From a traveler’s perspective, the glory days of frequent flyer programs are over. While you used to earn miles based on the distance you flew, meaning you could earn up to one free roundtrip ticket for every three or four you paid, now you only earn based on what you spend. Redemption used to be much cheaper, too: A one-way economy class ticket to Southeast Asia on Delta Air Lines costs 40,000 miles today, but cost 32,500 miles just over a year ago. The list goes on.
As bad as it is for travelers, we often don’t consider the other side of the equation, for better or for worse. Read on to let me do that.
Play Devil’s Defender
On the surface, it might seem like airlines are falling short when it comes to frequent flyer programs.
At this time, for example, United Airlines offers a specific promotion for certain users to receive 70,000 MileagePlus miles when they open a Visa MileagePlus Explorer account and spend $ 3,000 to receive the miles. When all is said and done, one of these customers would have 73,000 miles to redeem.
If “Saver” level awards are available, this would be sufficient for a one-way flight to Japan in business class on United, or any of its partners, including the five-star airline Skytrax All Nippon Airways. The cash value of this ticket would be around $ 4,000, but you haven’t paid any airline directly, as the $ 3,000 you spend on your card went to other goods and services.
Of course, most patrons don’t make money this way, they actually fly. And while this method is far less lucrative today, in the age of revenue-based mileage accrual, it still appears to offer airlines little more than passenger loyalty, which today is less of a commodity thanks to the consolidation of the industry.
The shocking secret weapon of the airlines
Surprisingly, the part of the equation where airlines get their money from frequent flyer programs, and make a lot of money from them, has nothing to do with loyalty or the flight, but with the direct sale of traveler miles. Frequent both for travelers and for the private companies that manage and partner with their frequent flyer programs.
For the credit card example above (and credit card partners are one of the main reasons airlines make so much money from frequent flyer programs), suppose United charges Chase, who actually issues the miles, 1.4 cents per mile. That would mean United has earned $ 1,022 from this transaction, regardless of how the customer redeems it. Or if.
And that’s the secret weapon of the airlines: Many frequent flyers rarely or never redeem their miles, either because they don’t have enough for the award they want or because they are simply robbed. Combine this with the aforementioned customer loyalty and higher residual earnings from revenue-based mileage accrual, and you could further infuriate the number of frequent flyer programs that screw you in.
Strange ways to win the frequent flyer game
Of course, just because airlines are winning big in the frequent flyer game doesn’t mean you can’t either. TripSavvy published an article earlier this year on using “manufactured spending” to maximize credit card-related earnings, and that’s just the beginning of the action you can take, both in terms of earnings and oddities.
Some travelers, for example, make a point of flying busy routes on busy days, then voluntarily take subsequent flights and include frequent flyer miles as part of their ransom for freeing up a seat. Others, on the other hand, find loopholes in airline policies, such as buying tickets on partner airlines of the program’s main airline, on whose flights the revenue mechanism is generally not applied.
Play the frequent flyer game though, just remember: you don’t have to feel guilty sitting in a “free” seat – the airline makes money off your butt being there, or it doesn’t. And whatever you do, spend your miles. Unlike cash in a high-interest savings account, frequent flyer balances do not increase in value over time but, thanks to frequent devaluation, do decrease.
