By Mitch Lipka
BOSTON Feb 27 The airline miles game is
changing, and the winner is the heavy-duty business road
The loser? The leisure traveler.
Delta Air Lines announced on Wednesday a fundamental
change to the way it rewards passenger loyalty. Instead of
tracking how far customers travel, starting in January 2015, the
airline will instead tally up how much they spend.
Business travelers who take many short flights, particularly
of the pricey last-minute variety, are going to earn far more
points under the new system, says Tim Winship, editor of
Airline-related credit cards recently made a similar shift
as well. Co-branded credit cards offered by both Delta Airlines
and United Airlines Inc added in minimum annual spending
requirements of $2,500 on tickets while also amassing 25,000
status-earning miles to get to the lowest elite level of their
respective frequent-flyer programs, according to Bill Hardekopf,
the CEO of LowCards.com.
BETTER FOR DELTA
Starting next year, Delta passengers will earn between five
and 11 miles for each dollar spent on airfares, depending on
their frequent-flier status. Holders of Delta SkyMiles credit
cards will earn additional miles.
While low-cost carriers including JetBlue Airways Corp
and Southwest Airlines Co also use the cost of a ticket
to calculate their rewards - as hotels typically do - Delta's
announcement is clearly a play for the business flyer.
Even a small percentage increase in the number of flights
taken by premium business travelers will bring in a lot more
cash for Delta, Winship said. And he expects the remaining major
airline carriers to follow Delta's lead.
Decades ago, airlines decided to base their loyalty programs
on miles traveled because they did not have the technology to
track the cost of a ticket. Now, it is much easier for airlines
switch to revenue-based metrics.
"You want to reward profitable passengers. This is the way
to do it. Otherwise, you reward expensive churn," says Robert
Mann, an airline analyst for R.W. Mann & Company Inc and a
former airline executive.
LEISURE TRAVELERS GLUM
But consumers who looked forward to building up to a free
trip by collecting miles from one year's vacation trip - with a
few more miles picked up here and there from linked hotel
programs - are pretty much lost in the new equation, says travel
loyalty expert Brian Kelly of ThePointsGuy.com.
"They're going to probably have to fly twice as much to get
the tickets they'd get today," Kelly says. "It will become a lot
less lucrative to earn miles. It says we really only care about
people who spend a lot."
Airlines have long been tweaking their loyalty programs and
reducing the currency of miles by making them harder to redeem
or raising the amount necessary to earn a trip. Dramatically
altering a system that people have spent years trying to
understand and benefit from is tough to swallow, says consumer
advocate Bob Sullivan.
"Many middle-class Americans travel like crazy for work
right now, taking red-eyes across the country - or the Atlantic
- so they don't miss a day or work, and their one reward for
crazy travel schedules is a nice trip for their families,"
Taking away rewards and making them harder to use is like
docking those workers' pay.
"And that stinks," Sullivan added.
Someone who gets a good fare for a cross-country flight will
feel the change the most.
Today, a $500 round-trip ticket on a coast-to-coast flight
will net a traveler about 5,000 miles (the minimum to earn a
free flight is usually around 25,000 miles). Under the new
system, the same passenger would get about half of that, which
amounts to 2,500 miles.
But Delta still needs savvy consumers to fill its planes. If
enough of the little guys take their business to other airlines,
Delta could still backtrack from its position, Kelly noted.
Otherwise, he suggests those who still want to try to get
that free trip accumulate points through other carriers.
Due to the partnerships between airlines, travelers can use
an Alaska Airlines frequent-flyer number, for
example, when booking a flight on Delta. Alaska also has a more
generous rewards system, Kelly noted, and the points could be
used to book flights on other partner carriers as well.
Watch your respective airline loyalty programs carefully,
however, since terms can change without much warning. Avoid
hoarding miles by using them as soon as you can.
Winship says whatever push back there might be - and he has
heard the grumblings - at the end of the day, will not amount to
"Change is always hard," Winship said. "My bet is that after
a month or two and all of this sinks in a lot of people in the
middle will decide it's not that bad."