Thoughts on Announcement from UA

About a year ago, Pekflyer posted a blog titled “The Next Big Thing” in which they predicted that airlines would change their redemption rules. United Airlines has announced the change for their frequent flyer program coming in November. Just like Delta Airlines, United will no longer offer the set amount of miles needed for a flight, instead, it will be a flexible award travel calendar based on demand and ticket price.

If an airline was asked what kind of travellers they prefer, the answer should be simple: loyal, frequent and price insensitive. How do travellers choose from hundreds of loyalty programs out there? The answer isn’t quite as simple as the first question. Over the last decade, miles and points have become a “subject” that worth studying, but only a few of us do.

Many airlines have partnerships with credit card companies and retail shops. It makes it easier to earn miles – you can fly with the airline, pay by the credit card, and shop online or with their partnered stores. Miles can be earned in different ways, and they are all combined under one account. The more you spend, they more points you earn, and the higher level you are granted in the loyalty program.

When it comes to redemption, it gets a lot more complicated than earning. I vaguely made it into three categories:

1. Airline’s favourite group: loyal, frequent and price insensitive travellers. These people collect plenty of miles and points through their constant and pricey travels, and they most likely wouldn’t worry about how many points it costs them to book a flight.

2. High spending, but less travelled. People in this category may not travel as much as those described above, but they use their credit cards for large purchases, for business in many cases. Points collected through credit cards are more flexible, as one can choose which airline’s program they want to convert to.

3. The rest of us, the general public. These travellers make one or two personal trips in coach each year and don’t travel much for business. Miles and points come from credit card sign up bonuses, daily spending and flights. This group follow deals and are sensitive to the number of miles needed for each flight. Every time an airline changes its award chart, they may lose a significant amount of members in this group.
With the cancellation of the fixed award chart, Delta and United can better control how travellers redeem their points by increasing the miles needed for flights. Those who have a high balance in their account will still be able to afford to redeem; however, others may only be able to pick services such as seat selection, inflight WiFi or food. It seems to be the direction airlines are going, and I believe that other companies such as American Airlines and Air Canada will follow in the near future.

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