Broken Promises

Broken Promises

It’s been said change is good. But for a growing number of frequent flyers, change feels more like broken promises. In a age when it is assumed that frequent flyer programs run the airlines, it might come as a surprise that airlines still run their businesses based on profit and loss and the ever-changing level of competition. This creates the need to drop routes that don’t perform, add restrictions to products that out perform to protect revenue, and re-price a product when it’s priced below market value. Sound familiar? It should, if you’re the typical frequent flyer who is involved in the same type of decision making in your own company. Certainly the difficult times that airlines in particular have faced going back to 2000 might be factored in to accepting these changes, but it’s becoming more and more difficult to understand the reasoning of some changes in light of missteps by programs themselves. In an industry that built its legacy on the word “loyalty,” it’s becoming easy to point out where this term is being redefined.

It’s been said that the only thing wrong with frequent flyer programs is that they are now considered a “God-given right.” And every time an airline even contemplates a change to a program, they’ll hear from those travelers who feel the rules and conditions are sacred. At some point nearly every program has implemented changes that caused dismay among their members. We have gathered some examples of these changes-changes that were made primarily for the good of business, but at the expense of customer loyalty, leaving a growing number of our readers asking, “Whatever happened to rewarding me for my loyalty?”

When frequent flyer programs began, awards had no capacity controls, no blackout dates and the miles in your account did expire. Over time, the airlines realized that they had to make changes to deal with all the miles building up toward free flights. It was openly a matter of time before an airline took the chance and changed the rules. In 1988, United Airlines was the first airline to introduce expiring miles. The changes that took effect on July 1, 1989, introduced miles that expired three years after accrual. Saver Awards were introduced with a domestic coach ticket being offered for 20,000 miles instead of 35,000 miles, but with blackout dates and capacity controls. Premium awards were also introduced for 40,000 miles (thus the term “double miles”). Another change introduced was the ability of members to transfer their awards to anyone they chose instead of only to family members. All of these features are now considered basic elements of frequent flyer programs. Looking back, there was a sense that programs tried very hard to balance these changes. While introducing expiring miles, they also offered reduced awards, albeit with restrictions. That seems fair. And that premise still exists today to some degree with changes recently announced by Southwest Airlines Rapid Rewards. While introducing some sort of controls on the redemption of their awards starting in 2006, they balanced that change with doubling the life of the existing credits being earned from 12 to 24 months.

But we must be clear that members of such programs often have short memories. For instance, when members complain that they can’t ever use their miles at a 25,000-mile award level, they aren’t factoring in the balance they got years ago when these awards became available for the first time. Would we not all choose to have the opportunity to redeem at 25,000 miles and risk staying active over a three-year period rather than have totally unexpiring miles and awards still at 35,000 miles?

Longtime readers might remember that ten years ago, the last major domestic coach award changes went into effect. American, Continental, Northwest and United changed the cost of their domestic awards from 20,000 to 25,000 miles, and Alaska Airlines went from 15,000 to 20,000 miles for a domestic ticket.

Members definitely were not happy with the new award redemption levels — especially if they had 19,999 miles in an account. But life goes on, and travelers have adjusted. Considering that programs had been around for 14 years and had raised the cost by 5,000 miles one time, the rate of inflation was low. Furthermore, if you take into account the vast increase in ways to earn miles other that flying, the 5,000-mile increase was reasonable.

Broken promises don’t always mean bad news for frequent flyers. There have been many examples when programs have offered additional value, assuming broken promises at the time. For instance, in 1995 when most programs were raising redemption levels, members of the Delta SkyMiles (then Frequent Flyer) program experienced the reverse. The award redemption for domestic flights was 30,000 miles and was lowered, not raised, to 25,000 miles. In changing these rules, it wasn’t considered a broken promise at all, but more like customer loyalty. Should Delta have said that miles earned before the change would have to be redeemed by the old rules? Delta could have, because miles earned to that date were “promised” as 30,000-mile domestic awards. But they decided not to take the risk. This type of reverse broken promise is prevalent today with American and United, from whose programs members can now redeem regional awards under 750 miles for only 15,000 miles. These are miles that had been earned with the understanding that the lowest award level was 25,000 miles.

In recent times, programs have not been so generous in balancing the changes, thus raising the suspicion that promises are being broken. Take for instance, three years ago, when all major programs set about repricing their upgrades. Not stopping at raising the prices for upgrades in some cases by over 100 percent, they also raised the number of miles required for cashing in miles as upgrades. The reasoning was that because fares were being lowered, these adjustments were necessary. Fares at the time were not and have not been lowered by 50 percent, which would have balanced the raising of prices by 100 percent. As well, programs raised the number of miles required for many of their international business and first class awards, hoping obviously to keep them available for sale demand even in a market that may face discounting when low-fare carriers begin competing in these markets as well. None of these changes were balanced for the good of their members.

Hotel programs are not immune from this suspicion either. When Marriott and Hilton a few years ago revamped their award charts, members felt cheated. At InsideFlyer, we understood that in many cases, members had enjoyed awards to Hawaii destinations are real bargains for years. Do we want changes yearly for inflation purposes or changes in bigger lumps spread apart? We’ll never know, because we all want something different. What we do want is the feeling that we can believe the loyalty programs we belong to. No matter what.

At the end of the day, there will continue to be a large number of members in all programs that will feel that promises have been broken. We will be among that group on certain changes. But having said that, the following is the best advice we can offer to all our readers: Accept the changes in the long run, this is the final solution. If you are getting some benefit from the program, stay with it and hope that the perks will out-weigh the changes you don’t like. Be reasonable. There are very few businesses that haven’t had to adjust their product form time to time. And be grateful for what you have. As members of Midway Airlines, Legend Airlines, National Airlines, Braniff and even internationally with the Ansett know, there can be times when your program can go bankrupt and the airline, program and the miles disappeared.

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