Miles vs. "Miles"
 

In idle moments I've been wondering about an inherent tension in the UA MP program (and many others). The mileage distance between any two points is fixed, and therefore there won't be any change in that over time. Inflation, on the other hand, makes everything more expensive over time and therefore there will be more and more miles earned from identical purchases. The effect is subtle, but can result in multiples over decades. If left alone, it seems to me that the credit card mileage programs would eventually swamp everything else, including miles earned for flying. So surely the airlines are looking at how they are going to adjust this, unless miles earned for flights become an afterthought (although their importance for elite status will remain).

It seems some airlines like Air New Zealand have anticipated this issue by going to points rather than miles. Will all the others have to follow suit? Or will the reduce the miles earned for spending on CCs? Or, perhaps more likely than that, they will award more than one "mile" for each mile flown and adjust things by increasing the redemption requirements. That, on the other hand, would instantly devalue existing mileage balances, which surely would cause some consternation. But if it's gradual perhaps nobody will notice (the old frog in boiling water analogy).

Thoughts?

These devaluations happen all the time, and it comes in the form of miles required for award redemptions. The last one happened in October of 2006, IIRC, where we saw Europe F awards go from 100K to 120K, Australia F go from 120K to 140K, etc. I doubt they'll change the earnings, but just the miles required for redemption.

This also make more sense as it affects future and past miles. Bigger bang for the airlines buck. It will also reduce the impact since a lower percentage of customers are redeeming miles for flights then are earning miles for flights at any given time. Win-win for the airlines.

In some ways, this is the reverse of what other int'l airlines are doing; reducing mileage earned on cheap Y fares, but keep redemption rates the same.

Instead, UA and others raise redemption rates but the elite bonuses (and in the know bonuses) keep going up. Int'l carriers are deflating mileage earned, UA is inflating it. The tension comes, then, from the *A program, and the result is Starnet blocking.

devaluation is also a hidden way for UA to emphasize and reward high earning fares and passengers, in the absence of a fare-based mileage earning system (which people here would be in an uproar about, which is silly because a reduction in the earning of the lowest fares is the same as an inflation in the earning of the highest fares, called "framing" the argument in irrational consumer psychology and politics).

Consider the GS level as the best example -- this is clearly fare-based and gives benefits to them, that take priority over regular mile-earning elites. Also the fact that F/C/D/Y/B fares earn a 50% bonus, admittedly not the 300%/200% kind of amazing bonus you get on LH for example, but similar (and maybe justified given the level of product).

But none of this addresses the relationship between the two earnings methods. Imagine 100 years from now, inflation will have increased prices in nominal terms by multiple times. Imagine that CC holders are earning eight times the current number of miles on their purchases and all the destinations are the same distance apart. Does this matter to the airlines, or are they content to let their mileage programs become credit card reward programs with actual miles flown adding what amounts to a rounding error. Or maybe in 100 years the planet will be so hot we'll all be running around in loin cloths and scrounging for invertebrates to ear.

This seems a topic better suited to the MilesBuzz! Forum.

Thanks,

FlyinHawaiian, Co-Moderator
United Mileage Plus Forum

Ok, let's imagine that the frequent flyer programs remain basically unchanged for 100 years. A 2500 mile flight will remain 10% of a domestic FF ticket (on most airlines), and inflation is irrelevant. However, each mile will become more valuable by the inflation rate. The airlines will have to charge the credit card companies more for each mile. Whenever they actually do that, I would expect the credit card companies to "devalue" and offer less miles per dollar spent by whatever factor their cost increases.

Or we will finally see high speed rail service in the lower 48 and not have to worry about miles...

100 years? you optimist...