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World’s Largest Frequent Flier Program Favors Heavy Users

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The first modern frequent flier program was created by Texas International Airlines in 1979. (Image: Svilen Milev)
The first modern frequent flier program was created by Texas International Airlines in 1979. (Image: Svilen Milev)

BUSINESS

  • United and Continental Airlines merger creates world’s biggest Frequent Flier program
  • New program announced this year admittedly caters to well-off users who tend to buy highest-priced tickets
  • New trend in highly competitive industry is to compete through changes and/or additions to Frequent Flier programs

The United and Continental Airlines merger has not only created the world’s largest airline but also the biggest frequent flier program anywhere.

In recent news of what is next for the combined programs of both airlines, the initial move perhaps paraphrases the old saying “the rich get richer.” Or in this case, the heaviest users of such programs will get the most perks, according to virtually all commentators on the move, as the new program essentially raises rewards for the most expensive ticket-buyers.

History: Frequent Flier Programs

The first modern frequent flier program was created by Texas International Airlines in 1979, with TI quickly overwhelmed by American’s introduction of AAdvantage two years later. Other carriers followed with programs that created ways to accumulate miles beyond racking up air time, and co-branded credit and debit cards fleshed out offerings but one element remained the same: the programs were highly popular and indeed, perhaps even cherished by participants.

"There is tremendous passion around these programs," Brett Snyder, writer of the "Cranky Flier" blog, told the Chicago Tribune. “It's a big deal for a lot of people."

2012 United Continental Airlines Frequent Flier Program

Though the two airlines merged last year, only recently was it announced that there would be a combined program for 2012. United Continental Airlines says its revamped frequent flier program caters to well-off users who tend to buy the highest-priced tickets.

The program retains United’s name as “Mileage Plus,” and, in total, should include some 85 million members. The airlines are obviously aware of the mindset of fliers in supporting such programs and a lot of thought went into the new plan, according to Jeff Foland, president of “Mileage Plus.”

Changes to the new progam impact some core areas that include the number of status tiers and the amount of award miles passenger get for flights. Free checked bags that no longer come with a ticket, and have increasingly been beset by fees in recent years at most airlines, are also part of the new program.

Frequent flier tiers are designed so benefits "logically and progressively improve" as fliers achieve higher levels, Foland said. "We want to make sure we distinguish one tier from another," he said.

What does it mean to members of the new program? Tiers have changed dramatically, say analysts of the program. The elite status has gone from three tiers to four. They are known as Premier Silver, Premier Gold, Premier Platinum and Premier IK. The flying levels start at 25,000 miles, 50,000 miles, 75,000 miles and 100,000 miles.

One important change involves the free luggage benefit, which starts at 25,000 miles a year. Critics of the program point out that even that offer is skewed towards rewarding more elite flyers. Silver travelers, for example, will only be able to check one bag for free (instead of the two they were allowed before).

Airline Trend: Use Frequent Flier Programs as Competitive Advantages

The new program is representative of recent airline trends. Most airline’s frequent flier programs have been based on one mile of credit for each mile flown. But last January, Southwest revamped its frequent flier program to give larger rewards based on the fare.

Southwest admitted that it was favoring customers who pay a higher fare to get more of a reward.

“Now United is headed the same way. Travelers flying on first-class tickets will get up to two-and-a-half times the miles flown, and those using business class and full-fare coach tickets will get more miles, too,” said the AP.

This is an obvious effort by airlines to make those types of tickets more attractive, leading of course to greater income from airlines who claim they continue to be profit-starved due to higher fuel prices. The goal, in other words, is to reward travelers who create the biggest value for the airline, admits Foland.

More details on the new program, which will also allow members with frequent flier miles to bid on sports tickets and other cultural events, will be detailed later this year, according to the airline.

Meanwhile, there are signs that heated competition among airlines is causing carriers to compete through changes in existing programs. Earlier this year, Virgin Australia tried to start winning back Qantas' business travelers and frequent flyers with a ”status match” deal. For those holding silver, gold or platinum status with Quantas’ Frequent Flyer program and for other competing airlines, Virgin Australia started providing a year’s worth of equivalent status under their “Velocity Rewards” program.

The offer is free but runs for a limited time, according to the airline.

Usually, these types of promotions are closed quickly because of strong demand, but this time Virgin didn’t issue an end date. It did issue a sort of oblique warning: “Velocity reserves the right to retract the offer at any time at its absolute discretion."

Key Statistics - Frequent Flier Programs*

*(From Frequent Flier Program Survey Results by FrequentFlier.com; Idea Works Survey, based on 6,700 booking requests made through 24 frequent flier programs for travel from June to October of 2011)

Successful award bookings for U.S./Canadian programs and the change from 2010:

  • Southwest  99.3% (No change)
  • Air Canada  82.1% (-11.5 points)
  • JetBlue  79.3% (New for 2011)
  • United  71.4% (+2.8 points)
  • Continental  71.4/ (No change)
  • Alaska  64.3% (-10.7 points)
  • American  62.9% (+5 points)
  • AirTran  47.1% (-20.8 points)
  • Delta  27.1% (+14.2 points)
  • US Airways  25.7% (+15 points)

By David Wilkening for
David Wilkening is a former newspaperman who worked in Chicago, Detroit and Orlando. He now specializes in travel and real-estate business writing.

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