Loyalty programs offer members goals. If they take a set of actions — flying an airline, spending on their credit card, shopping through their partners — there will be rewards. They may need to have some flexibility to use the rewards at the saver level, but they know what they’re aiming towards.
Unless, of course, the airline simply doesn’t tell members what kind of value they can expect from their points at all. That’s what Delta did four years ago, eliminating award charts, declaring that ‘the price is the price’ at any given moment.
We’ve seen lower prices for the cheapest (mostly domestic) coach tickets, and much higher prices for awards where members used to get outsized value, especially premium cabin international travel. They announce whenever there’s a ‘deal’ and make it hard to figure out when prices go up.
Now United is following Delta, eliminating award charts. Prices won’t go higher for travel, though, until November 15 and members may see lower prices today.
I wrote in January that you should expect this since they introduced premium economy awards but didn’t publish pricing and they removed the actual .pdf chart and only had a lookup tool for pricing by route. Here’s United’s award chart for posterity.
A couple of weeks ago United started pricing domestic coach awards as low as 5000 miles, with the value per mile hovering around a penny, in other words the cheapest points prices corresponded only to the cheapest ticket prices. That’s fine as far as it goes, but the fundamental value of frequent flyer miles comes from getting outsized value, being able to secure travel you wouldn’t afford on your own.
As I wrote at the time, “It’s better to pay United 5000 miles to fly Los Angeles – Las Vegas, I suppose, than it is to pay 12,500 miles. But when fares may be as low as $49 I’m not sure I see it as much of a value.”
How United Explains the Change
This morning I spoke with United’s Vice President of Loyalty Luc Bondar to learn more about the changes. He laid out the “four key goals” for MileagePlus,
Simplify the program, better reflect how our customers travel today, engage the wider member base (not just premium members), and continue to reward most loyal customers in the most meaningful way.
They’re changing award prices in a way that engages ‘the wider member base’ that doesn’t have many points by offering awards at times for far fewer miles than before and in the process they’re eliminating award charts “as of today for travel on or after November 15.” Their goal is to “better match demand for awards with supply of seat availability.”
United makes a “commitment” to be “market leading” and is not “t[ying] the price of a mile to a specific value.”
There’s “no longer a published ceiling” on award prices, so no comment on how high award prices might go. However their “goal is to be the most competitive program in the marketplace.”
What Members Can Expect for Premium Cabin, Extra Availability, and Partner Awards
These changes apply to both economy awards and to premium cabin awards on United. However these changes do not affect how partner awards are being priced at this time. There will be “some variability if United segments” are included in the flight itinerary.
ANA First Class
There’s no change to the booking classes that are being used for awards, and as a result no changes in how extra award availability works for co-brand credit card holders and elite members.
As a side note, although Bondar emphasizes how more members with low mileage balances will be able to use their points, they are not making any changes to their breakage assumptions for determining MileagePlus liability.
Finally I asked Mr. Bondar whether we can expect United to punish members the way Delta has by booking the cheapest awards into basic economy? He told me that this is “not at this point something we’re considering.”
And that actually suggests the value of miles redeemed will be greater than a cent — since even when travel could be purchased for $49 or 5000 miles that $49 fare is often a basic economy fare. The relevant comparison might be to a more expensive ticket.
Removing Close-in Booking Fees and Posting Flight Miles Instantly
United is eliminating close-in booking fees that range $25 – $75 for some members based on elite status for any award travel November 15, 2019 onward.
This seems to make sense when the cost of an award is tied to the price of a ticket. There’s less of a chance of getting outsized value for miles, and therefore less of a chance that someone will decide to book an award ticket instead of buying an expensive last minute ticket (something many loyalty programs try to avoid). As a result the close-in booking fee disincentive is no longer needed.
Meanwhile since Monday miles from United Airlines travel post within 2.5 minutes of gate arrival. That means elite status updates quicker when members cross a threshold and can make use of that status right away on their upcoming travels.
Is This Good for Members, or Gutting the Value of MileagePlus?
As I observed two years ago United and American copy Delta for all the wrong things. Delta can get away with a low value frequent flyer program because of marginally better inflight product, friendlier employees, and better-performing techops that gives them a more reliable operation.
United says this is about increasing value to members, not taking anything away. At some level all we can do is judge empirically what actually happens in practice. But from my perspective there’s absolutely zero reason to believe that members will get more value from the program over time. Instead miles will become easier to use for low value awards, and opaque pricing will make it easier to increase the cost of high value awards.
Although I disagree forcefully, The Points Guy has argued making the best awards more expensive is good for members because it means fewer members can afford them, and those who still can might find better availability.
In 2014 I was sitting with American Airlines executives when news broke that United was copying Delta’s move to revenue-based mileage-earning. I was told that American wasn’t going to do the same thing, they had some changes in mind to reward high spending customers but would do it ‘in their own way.’ It was only six months into the US Airways takeover, and they hadn’t realized that airline President Scott Kirby would overrule the AAdvantage team’s recommendations. Now Scott Kirby is President of United.
I know how I’m betting this turns out, based on nearly 20 years watching and studying this space. I’d love, however, to be wrong.