Devaluation Of Airline Miles

PREV 2 of 2

The inevitable economic effect of too many miles chasing too few seats: Airlines are hiking, sometimes by hundreds of thousands of miles, the amounts needed to claim an award.

Delta, for example, revised its award chart again just last week. Last year it took the unprecedented step of slapping restrictions on its most expensive (and formerly unrestricted) SkyMiles awards. For the first time ever, Delta told its fliers: There are seats you can't have no matter how much of our currency you want to spend. The new three-tiered award structure Delta unveiled last week revives unrestricted awards, but at a brutally high cost. The best ones, redeemable for international business-class travel to Europe or Asia, now cost upward of 370,000 miles round-trip, or about 100,000 miles more than last year.

Continental's program is also undergoing a major devaluation. Earlier this year, it raised award levels by thousands of miles. Last month, it raised fees and now charges a co-pay of as much as $500 to claim an upgrade award. And last week it announced it would do what Delta has just abandoned: impose restrictions on its most expensive, previously unrestricted awards.

And the concept of a "free" seat as a frequent-flier award is gone too. Years ago airlines decided an award ticket didn't include applicable taxes and fees. Then they imposed charges if you booked an award too close to departure, claimed one by telephone, or changed your booking after the award was issued. Last month came the next wave: Fees of as much as $100 simply for claiming the award. American Airlines even invented a $5 omnibus fee. Its purpose? By the airline's own admission, the fee applies if you somehow managed to avoid all the other award fees it now charges. Depending on the airline, your destination, and your time frame, a formerly free award seat can cost you as much as $300.

As a result, airline programs now give fliers less for their loyalty than hotel frequent-guest plans, gas-rebate credit cards, or other frequency schemes.

About a month ago, one frequent-flier program manager told me that he thought "a penny a mile is a pretty damn fine return on your loyalty." That's a shocking assertion considering that frequent-flier programs once paid you three to five cents. And it also behooves frequent fliers to look elsewhere for a return.

Take Chase, for example. Its United Mileage Plus and Continental OnePass cards generally give customers one mile of credit for each dollar charged. In other words, a 1 percent rebate for every dollar spent. But why settle for that when Chase's Freedom Visa Signature offers you $50 cash back after your first charge, a 3 percent rebate on selected purchases, and 1 percent back on everything else?

The Fine Print…
Should travelers simply stop playing in the frequent-flier programs? No, because the plans remain the vehicle the airlines use to confer elite status recognition and upgrades. So the obvious solution is to use frequent-flier programs only to accrue miles earned from flying. In most cases, those are still the only miles that count toward elite airline status anyway. For some other thoughts about how to beat the system, read last fall's Frequent Flier Fallacies column.

PREV 2 of 2