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The Honolulu Advertiser
Posted on: Sunday, September 30, 2007

SAVVY TRAVELER
Frequent-flier programs aren't what they used to be

By Irene Croft Jr.

The primary purpose of frequent-flier programs when they originated with American Airlines back in 1981 was to reward a carrier's most loyal customers.

It still is, but with lots of revisions and fine-tunings along the way.

Over a 26-year span, passengers have come to view frequent-flier programs as part of the "core product" offered by airlines. Mileage earning and awards are now a basic consumer expectation, alongside convenient schedules, competitive pricing, safety and customer service.

More than 100 million fliers are enrolled in U.S. air programs, and they are now holding more than 14 trillion unredeemed miles in their accounts, a potentially crushing financial liability for the airlines. For example, at the end of 2006, American Airlines carried a $1.6 billion frequent-flier liability on its books and Delta, $887 million. With an ever-expanding passenger stockpile of frequent-flier miles, the relative scarcity of available award seats, and up-trending load factors, airlines also risk a serious devaluation of their loyalty programs.

RANK HAS ITS PRIVILEGES

Elite fliers — those logging millions of miles on high-revenue tickets — get greater access to free seats than low-mileage travelers. Fair enough. An estimated 80 percent of elite fliers obtain the free seats and upgrades they want on their first try and 93 percent on their second try. They can book farther in advance and have fewer and sometimes no blackout days to juggle.

Many infrequent — i.e., leisure — travelers find that it's easier to earn miles than it is to redeem them for awards. Today, more than 40 percent of all miles and points are earned without ever leaving the ground. You can collect mileage with co-branded affinity credit cards, telephone services, real-estate sales/purchases, mortgages, hotels, car rentals, flower sales and with scores of other very savvy partners who award airline miles.

Albeit irritating, the major airline obviously have valid economic reasons for continually tinkering with their programs. Despite the lack of firm figures from domestic carriers, thoughtful estimates indicate that about 5 percent of the seats on any given popular route are filled with freebie fliers. The two most desired free-ticket destinations are Hawai'i and London.

A partial fiscal solution for the carriers has been to revise their award systems so that elite-level business travelers, buyers of the highest-value-revenue tickets, are given priority for upgrades and awards ahead of leisure travelers who tend to buy low-yield, discounted excursion tickets. The average vacationer will find that earned mileage is more and more difficult to redeem for tickets to the destinations he desires.

Another direction has been to enlist more partners in airline award schemes — retail, credit card, hotel, auto-rental and others. To lighten individual mileage account loads, airlines are promoting to its customers the swapping of miles and points for merchandise, events and vacation components. This can be a substantial and steady source of revenue to the carrier. Typically, a partner company pays the host airline one to two cents per mile earned when a member exchanges mileage points for the partner's product.

QUICKER EXPIRATIONS

The latest liability-reducing measure enacted by several carriers is to shorten the expiration dates of earned miles in your account by 50 percent, from 36 to 18 months if no activity is reported. This new time frame has significant consequences for frequent-flier program members, so verify with individual airlines how you may be affected.

All frequent-flier programs, whether air, hotel or rental-car, revolve around two underlying concepts: blackout dates and capacity controls. Unless you're in the 1 percent of travelers who've earned elite status in a program, your vacation plans may be severely crimped by these restrictions.

Blackout dates are set by most airlines, during which freebies may not be used. These tend to fall, of course, on the most popular travel dates — holidays, school breaks, weeks in summer, etc. — and cover just about any time period during which you'd really like to travel. Airlines normally adjust their blackouts from year to year but will commonly waive all date and award-availability restrictions in exchange for redemption of double miles for a desired ticket.

BEWARE SEAT LIMITS

Capacity controls can further aggravate your attempts to claim an award, as the number of seats per flight allocated for nonrevenue passengers is shrinking in the wake of increasing fiscal liabilities. The upshot, generally, is that more fliers are scrambling for fewer available seats. In U.S. programs, all frequent fliers, collectively, have an average award-redemption success rate of 53 percent for free tickets and 58 percent for upgrades.

Earned and purchased upgrades, on the other hand, are relatively easy to obtain, particularly for very frequent fliers, but are useful only if you're willing to wait until 100, 72 or 24 hours before boarding to be confirmed upfront. The highest-level elites flying on certain fares are usually offered free upgrades at time of reservation. Lower-level elites and regular program members may redeem upgrades at time of booking with mileage credits, but the eligible fare is often substantially higher than the lowest published fare for your itinerary and availability is on a capacity-controlled and priority system.

To make sense of all the airline program rules and awards, and to formulate your own mileage-earning-and-redeeming strategies, buy a copy of "Mileage Pro — The Insider's Guide to Frequent Flier Programs" authored by renowned travel reward gurus Randy Petersen and Tim Winship (Winship also writes a column for this newspaper) and published by OAG Worldwide Inc.

Excellent, highly informative frequent-flier online resources include www.insideflyer.com, www.flyertalk.com and www.webflyer.com.

Irene Croft Jr. of Kailua, Kona, is a travel writer and 40-year veteran globetrotter. Her column is published in this section every other week.