Randy Petersen's Opening Remarks – April, 23 2007

Randy Petersen's Opening Remarks – April, 23 2007

With the 19th Annual Freddie Awards upon me, I’ve spent two whole days looking back at 2006 and trying to determine if there were any initiatives among travel loyalty programs that deserve a place of honor in this column. I thought the Marriott DreamRewards Tracker was clever, but I’m looking for things that will change the world of miles and points as we know them. Well, I think I have them. The winners this year for Industry Impact honors are the United Mileage Plus Choices program and the Etihad Airlines Guest program. This Choices program available to United Mileage Plus Visa cardholders offers an extended flexibility for members to redeem their awards. While at first confusing for many, if not most members of the program, it allows miles earned by credit card spending to be used as a true dollar value for award redemption using the normal United Airlines booking engine. Members shop for airfares as they normally do and when it comes time to pay for the ticket, they can use their “Choices” miles based on the prevailing exchange rate. They can even use their miles to pay for a ticket after already paying cash. A wonderful concept since it totally eliminates any capacity controls for award redemption. What we love is how it has brought great value to tens of thousands of Mileage Plus members. For instance, the average conversion of paid tickets to miles is just over 17,000 “miles.” This means that members are getting exactly the award they want and only paying 17,000 miles, vs. the standard saver award level of 25,000 miles. For me, it was a no-brainer to honor United Mileage Plus with this Industry Impact award and I hope it signals creative ways for other frequent flyer programs to address the issue of award redemption.

Halfway across the world, Etihad Airlines launched a new frequent flyer program with one of the most unique approaches to award redemption I have ever seen. Sure, they have a standard award chart similar to everyone else’s. But they also have something called “1MileRedemption” with an accompanying online tool called the slider. Essentially the slider allows every member, no matter the number of miles, to get value from the program. Members adjust the slider which moves to adjust the number of miles an award is in combination with the amount of money a member might have to pay. For instance, if a member has 8,234 miles in their account, the Guest program allows them to redeem those miles along with let’s say $313. Moving the slider to use fewer miles results in more money required for the award. Conversely, if you have enough miles, you can move the slider all the way and completely pay for the award with your miles. It’s all up to the member to decide the proper mix of miles and money. The wonder of it all is that every single mile in a member’s account has value, something not yet available in other programs around the world. This is very deserving of an Industry Impact award.

Now, on to what seems to be a world of fantasy. As many of you know, I live in Colorado, famous for its water which is used to brew Coors beer. But after this past week, I’m thinking there must be something else in the water. Sen. Bob Hagedorn, D-Aurora and Rep. Sara Gagliardi, D-Arvada, introduced Colorado Senate bill 243 that would have changed the mileage expiration policies of the state’s frequent flyer programs. That’s good. I’m all for reasonable things good for members of these programs. The new bill would prevent miles that are earned through using a credit card or a travel agency from expiring. The bill specifically states that “no frequent flyer mileage awarded or accumulated in connection with the issuance of a credit card to or the utilization of an online travel agency by a consumer shall be subject to expiration or revocation by the commercial airline awarding that mileage.” The sponsors of the bill say they introduced the bill because of “persistent constituent complaints” that they were losing frequent flyer miles because of changing airline rules and restrictions. We added our support towards killing the bill and thankfully it was DOA. As noted, we’re all for member’s rights, but did not feel it worth the possibility for airlines to cut off Colorado customers from their programs to avoid the hassle. Because of airline deregulation in the 1980s, states aren’t allowed to regulate airline rates, routes and service which is why Hagedorn tried to skirt that law by only dealing with miles accumulated with airline credit cards or through Web-based travel agencies. I tell you, it’s the water.

My next report actually does involve a fantasy world involving the growing interest in an online Web site known as Second Life. Brazil’s TAM said it is about to become the first airline to promote itself in this online virtual world by offering cyberspace flights that correspond to its real-world international service. Second Life has millions of registered users and its own economy and currency, known as the Linden dollar, which can be exchanged for U.S. dollars. TAM will offer avatars that, ironically, can fly on their own to other Second Life islands called Milan, Paris, New York and England. Here’s my warning: Members will actually get frequent flyer miles and gifts like a virtual aircraft or clothes so please don’t get any fancy ideas that an award redemption using miles to Milan on the Second Life Web site will be just like the real thing. I can just see it now — no waiting for award redemption, click and fly today.

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