Travel still best reward for mileage
By Tim Winship
Airline frequent-flier programs traditionally have been based on a simple premise: Be a loyal customer and we'll reward you with a free trip.
While the airlines still covet travelers' loyalty, the reward component of the proposition has become problematic. With profits still elusive and flights running full, airlines have been less willing and able to make adequate numbers of seats available as mileage program awards. So they're supplementing the programs' award catalogs with such nonflight items as Apple iPods and Movado Museum watches.
In the most recent example, United announced this month that, through Dec. 31, elite-level Mileage Plus members can redeem their miles for a range of merchandise that includes consumer electronics, jewelry, sports gear and cookware, through Mileage Plus Merchandise Rewards.
This month, Delta began allowing members of its top tier to redeem miles for items in the Medallion Marketplace, a collection of 300 new travel- and nontravel-related awards, including electronics, home and garden items, outdoor equipment, and hotel stays.
The developments at United and Delta follow a similar move by Frontier Airlines. In June, the Denver-based discount airline introduced the More Store, an online catalog of "lifestyle-oriented merchandise" from jewelry to restaurant meals to golf outings, which elite members of Frontier's EarlyReturns program can obtain with their miles.
Although the nonflight awards mentioned are offered only to the airlines' best customers — elite members of their mileage programs — it's likely they will be extended to the programs' general members if they prove popular. Indeed, merchandise awards are already available to nonelite members of the programs of American and Continental.
American's redeemAAmiles program allows AAdvantage members to cash in miles for hotel stays and car rentals, as well as for points in the Diners Club program. Those Diners Club points in turn can be exchanged for a wide variety of merchandise in the Diners catalog. American also allows its members to redeem as many as 50,000 miles per year to save up to $250 annually in a 529 college savings plan.
Members of Continental's OnePass program can combine miles and cash to obtain jewelry, electronic merchandise and cookware through the program's Miles for Merchandise feature. Or they can bid their miles for merchandise or event tickets on the OnePass Online Auction.
Is the iPod the solution to the award seat crunch?
Certainly some frequentflier program participants will welcome the chance to use their miles for a toaster or a restaurant voucher. But will the new awards siphon away enough of the demand for free seats to quell the widespread frustration with the programs' award offerings? That's unlikely.
And most merchandise awards fall far short.
A January report by industry analyst Jay Sorensen estimated the value of miles redeemed for nonflight awards in the programs of American, Delta and United at .5 to .8 cents each. That's just half the 1.4-cent average value of miles cashed in for free tickets.
There is one nontravel award option which proves to be the exception to the rule, offering better value than either free tickets or merchandise. Redeeming miles for magazines (now a feature of the programs of most full-service carriers) provides members with an average per-mile value of 2 cents.
But that's an isolated case, made possible by the fact that magazine publishers can afford to give away subscriptions at little or no cost to the airlines, because the increased circulation generates more ad revenue, even if subscription revenues remain flat.
Marketing execs explain travel's power as aspirational.
It's the primary reason more than 100 million Americans participate in airline mileage programs; and it's why nontravel awards will never be more than distant second choices for most mileage program participants.
Reach Tim Winship at questions@frequentflier.com.
