Frequent Flier Miles Are Dead. Now It’s All About Credit Cards
Oh, Thanksgiving: A time for turkey, a time for uncomfortable political discussions, a time for the most nightmarish airplane trips imaginable. Roughly 24 million Americans will fly with US airlines this week, and a lot of them will be thinking: Hey, at least I’ll come out of this misery with some frequent flier miles for that solo kayaking trip to New Zealand.
Except, not so much. For the first time since frequent flier programs got their start in the 1980s, most American airline passengers are earning rewards in a new way. To put it bluntly, the frequent flier mile is dead.
Since 2015, American, United, and Delta Airlines have each changed the basis of their rewards programs from miles flown to money handed over. (American just made the switch in August.) You get points based on what you pay, not how far you go. They’ve made it harder for passengers to reach the elite statuses that come with perks like seat upgrades.
That’s likely to aggravate the folks who buy tickets weeks in advance to score cheaper seats. The changes may not break the law or cheat anybody, but they reek of betrayal: Suddenly, seeking out a good deal on tickets makes you less valuable to the airlines you fly with, less worthy as a customer.
“The airlines have continued to move the goal posts, to change the rules,” says Brian Kelly, who runs the credit card reward obsessives’ blog The Points Guy.
Still, the carriers made a smart financial move, industry experts say. “The thing that matters most to an airline is how profitable each customer is—and customers that pay a higher fare are always more profitable,” analyst Vinay Bhaskara wrote in Airways Magazine. “A program that rewards passengers that pay a higher fare with more points is rewarding an airline’s most valuable customer.”
And yes, Kelly says, the average traveler can still find a sweet deal. She just has to know where to look.
The Economics of Frequent Flying
First, let’s review why these airlines are making the change. In the years after the September 11 attacks, the industry flirted with financial ruin. Desperate to lure Americans back into the sky, airlines cranked up the generosity of their rewards programs. Those perks and privileges kept rolling through the 2008 recession.
Now, things are looking up. A record 896 million people passed through American airports in 2015. The problem is that price-conscious passengers are increasingly jumping ship for budget carriers like Spirit, Frontier, and Norwegian, where ancillary fees are the norm, customer service is near nonexistent, and prices are cheap. So now, American, United, and Delta focus their rewards on the customers who cough up the most dough.
Hit the Sky
“The tweaks that [the airlines] are making are not about loyalty, but about revenue optimization,” says Brett Snyder, who runs the Cranky Concierge, an air travel assistance business.
(Delta, for its part, says it’s continued to see new members sign up for its SkyMiles program, while American and United say their programs are purposefully structured to recognize the value of their customers to the airlines.)
The big airlines’ changes haven’t sparked a public outcry, but they spurred the Department of Transportation’s Office of the Inspector General to investigate. It found no obvious evidence of wrongdoing, but noted the airlines do a terrible job explaining how they award points. “They do not fully inform consumers that limitations are decided using complex computer modeling to forecast demand for each flight,” it wrote. It advised the DOT to keep a closer eye on these programs.
Travel Hacks for Normies
The airlines making it harder to earn points might seem unjust; it always sucks to lose perks. (You’re doing what with the office foosball table?) But while the rules have changed, there are smart ways to navigate (and obsess over) flying deals.
The first rule: Collect whatever you can. “I’m a general believer that if you’re flying somewhere, you might as well earn miles,” says Snyder. “If over time you collect enough of them, great. If not, oh well.” So go ahead—sign up for that awards program and make sure you’re scoring ’em.
But the real players know that these days, it’s all about credit cards. The best way to earn travel points it to open a card with a signing bonus, not actually take a flight, says Kelly, the points aficionado. (Note that his website receives referral bonuses from credit card companies.) Points aren’t just for flying anymore; travelers can run up their scores by charging groceries, hotel stays, rental cars, even their mortgages.
Just don’t rack up credit card debt in the name of point foraging: A free flight to South Korea isn’t worth bombing your credit score. It’s also probably worth looking into general cash reward cards, rather than ones tied to specific airlines, since they give fliers more options.
Kelly is a professional points acquirer. He has 30 credit cards, says he earns six figures in rewards a year, and keeps track of his spending via one doozy of a spreadsheet. But getting at least one card and paying it off every month should be doable for most consumers.
Future of Loyalty
So the frequent flier reward isn’t dead. It’s just less accessible to the occasional traveler who values a good deal over swanky amenities. And that could hurt airlines in the long run.
Without the potential to score easy points, those budget-conscious travelers are that much more likely to stick with the budget carriers, or hop to whatever company is offering the best deal. That’s partly why United recently announced a “basic economy” fare—a perks-free option that charges for carry-ons and the privilege of choosing your seat, and doesn’t let riders accrue points toward elite status. It’s basically a budget airline within an airline, but that might not assuage the annoyed.
“They’re screwing with us, and I don’t see why I should be loyal,” George Hobica, the founder of the deal-finding website AirfareWatchdog.com, said last month. “I’d rather give my loyalty to an airline that provides good service.”
It might just be that occasional travelers, more interested in deals than flying in luxury at every price, are not valuable customers for the big three airlines. Either way: Know exactly what you’re getting for your money. And maybe sign up for another credit card.
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