Airlines squeezing frequent-flier programs
 

http://www.mercurynews.com/mld/mercu...l/15821851.htm

Posted on Sun, Oct. 22, 2006
Airlines squeezing frequent-flier programs
By Ed Perkins
Airlines never sleep when it comes to weakening their frequent-flier programs. The latest broadside, from US Airways, cuts in half -- from three years to 18 months -- the time it allows frequent fliers to retain their miles without any account activity.

Frequent fliers on US Airways should be furious; frequent fliers on other airlines should be apprehensive. If we've learned anything lately about frequent-flier programs, it's that the worse the idea, the faster it's copied. Watch the fine print in your line's program to see if (or, more likely, when) it copies this latest ``revoltin' development.''

(Note: Delta is cutting the lifespan of frequent-flier miles down to two years from three and has instituted a retroactive deadline, the New York Times reported. On Dec. 31, miles in SkyMiles accounts that haven't been touched over the last two years will expire.)

I'm a US Airways frequent flier, but I don't recall receiving a notice about this latest assault on fairness. Nor did I find any recent press release postings. But if you look at the program fine print, you'll see this: ``Effective December 1, 2006, active membership status is based on having earned or redeemed miles within a consecutive 18 month period. With our new Mileage Reactivation Policy, Dividend Miles members have an opportunity to reinstate their Dividend Miles accounts to active status for an additional 18 months for a $50 processing fee and reactivation fee of $.01 per mile. If members do not extend with this reactivation option, the Dividend Miles account will be closed and all miles forfeited.''

Clearly, US Airways and the other legacy airlines have forgotten the basic precept that loyalty should work both ways. Granted, you've never had an easier time ``earning'' miles; they've clearly become an important second currency among American travelers. But at the same time, the big lines inundate you with extra-miles promotions, they make it almost impossible for you to find seats -- especially those cherished upgraded business-class and first-class seats.

Knowing how tough they've made it to score ``free'' trip seats, some big lines are pushing non-travel ``rewards'' as an alternative way for you to work off your credit balances. But when you take a close look, you usually find that the ``prices'' of those non-travel rewards -- services and merchandise -- work out to an exchange rate for points that is less than the 1 cent per mile minimum that the airlines get for selling points to banks and other merchants that use them as premiums.

That's one of the reasons why I have suggested that people who earn miles mainly through their credit cards should seriously think about switching to cards that offer other rewards or cash back.

Otherwise, concentrate on making sure you don't get ``timed out'' of your backlog of miles. You don't have to do much; you can make a small purchase that awards miles, a small deduction for something or even buy a little additional credit, though you may have to pay the gouge price of 2 1/2 cents a mile.


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Contact Ed Perkins at [email protected].

I realized DL cut the idle time to expire...I figured it was just a matter of time until the others followed. USAIR never told me about this 'enhancement'. Last month United zeroed out Mrs. Outoftown's account because an idine posted a month late, after the 3 year expiration date. All fixed now since it was idine's error. I got her a United credit card to boost her account enough to get an award ticket, but after cashing out for a ticket, I'm going to let her account and credit card expire. I will do the same for her USAIR account after she earns next award level. Don't the airlines realize this shorter expiration is pushing us to choose only one airline per alliance?

I envision someone posting this thread topic in the near future..."I lost xxx,xxx miles due to the 2 year expiration date".

-outoftown

Really egregious. Kudos to Ed for outing this one; hopefully others in the travel media seize on it. I think it can be pushed back with enough protest. Whether airlines realize it or not, there's a tipping point somewhere where people will realize their miles aren't worth what they had thought, and once that point gets passed the airlines will lose a huge amount of future revenue as the non-flying incentive programs unravel and move to other types of "rewards". I don't think it'll be a gradual runoff, but more like an avalanche.

Also, any claims that inactive accounts are costing the airline any amount of money are total rubbish. The miles are valued at very low levels for the airline, and the administrative/computer costs are negligible in an age of e-mail. They don't have to send snailmail to accounts with no activity if they don't want to, and the value of the e-mail and snailmail list more than compensates for any costs (in fact, it's one of the most valuable assets if a program should be spun off). Anyone having to pay to reinstate miles also will not be a happy camper.

I just got a "reminder" email that my miles will be forefeited if there's no "activity" by Jan. 31. This is outrageous, because I, too, have no recollection of having received an initial notice.

It's one thing to scale back the programs, but it's quite another to spring the news on people in such an underhanded way.

I'm afraid I'm on the other side on this one. With all of the ways to earn miles, it is a trivial issue to get something deposited into your account at least once a year. If the airlines feel they need to cut back somewhere, for a frequent flyer (and that is who the programs are for), this should have little or no impact.

Every store I know that has a frequent buyer program has limitations on how long your credits last. In this case the airline is not putting an expiration date on your miles; they just saying you have some activity in the account once in 18 months. I guess I am in the minority but I just don't see that this is a big issue.

On the other side of the ledger, is Perkins making a big deal about the enormous increase in the ability to earn miles on US with the merger with HP? For US ff's, I would think that enhancement would be worth far more than what this new limitation takes away.

Once has to pick which battles to fight - for me, this would not be one with a high priority.

I do agree with tusflyer, however, that notification of changes need to be made with plenty of advance notice.

Do non-airline purchases in a FF acount count as "activity"?

Yes. One purchase a year of anything. It's that easy.

What about a transfer of miles from one expiring account to another to get a consolidated account?

The New York Times had a story over the weekend that I posted in Newsstand:

Airline Programs: How Your Frequent Flier Miles Can Disappear

Not sure I understand this one - most of those of us who flew USAir had no problems earning miles on US before the merger with HP, by using United for destinations in the West. By contrast, it wasn't until after the HP merger that the new USAir decided to cut the mileage bonuses significantly for all elites except the highest level, and eliminate mileage bonuses for unrestricted coach fares. All in all, I'd be willing to bet most frequent US-East flyers got a lot more miles pre-merger than post-merger.

Man, that's a cool question! While that sure seems to signify activty, it might not be "qualified" activity, i.e. something new. Sooo..it might not, imo!

True so far, at least for the programs I'm familiar with, but that's not a commitment. The airlines write the rules. There is nothing to stop them from writing, in the future, a rule that says (for example) that you have to take one flight a year to maintain your account. Maybe, when they first do it, they'll allow reward flights to count. Later, when that fuss has died down, maybe they won't.

However, the unused miles do have a monetary value that has to be accounted for on their balance sheet as a liability. Essentially, it's an outstanding debt. Expiring the miles allows them to write that off. I'm not an accountant so I don't know all the details or the exact valuation, but there's more involved than just the administrative/computer costs.

Since it doesn't affect cash flow, I wouldn't get really excited about it. Yes, you improve the balance sheet, but for years the airline business has accumulated losses and look how many are still in business. Give me a bank account full of cash any day. Who cares whether you owe people free flights or not when you control the availability.

Yes, notice the timing of that "reminder." 12-24 hours after that and the NY Times article hit the press (thanks Tom 911).

However, I really do not see that having activity within 18 months is so onerous. After all, Hyatt has a 1 year account acitivity requirement otherwise you lose your points. Moreover, Hyatt has exactly 3 partners where you can earn GP credit: Avis, Sixt (car rental as well), and Diners Club.
Compared to the numerous opportunities presented by Dividend Miles, Hyatt's opportunities are quite scant, indeed.