United Plans to Introduce Revenue-Based Redemptions This Year

Wandering Aramean notes that United plans to “begin introducing dynamic award pricing”.

He quotes a United spokesperson as describing this as part of their strategy of “giving customers a broad set of redemption options” and the spokesperson also notes United’s “focus on ensuring saver-award availability in general” which seems to suggest that this would be an add-on offering rather than a replacement for award charts, at least in the near-term.

Delta is clearly preparing to move towards more revenue-based redemptions so it should come as no surprise that United is trying to do the same, since United’s modus operandi is to ‘manage by doing what Delta does.’ I’ve heard several airline executives say that revenue-based is clearly the way to go “since Delta is doing it, and Delta is profitable.” (Nevermind that the history of profitabiltiy came from not being revenue-based, and that Delta’s business is different – with different routes, customers, and revenue – than other airlines’.)

My guess is that United will offer an additional option to spend miles on any paid United ticket (although conceivably extending to their joint venture partners), with the number of miles based on the cost of a paid ticket.

In other words, they’d basically make the ‘Choices’ program available to all members, bookable through the website instead of as a credit card statement credit.

See, this idea isn’t at all new. United, Delta, and American have already offered some version of this.

  • For three years American offered revenue-based redemptions as an option for elite members only. It was called Dynamic Air Awards and it was run by Switchfly. The offering was discontinued April 1 of last year.

  • Delta introduced a Miles as Money feature where you could get a penny’s worth of value towards airfare back in 2008. It was open to all co-brand cardholders with a US address.

  • Around the same time United introduced the Choices program which allowed MileagePlus co-brand cardholders to use the points earned with their Chase credit card as money towards airfare.

People seem to like ‘miles as money’ for cheap tickets — “I can get a $150 roundtrip ticket to Florida for just 15,000 miles instead of paying 25,000 or even 50,000 miles for it!” Of course they’re still only getting a penny a point so assuming they have some number of miles that’s below infinite they’re better off if they can pay cash and then use the miles later for a trip that would have cost them more. Under any and all circumstances one cent per airline mile is a terrible redemption.

I imagine United is looking at making this option more prominent. The question is whether they’d retain one cent per point in value or whether the value itself would be ‘dynamic’.

Clearly United would like to stop offering value, something their award chart still does (at least for awards which aren’t in partner first class cabins).

While planes may be flying full, and lower fuel costs turning around the financial position of the airline, and so they don’t need to be as rewarding to put butts in airline seats at a profit, moving to straight revenue-based redemptions (rather than as an add-on option) would undermine the allure of their points and destroy their program which is otherwise worth billions on a standalone basis. They wouldn’t be that stupid, would they?

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 »

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Comments

  1. @ Gary — The Delta “Pay with Miles” doesn’t even give 1 cpm for cheap tickets since the minimum redemption is 25,000 miles, regardless of price.

  2. just another reason to be highly cautious with All programs now and in the future
    No more mile purchasing for me
    Southwest has already proven their points are worth very little and revenue is more valuable
    Its cheaper to use cash then transfer or earn points
    I will totally give up loyalty on any airline and switch all my spending to a cash back card and buy only by price
    if revenue redemption becomes a reality and or seats get scarce

  3. If companies start switching to a revenue based rewards, cards like the arrival will be a better option than some of these co-branded CC. 2x miles with the Arrival is even better than using UR points or SW miles for SW flights.

  4. I’ve dealt with United’s crap products, no existence customer service, and rude employees all because I loved their FF program. I’ve even dealt with their revenue earning structure. But, I’m done if they do this. I’d rather have a good product than a useless FF program and a horrible airline. United needs to learn.

  5. Southwest has decided that “points as good as cash” is a bad deal for the airline. They are killing fixed point value 2 weeks from now. Granted, that value was 1.43 cents rather than just 1 cent per point.

    Airlines prefer award redemption for seats which will not sell for cash. Any redemption option for flights that go out full costs the airline money unless the price in points is insanely high.

    See the discussion at http://www.flyertalk.com/forum/milesbuzz/1655262-all-points-good-cash-loyalty-programs-inevitably-doomed.html

  6. This is a straight alignment with AC/AP. Offer saver seats at a preset level, everything else is offered dynamically with prices varying both by flight and member status.

  7. “They wouldn’t be that stupid, would they?”

    Do you really need to ask that question?

  8. it’s as if all these US airlines have convinced themselves that their govt bailout mergers will, along with eradicating competition, have also ended economic cycles. trillions in printed $ will some day come home to roost and airlines will once again need butts in seats. there will be zero value, beyond sign up bonuses, to use airline credit cards.

    most people view miles as more dear than hotel points- i disagree. my spend is on 2 hotel cards and 2x cash cards. if i want to take a $1500 flight, i MS enough to make that less than a $700 flight where i also earn status/RDM miles- unlike an award flight.

  9. “They wouldn’t be that stupid, would they?” I laughed when I read that.
    Of course they would be–fed by their greed and assuming that the golden goose can’t be killed.

  10. Not the right topic, but Gary, I have a bone to pick with you. TOP CASH BACK IS THE WORST WEBSITE EVER. It will not stop spamming me even though I have unsubscribed. It will not delete my account even though I have asked. It is violating FCC regs all over the place.

    No amount of cash back is worth getting regular emails asking me to use the website more. That just makes me hate a website.

    Any help? Top cash back won’t help me. Can you?

  11. @emily, figure out how to create a filter in your email that takes all mail from them and moves it to the junk folder or trash. No need to worry about an unwanted sender not removing you from their list.

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