Plan Will Be Based on Ticket Price Rather Than Distance Flown
Airlines embrace dollar-based rewards. Pictured, a United check-in kiosk. Getty Images
United Continental Holdings Inc. plans to change its frequent-flier plan to award miles based on ticket price rather than distance flown, becoming the latest carrier to shift its loyalty program to favor bigger spenders.
The No. 2 airline by traffic said on Tuesday that its MileagePlus program, which has about 95 million members, will make the change on March 1. Starting then, customers who have no status in the plan will receive 5 miles for each dollar spent on tickets, excluding government taxes and fees.
The number of miles awarded will increase based on the passenger's elite status, with the lowest level silver members earning 7 miles a dollar and top-level 1Ks getting 11 miles.
These awards mirror a change rival Delta Air Lines Inc. rolled out for its SkyMiles members in February and take effect Jan. 1. Southwest Airlines Co. , JetBlue Airways Corp. and Virgin America Inc. already have gone to the so-called revenue model, intended to reward frequent fliers who spend more money.
The changes to loyalty programs come in response to research that indicates that passengers who fly often and spend the most money often feel they aren't adequately rewarded. These fliers drive an outsize portion of airlines' revenues.American Airlines Group Inc., which merged last year with US Airways to become the largest airline by traffic, recently said it couldn't make such structural changes until it integrates its two loyalty programs, which likely means not until next year. "But conceptually, it certainly makes sense to reward your best customers the most," said Scott Kirby, American's president.
Linking elite status and dollars spent to awards likely will dent the widespread practice of "mileage runs," in which savvy travelers find cheap, long-haul flights to take to top up their miles flown before the end of the year, to keep or advance their elite status and add miles to their banks.
"These changes are designed to more directly recognize the value of our members when they fly United," said Thomas O'Toole, president of MileagePlus.
United Continental is the latest carrier to shift its loyalty program to favor bigger spenders. Getty Images
As part of Delta's new rules for its 91 million SkyMiles members, Delta subsequently said it would add two new redemption options to the three it already has. A member wanting to use miles to receive, say, a round-trip economy-class ticket for travel in the continental U.S. or Canada will be able to spend 25,000 miles, 35,000 miles, 40,000 miles, 50,000 miles or 65,000 miles for a ticket, based on availability. Travel to Hawaii and to international destinations will require more miles in the five basic categories, along with tickets in business- and first-class.
United on Tuesday said changes to its redemption options weren't part of the announcement that its MileagePlus members starting next year will earn award miles based on ticket price rather than distance flown. It declined to say whether changes in redemption levels are in store in the future. It also said it plans next year to offer new choices for passengers to use award miles to purchase upgrades to extra-legroom Economy Plus coach seats and to buy Economy Plus and checked-baggage subscriptions.
The awards changes will apply to all MileagePlus members world-wide, the company said. The new award structure will apply to most tickets on United and its commuter affiliates and most tickets issued by United on its airline partners, the company said. But if customers buy tickets through United's partner airlines, they still will earn awards based on the distance flown and the purchased fare class.
Four months ago, United said, it increased the number of miles required to redeem some awards to offset the increased cost of providing award travel, particularly in premium cabins and on partner carriers.
In 2013, both Delta and United added a minimum annual spending level to the requirements passengers must meet to quality for elite frequent-flier status in 2015. In the case of both companies, fliers are now required to spend at least $2,500 on tickets to qualify for the lowest elite status, in addition to flying 25,000 miles or 30 segments. For the next level, they must spend $5,000 in a year and fly 50,000 miles or 60 segments.
Corrections & Amplifications
United Continental Airlines said changes to its MileagePlus frequent-flier plan only cover a switch to award miles being earned based on ticket price rather than distance flown starting on March 1. An earlier version of this article incorrectly said United would disclose its redemption options at a later time. The airline said redemption options weren't part of Tuesday's announcement and declined to say whether changes are in store in the future. It did, as the original version stated, make some changes to redemption options four months ago to offset the increased cost of providing award travel.
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