It’s important for travelers to realize that airlines are corporations, many of which are publicly traded and duly bound to maximize profits for their shareholders. We’ll just leave that there for you to think about for a second. Therefore, when an airline figures out a way to (in theory) increase profits, others will follow. In recent years, US airlines found a way to (in theory) reward customers not based on how far or frequently they travel, but how much they spend – and now airlines around the world are following, one by one…
Finance Not Frequency
What makes a great customer? Is it the person that chooses a specific airline every time? Or is it a person who travels twice a year, when someone else pays and they have no choice who to fly with – but the employer purchases expensive tickets? US airlines believe it’s the latter. Rather than frequent flyer “miles” being calculated based on the MILES you actually fly, revenue based earning means you earn miles based purely on the cost of your ticket. For the most part, it’s not how much you fly, or how loyal you are – just how much you spend.
To be clear, this is all talking about miles you can redeem, not separate points which count towards elite frequent flyer status.
Simplest Example
Let’s say you fly from New York to Tokyo. The distance is about 13,500 miles round trip. With most airlines, economy tickets earn about half the distance flown, regardless of price – so you’d end up with about 6,750 miles. Under the new system, you’d earn purely based on how much you paid. So if you got an amazing deal, and only paid $395, you’d earn miles based on a multiple of that dollar amount. Figure upon 5 miles per dollar. So instead of earning 6,750 miles based on distance, you’d earn only about 2,000 – based on spending. Of course, if you bought a $10,000 ticket, you’d earn more miles than ever. Get it?
Increases For Loyalty
It’s not all doom and gloom. With these programs, the higher your elite frequent flyer status, the more points per dollar you earn. In many of the systems, top tier flyers earn 2x more points than general program members. Very few fares will earn more points in these new systems, but some will – and the higher your status – the more you’ll earn. A key factor to keep in mind, is that many of these programs now include “revenue requirements”. In other words, even if you earn enough points to achieve a status, you must also spend a certain amount to actually qualify. This feels far more transactional, and less about the emotional attachment and “loyalty” component involved.
The Present And Future
American, Delta and United presently operate under a revenue based reward system. Air France and KLM will offer this system as of April 1st, 2018. Today, Lufthansa launched a revenue based program. It’s widely expected that British Airways will soon follow this week, with a similar system for rewarding Avios points. We cannot confirm this at the point of publishing. This is a less than ideal system for rewarding travel in our eyes – and virtually eliminates the term “mile”. These systems are now just points. But flyers to some extent can expect business as usual. Airlines have already tiered their tickets so that the most expensive tickets earn a large multiple, whereas the cheapest tickets only earn a fraction. This is just another step in that direction.
