their value will result in declining consumer receptivity to marketing efforts, and a subsequent fall in airline revenues.

  5. I think thank any of these policies can change over time. I dont believe that every change will be necessarily be permanent all of these programs. So much consolidation in airlines over the past ten years and the last few few have been some of the biggest ones. And with all the bashing non stop about United and Delta, keep in mind American has made many changes already to their system. Maybe not the award chart per se, but other changes like making more British Airways flights available vs American which have no fuel surcharges. Adding in legs of travel that make no sense. I ran some award travel from South Fla by way of DFW. There are about a million flights a day form FLL and MIA to DFW (hub) Instead American wants you to go from FLL/MIA to TPA and then to DFW. Why throw in an extra domestic leg like that? In fact American has the ability to keep the award charts as is and not go to a revenue program tp see if they can actually steal business form United/Delta. Frankly I think they are crazy if they dont consider this. Sit on the sidelines for a year and consider some marketing to steal those customers. The frequent flier community thinks United/Delta customers are up for grabs. Maybe they are, or maybe only in the FF community?

  6. One retreat you didn’t mention — I know there are many others you could have selection — was UA’s plan to eliminate what are now known as RPUs. When the airline announced it was moving to domestic CPUs it also indicated there would no longer be RPUs which elites then earned a pair every 10K of PQMs IIRC. This was announced just before the second STARMegaDo and at that event we had several receptions with UA/MP execs. Several of us took it as our mission to pepper them with the message that RPUs were still a valued benefit and CPUs would not cut it since there was no guarantee of an upgrade, and other than using miles, no other way to confirm an upgrade in advance. Not to mention since CPUs would not be applied to PS flights, a way to upgrade on these except with a GPU. Management relented and kept RPUS, albeit cutting back in how they were earned.

  7. “At some point economic fundamentals will change and an airline’s customers will matter (as Alaska suggests they do today)”

    At one point not too long ago, facing strong competition from a fuel-hedged WN, AS considered eliminating first class. IIRC, consumer sentiment led them to keep it and figure out how to monetize it better, which they have.

Leave a Reply

Your email address will not be published. Required fields are marked *