Defending FF Miles, 19 Years Later
 

From my travel blog ( www.knifetricks.blogspot.com ):

DEFENDING FREQUENT FLYER MILES, NINETEEN YEARS LATER

This is the post where I respond to a 19-year-old New Republic column, conclusively proving that I have too much time on my hands.

Michael Kinsley (pictured) is the country’s most intelligent and humorous columnist, and he was in top form during the late ‘80s and early ‘90s. On the night that Bill Clinton was elected president, Kinsley wrote a column with the best lead sentence I’ve ever read:

“No doubt it will all end in tears. But for the moment, I FEEL GREAT!”

Both sentences were accurate.

Kinsley’s columns from the era are collected in a 1995 paperback called Big Babies, which is his description of the American electorate with its contradictory demands for more spending and lower taxes. Kinsley breezes with verve through all the great issues of the day: the Bork nomination, Iran-contra, the first Bush presidency and the rise of Bill Clinton.

But what really caught my eye was a column about frequent flyer miles.

On April 25, 1988, Kinsley’s New Republic column, headlined “Skyway Robbery,” attacked frequent flyer miles and triple-mile promotions as “a commercial bribe.”

“As the blight spreads to rent-a-car companies, hotels, and credit cards, mileage has turned into a sort of black-market currency operating beside the dollar,” Kinsley wrote. “Frequent flier programs are in essence a bribe to employees deciding how to spend the boss’s money. When amounts smaller than a billion dollars are involved, people have gone to jail for this sort of thing.”

“Frequent flier programs are specifically designed to prevent the boss from reclaiming the kickback,” he continued. “That’s one reason they’re so complex. American’s original program simply distributed coupons on each flight that could be saved up and used for free travel. When companies demanded that employees turn in the coupons, coupons were replaced by today’s elaborate computerized accounting systems and various rules were added making the mileage credits hard to transfers.”

Kinsley is correct, but so what? Individual employees enjoy all sorts of freebies and perks in which the employer does not share. Lunches, tchotchkes, box seats, contacts, reputation, leads on landing a better job. All are a part of the work-a-day world, and I have yet to hear about a boss becoming exercised because the office supply salesman slipped the office manager a promotional paperweight and four tickets to Medieval Times.

Kinsley overlooks the fact that most employees do not have carte blanche in selecting their travel arrangements. Many offices have a travel coordinator or a written travel policy; there’s so many, there’s a trade group. In any event, the company or client budget can only withstand so much financial headwind, so, although it’s not their money, there are limits on what employees can spend on travel.

Kinsley takes four jabs at “rip-off” frequent flyer miles.

“First, ticket prices are higher than they otherwise would be, in order to pay for the free travel and because the programs replace true price competition,” Kinsley wrote.

This isn’t an argument against frequent flyer miles, it’s an argument against all promotions. Assuming a zero-sum universe (which I doubt is the case), every dollar spent on an airline promotion is a dollar that needs to be added to ticket prices.

The entrenched domestic carriers, called the Big Six, could spend their promotion budgets on wider seats with more space between the rows, but their business judgment is that consumers would rather have a mileage program. In an illustration of that dynamic, American Airlines quietly dropped its “More Room Throughout Coach” promotion in 2004 but retained its AAdvantage miles club. That’s what the customers apparently wanted.

“Second,” Kinsley continued, “the programs encourage travelers to go for the airline they belong to, rather than the one with the cheapest fare. That’s the main idea, of course. If frequent fliers were paying for their own tickets, this wouldn’t matter. But generally they’re not.”

Kinsley misses the fact that an employee could select a particular airline for a non-price-related reason that benefits the business. Routes and departure times are a significant factor in selecting air travel, as are on-time performance and amenities which allow for on-board work. Ultimately, most business flyers want to travel to and from their destination as quickly and comfortably as possible; the miles are a nice bonus, but they’re not the central variable in the equation for the majority of people.

“Third, a more egregious form of the same abuse: People take entirely needless trips in order to run up their mileage,” Kinsley wrote.

You’re hitting close to home there, Mikey. One man’s “needless trips” is another man’s “Air Canada mileage run to Vancouver, Kodiak, Yellowknife, Saskatoon, Toronto, Quebec City and Vancouver, all for triple miles, yipee!!”

People who engage in mileage runs -- and they are a tiny percentage of travelers -- usually purchase the tix on their own dimes. Bizarre, multi-airport routings would flag the curiosity of someone in the back office. Sophisticated mileage runners can create high-mileage itineraries without appreciably increasing the ticket price. If a person spends the extra flight time engaged in work, what does it matter to the employer?

“Fourth,” Kinsley concluded, “frequent flier programs protect the established airlines from upstart competition, thereby raising prices.”

On this point, My Favorite Columnist Before I Started Reading David Brooks was wrong, laughably wrong, more wrong than his hilarious prediction (also found in Big Babies) that the confirmation hearings of Clarence Thomas would focus on the jurisprudential doctrine of natural law.

As I’ve blogged before, domestic airfares have been in freefall for the last 30 years. On many routes, it’s cheaper to fly than drive. Kinsley’s prediction that frequent flyer programs would drive up prices is refuted by the fact that not even increases in the price of jet fuel have raised tickets prices.

Of course, the domestic carriers are protected. They’re protected by the provision of federal law which prohibits foreign ownership of a domestic carrier, so the Northwests of the world don’t have to compete with the Emirateses on lucrative domestic routes. They’re also protected by the Fly America Act, which coerces people on federal government business to use U.S. carriers, although a foreign carrier may be offering a superior product on the same route. And they’re protected by the market assumption – proven correct in the wake of 9/11 – that if the Big Six find themselves in Big Trouble, the feds will bail them out.

The situation reminds me of one of Kinsley’s famous sayings: “The scandal isn’t what’s illegal; the scandal is what’s legal.”

Thanks for the post Paul, that was excellent. And, yes, I do believe you got Kinsley on a couple points. What's amazing about the guy though is that he keeps going despite his Parkinson's disease.

And he had a brain operation recently, which he wrote about with his trademark wit.

He doesn't write as often anymore, which is sad, but he's still one of the best columnists we have.

Arthur Frommer has also been on the anti-FF-mile bandwagon for many of the same reasons, arguing that the programs add cost but mainly benefit only a small subset of travelers (who also don't tend to be budget travelers, his primary readers). Many of his readers have written in to disagree.

I used to work in a big company and not only had very occasional (usually non-interesting) travel, but also had to do communications about travel policies, even as I was personally learning the ropes about FF programs. Upper management basically didn't like the idea of FF programs much at all, but the programs' complexity was enough to prevent trying to reclaim the miles. Instead they kept cracking the whip over the in-house travel people to flag any cases where an employee went with a more expensive travel arrangement to report up the chain of command.