United Airlines, for instance, has downgraded benefits offered to the lowest tier of its elite frequent fliers. Last March, Southwest made an even more fundamental change in its loyalty programme, moving from a system that awarded participants credits for flights, regardless of distance flown or fare paid, to one that gives participants points based on the types of fares they purchase. So someone who paid $349 for a Business Select fare on a flight from Chicago to Denver would earn 4,188 points, while a traveler buying a $195 Wanna Get Away fare on the same flight would earn just 1,170 points.
JetBlue and Virgin America, too, reward passengers who spend more. Loyalty programmes today are “all about the airlines’ bottom line,” said Henry Harteveldt, co-founder of the Atmosphere Research Group, a market research company. “Business travelers have to understand that the benefits of the past three decades probably will not be part of the game going forward. Airlines want to make sure the financial benefits they offer elite travellers are commensurate with the revenues and profitability that traveller generates.”
Last month, United Airlines revealed details of its new loyalty programme, which goes into effect next year when its system is merged with that of Continental Airlines. The new programme will offer four tiers to what it calls ‘premier’, or elite, participants — 1K (for travelers with 100,000 qualifying miles), platinum (75,000 miles), gold (50,000 miles) and silver (25,000 miles) — rather than the three elite tiers the two airlines’ programmes had before. But the silver elite travellers will lose some of their perks.
Silver elite fliers
Silver participants, for instance, will no longer be able to reserve seats with extra legroom, in Economy Plus. Instead, they will be able to reserve those seats only when they check in 24 hours before departure. United officials said they expected the silver elite fliers would still generally be able to get this upgrade. But the other levels of elite participants will get access to the seats first, because they can still reserve them when they book.
In addition, free baggage checks for the silver participants have been made more restrictive. No longer will they be able to check two free bags, each weighing up to 50 pounds.They can check only one free bag weighing up to 50 pounds. The three higher levels of elite frequent fliers will be able to check three free bags weighing up to 70 pounds each.
Among the biggest changes in the industry since 1981, are consolidation and globalisation of airlines and the carriers’ decision to increasingly put their marketing focus on price ahead of the customer relationship. Another factor in the programme’s evolution, is the growing influence of the issuers of carriers’ co-branded credit cards. The issuers pay carriers for miles awarded to cardholders.
Tim Winship, publisher of Frequentflier.com, a Web site devoted to travel loyalty programmes, predicted that in the short term, “what you’re going to see from other airlines with mileage-based programmes is more tweaking like United’s.”
Petersen predicted the next big change in airline programmes would come if and when the US government liberalised its regulation of overseas investment in American carriers, which puts a 25 per cent cap on foreign ownership of voting stock. A merger of a carrier based in the US with a foreign airline—American with British Airways, for instance — could give the combined company a perfect setup to replace a mileage-based programme with a revenue-based program, he said.
Harteveldt said he also expected that airlines would impose a modest annual fee on passengers who want their frequent-flier miles to count toward elite-level participation. And he said that passengers seeking to earn elite status might be required to meet mileage levels and certain spending thresholds, based on ticket purchases and use of co-branded credit cards. An airline, for instance, might require a traveller to spend $1,500 on the airline operating the programme and to fly 25,000 miles annually on it.
“The risk an airline has to factor in,” he said, “is if they change their programmes too dramatically, travellers might defect to low-cost carriers’ programmes or switch their membership to the airline’s alliance partner.”