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Price of loyalty is on the rise
March 9, 2014, 2:19 pm

Last week, Delta Airlines became the largest carrier to switch to a frequent flyer program that issues points primarily based on ticket price, not distance flown. Similar programs are used most prominently in the United States by Southwest Airlines and JetBlue Airlines.

Delta’s move is just another signal that the cheaper, ‘saver’ rewards — those more accessible to most of us — are moving further out of reach. And they may not continue for much longer. Indeed, over the last few years, as airlines have consolidated and maximized capacity they have been shifting their reward programs to favor customers who spend the most on tickets.

Delta’s move should prompt even casual members of loyalty programs to reconsider how they react to incentives and rewards that seem to regularly decline in value. Unlike cash at the bank, which at least has the chance to earn some interest, earned miles are only worth less over time. And unlike most currencies, for which value is modulated by market factors, loyalty programs are controlled purely by marketing factors.

Today, our once meager points balance supercharge on the backs of hotel stays, theater tickets and taxi cabs. But when we have finally accumulated enough miles for a ‘free’ flight, those ‘saver’ awards are long gone or only available to remote locations, in the off-season, or at 5 in the morning.

Moreover, many of those hard-earned benefits — upgrades, access to a passenger lounge, expedited security, even more points — can be paid for and often are for sale in advance or at check-in.
Southwest Airlines, the archetype for the customer-friendly skies, enumerated its three-pronged approach, which is typical for almost all loyalty schemes these days: to bring in more members and credit card customers, increase business from current participants, and build partnerships with hotels, rental cars, retail stores and more. And it is paying off, but not necessarily for you.

Customer miles and pre-sold points sit on company balance sheets as a liability, but unlike most liabilities owed to third parties and with legal obligations to repay, miles value and program rules can be nullified or changed at a moment’s notice. Many reward points programs now expire if not used or the account is dormant for 18 months. As holders of points, we have very little say.

So, while you are waiting for the rest of the airlines to catch up, and they will, don’t sit on your accumulated miles. Use them for flights, products or day trips and experiences that have real value for you. Do not let them age, or be prepared to watch what little value they once had wither away with the coming change in programs.

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