United Airlines‘ MileagePlus program is following the lead of American Airlines AAdvantage, upping the earning rate towards elite status for passengers flying on premium cabin tickets in 2016. Even the discounted premium cabin fares will earn at a higher rate (200% versus 150%) while full fare flyers will see favor with the earning rate doubling to 300% of the flight distance. American announced similar rates just a couple weeks back. No word yet on whether Delta will match with its SkyMiles program.
As the carriers shift their pricing policies to make premium cabin fares more affordable – at least relative to coach fares – this earning shift will see some travelers getting to “double dip” in the benefits, getting the better seat and also move towards elite status more quickly. Of course, the minimum spending requirements still exist for most MileagePlus members while AAdvantage has not gone down that path yet. It is conceivable with the spend requirement and discounted premium cabin fares that some passengers might get the necessary miles, flying in the big seats, and still not have the spend for status (e.g. the ~$2000ish sale fares in business class for LA-London which have cropped up from time to time), though those will likely remain the exception, not the rule.
It is also worth noting that United has surpassed American when it comes to JV partners and the increased earning rates. Flying on ANA, Lufthansa, Swiss and Air Canada will earn the higher rate with MileagePlus regardless of marketing carrier. In the AAdvantage program the increased earn on partner flights will come only if the ticket carries the AA booking code for that segment.
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Any word on Air Miles with Air Canada?
If you mean changes to the PQM earning rate crediting to UA when flying in premium cabins on AC metal then, yes, it will be the new rates. Otherwise, nothing changes.
If you mean when crediting to Aeroplan then, well, that’s a completely different topic but nothing changing there AFAIK.
Seth – any thoughts on whether carriers are actually making a gigantic mistake by this switch to changing the rewards dimensions towards higher revenue travel?
Here’s my thinking:
1. Premium cabins take up far more real estate and the fixed asset cost (E.g. a lie flat seat) is far higher than that of economy cabins. So just on a pure unit cost basis, premium cabins cost the airline a lot more money.
2. Loyalty matters a lot less when you travel in a premium cabin. Non-stop routing, timing, and amenities become substantially more important. The first two are hard to compete on while the last one has real cost and is an arms race.
3. Premium cabin travelers are now earning massively more miles than they did before. While airlines may be awarding fewer total miles for travel than they did before (assuming $0.20/CPM as the breakeven point with most revenue based programs vs. their usual RPM), the premium cabin travelers are on average more savvy and less likely to have breakage on miles (forgetting to redeem them or using them for crappy redemptions).
4. Add #1 + #3 and the unit costs are even higher for premium cabin travel. If pricing drops, on a per unit basis, airlines could end up losing a lot of money on premium cabin traveler and have made economy so crappy (10-across Y on a 777/9-across on a 787) that they drive themselves back to the place where Y-purchasing decisions are purely made on cost giving themselves no differentiation.
5. While our US economy is doing well (Thankfully), there are lots of major aviation markets around the world where that’s not the case (Brazil, China, Europe, Canada, Australia, etc.) and average fares are dropping fast. The only thing saving the airlines are low jet fuel prices.
So…. is this a boneheaded move? I realize this is a highly capital intensive space so it’s not like WN can say “hey, let’s do all-Y, good quality long-haul travel and steal all the Y pax from the legacy carriers and destroy their business model because we all know no premium-cabin only airline has worked out.”
I disagree with many of the assertions in your #3. It is higher fares which are earning more award points, not necessarily premium cabins. Also, the belief that they are more “savvy” is unfounded. In many of my discussions with passengers and the programs those are actually the members more likely to redeem for merchandise or other non-travel awards, resulting in a lower fulfillment cost for the airlines.
Moreover, the total space consumed by the C seats is not increasing that much these days. Even at full flat and aisle access the seat vendors and airlines are doing a pretty good job of squeezing them in.
Fares are not tanking across the board in those other markets and that’s something of a non-sequitur as the programs in those countries are nearly all revenue-based already and have been for a while now.
Finally, you’re not considering the ever increasing value of 3rd party partners in the earn/burn equations. That’s a HUGE part of this marketplace.
There is premium demand and economy demand. Both have their quirks and challenges. But for the business the idea of rewarding those who bring in the profits seems a smart move to me. I recognize that the revenue-based earnings is bad for me personally but I believe it is the smart move for the companies.
So do these extra pqms go towards million miler status. For example 333,333 miles in f nets you 1 mm status?
Nope…no MMer credit for the new rates.
It’s basically part of a transition from loyalty to marketing program. 1K can be earned with just about 2 roundtrip business class trips to Africa. Except that it’s not worth what 1K was back in the day.