Reading through the February issue of Inside Flyer and some recent posts on Flyertalk by Randy Petersen I’m struck by a few of his predictions for changes to frequent flyer programs in 2006.
Among the no-brainers, American and United are extending their 15,000 mile awards for short-haul travel (flights under 750 miles). Other airlines will certainly match. Continental has announced its own 20,000 mile awards for flights under 1500 miles — more miles, but longer flights, and interesting competitive response. Short-haul flights tend to see better award availability, since most flyers don’t see them as a good value for use of points. Fewer points make sense. But in most cases they’re still not a particularly good value. Randy has seemed very high on these award offerings, but they really don’t excite me one bit.
More controversially, Randy sees programs — or perhaps just Delta — moving to a new regime where all capacity controls are lifted on awards, presumably offering only one tier of awards (no more saver and anytime offerings) for an amount of points somewhere between the current two prices such as 35,000 miles for a domestic coach award utilizing any seat on any flight.
Inside Flyer has reported that in 2005 Delta ran a brief test eliminating capacity controls on international premium awards. A fascinating idea, and one that seems plausible, but I’d expect to see it on domestic US awards only at least at the start. I don’t think we’ll see this on international business class flights, since the mileage cost of anytime awards has been on the rise. Both Continental and Delta recently raised their anytime awards for business class from the US to Europe to 250,000 miles.
Since it’s so difficult to redeem miles on these programs, customers have been using anytime awards. And these have been cutting into revenue sales. So the mileage requirements have gone up. It’s difficult to see the airlines agreeing to reduce the mileage cost to redeem these seats.
(A somewhat implausible conspiracy theory would be that they’ve increased the mileage requirements for these awards so they coulod ‘reduce’ them back to their earlier levels, offering one class of award all at the old anytime price and misleadingly advertising it as a better value.)
Randy also sees an airline offering elite status based on credit card spending. Several airline credit cards have already offered miles towards elite status based on spending thresholds (United, Delta, and USAirways spring to mind). He expects an airline to go all the way and offering status wholly based on spend.
Hotels already do this. Several chains offer low-level status just for signing up for their card. And Hilton introduced Gold (mid-tier) status for spending $25,000 in a year on their co-branded Amex.
This is certainly a trend. Credit card partnerships are hugely lucrative for travel providers. USAirways and Delta have received several hundred million dollars in pre-purchased miles from their credit card partners. United got both debtor-in-possession and bankruptcy exit financing from theirs. These partnerships can only deepen. (Sidenote: it amazes me that Hyatt can remain without a credit card partner, this would seem like it has to change, so this might be my prediction.)
My own expectation is that the airline offers will (1) come on premium cards with annual fees and (2) will offer only the lowest tier of status based solely on spending. Still, this is a step forward. Personally I’m waiting for top tier status to be offered based on spend..