The general counsel of airline industry lobbying group Airlines for America says frequent flyer programs should be able to make changes any time with no notice.
But David Berg, a member of the panel who is also general counsel for the trade group Airlines for America, which represents the largest carriers, said loyalty programs are essentially discounts that could change as frequently as fares.
“I would beg to differ that changes in miles and changes in fares are different,” Berg said. “I think they’re the same.”
This is the Delta argument, and it’s been adopted by the industry. But with due respect to the major US airlines and their hired gun in Washington, miles – and loyalty programs – are not at all like airfare..
Miles are Not Merely Money
Loyalty programs aren’t sandwich shop punch cards, get the 10th sandwich free. They’re precisely sold to members on the basis of the dream of travel, obtaining something special you couldn’t otherwise afford, not on receiving 5% – 15% of your spend back.
- There is a ‘published’ value of cash. Loyalty programs don’t tell you how much money your miles are worth.
- You can use cash equally with any airline or with any vendor to purchase any goods or service. You can only use a program’s proprietary currency in whatever manner the program proscribes.
Members accept this precisely because frequent flyer miles are not like cash, there are some shortcomings but they also can deliver superior value too.
If you try to turn them into cash, you create a poor substitute. And you undermine the very thing that makes them special to members.
Miles aren’t mere rebates. They hold the promise of going places, of experiencing things, in a way that you wouldn’t if you were spending cash. They capture our imagination.
If they’re just going to be airline funny money, then the alternative of federal reserve notes is clearly superior. There’s no reason to accrue points through a co-brand credit card. There’s no reason to chase the points at all. Airlines can’t have it both ways.
Program Changes Need to Be Disclosed to Members Long in Advance
Mileage programs represent a promise of future reward on the basis of current action. That’s true for award redemptions — buy these flowers, eat at these restaurants, choose to fly our planes, and do that for enough time and you’ll earn points for your honeymoon, anniversary, or family reunion.
The intertemporal nature of the program — it inherently involves saving for the future, versus cash which you can combine with other funds and spend in whatever proportion you wish right away — represents a commitment.
If a loyalty program is going to unilaterally change the terms – renege on its commitments – at the absolute very least they have to give members who have detrimentally relied on their previous promises the opportunity to take action to get their bookings made, to top off their accounts before it’s too late.
And an elite program works in much the same way. Fly all of 2015 and there’s a slate of benefits you’ll receive for your 2017 travel. If you’re going to change those 2016 benefits, you needed to announce that before people started buying tickets on the basis of your promises.
That’s How it Used to Work, Before Programs Became So Brazen
There were exceptions, like Amtrak changing redemption pricing and shutting down mileage transfer options overnight a decade ago, and LatinPass becoming an online shopping portal instead of a coalition airline loyalty program.
But on the whole programs did give advance notice of changes. In fact, United always has when changing their award chart. When they announced changes in November 2013 it was three months’ notice, which is a far cry from the six months they used to give a decade ago. But it’s still notice.
Indeed, even American has given advance notice of its minor changes since April 8 of last year when they eliminated distance-based oneworld awards and free stopovers at a North American international gateway city.
Of course, no one is as brazen – not just in deed but also in word – as Delta.
Airlines think they owe no duty of good faith or fairness to members. And legally speaking – under current rules – they are right. But under any reasonable moral principle, and in my view any long-term theory of profitability, they’re terribly mistaken.