Airlines Frequent-Flier Programs

After years of shrinking benefits and increasing fees, frequent-flier programs are courting their most loyal customers again.

In recent weeks, American Airlines introduced new awards for one-way flights; United dropped its $75 to $100 fees for booking an award within three weeks of travel; and Delta Air Lines made it easier for elite frequent fliers to retain their V.I.P. status.

Carriers have also been dangling mileage offers, including double-mile promotions, and have even resurrected bonuses for booking online.

Those who follow the programs describe the changes as a slight shift in a more consumer-friendly direction, giving customers more ways to earn and redeem miles.

“What we’re seeing is a bit of a resurgence on the airlines’ part in focusing on their frequent-flier programs,” said Tim Winship, who tracks loyalty programs for SmarterTravel.com. But he added that the issue members care about most — being able to use their miles for free tickets — remains a challenge, especially with planes flying nearly full.

“I think award availability remains the elephant in the room,” he said. “The travel slump has not resulted in any increase in award availability, and in fact, if anything my sense is that people are having a more difficult time now.”

That assessment, while hotly debated on travel Web sites, is difficult to confirm.
Randy Petersen, founder of the frequent-flier hubs InsideFlyer.com and FlyerTalk.com, said 2008 was a record year for award redemption, which he attributed to travelers using miles for more mundane trips, like visits to relatives in less exotic locales.

“In a good economy, everyone wants to use their miles to go to Hawaii, London or San Francisco,” he said. “But when the recession hit, award redemption really started to spread out because people were using their miles not as much for vacation as necessary travel.”

Another factor spurring award redemption, Mr. Petersen said, has been the shift to “dynamic pricing.” If a seat that requires 25,000 miles is available for the outbound leg of a trip, but there is only a 50,000-mile seat on the return, many airlines now offer the itinerary for an amount in between — say, 37,500 miles — rather than charging the higher price for the entire trip.
In a similar vein, the new one-way award from American Airlines lets members book a flight after as little as 12,500 miles, a good option for students returning to college or snowbirds heading south for the winter.

There have also been changes in financial regulations that require airlines to account for unused frequent-flier miles as a liability, which has motivated carriers to make awards easier to redeem.
“There really is an incentive now for the airlines to get all of their miles redeemed because it’s expensive for them to carry them as a liability,” Mr. Petersen said.

Even so, he acknowledged that as travelers prioritize low-priced tickets over flying with a preferred airline, carriers need to work harder to earn loyalty, especially among their elite fliers.
Delta Airlines, for example, recently announced new benefits for its elite SkyMiles members, which take effect in 2010.

Among the more significant changes, Delta added a “diamond” tier to its existing levels of Medallion membership (silver, gold and platinum) — all referred to as having elite status, which comes with benefits like free upgrades and fee waivers.

Paul R. Skrbec, a Delta spokesman, said adding a fourth tier encouraged Medallion members to stay with Delta, rather than switch to another carrier after obtaining platinum status. The higher the tier, the better the benefits. For example, a diamond member will get a 125 percent mileage bonus versus a 100 percent bonus for platinum elites.

Seth Miller, a freelance technology consultant in Manhattan, is one of the elite frequent fliers airlines have been courting, having maintained top-tier platinum status in Continental’s OnePass program for 10 years.

“The legacy airlines especially are doing as much as they can to generate loyalty, and these days that means crazy bonuses — double miles for this, triple miles for that, miles are being given out like candy on Halloween,” Mr. Miller said.

“It’s great now,” he added, but he worries that the airlines’ largess could have a downside. “The question is, what happens when everyone tries to take advantage of all these benefits that are being handed out now? I’ve got elite status, but am I going to be able to get upgrades or will everybody else have status, too?”

Another question is whether nonelite frequent fliers have dropped off the radar as airlines focus on their biggest spenders — a message that average consumers may be responding to by shifting their loyalty to other rewards programs, like those offered on credit cards.

A research company that tracks loyalty programs found that membership in credit card reward programs surpassed membership in frequent-flier programs for the first time in 2009.

According to Colloquy, the company that conducted the research, the average household in the United States is signed up for 14 loyalty programs, ranging from grocery stores and gas stations to airlines and hotels, but actively participates in only six.

The recession has diminished participation in multiple travel programs, said Kelly Hlavinka, a partner at Colloquy. She said this could bring about a return to the original premise of loyalty rewards: to cement a relationship with just one airline or hotel.

“Savvy travelers may be saying, ‘I may not be able to spread my business out to two or three airlines, but I can consolidate my travel with one company,’ ” Ms. Hlavinka said. “The real opportunity for airlines is to try to keep that business with their airline.”

American Airlines Cancels Flights

Business trips and vacations were disrupted for tens of thousands of travelers Wednesday as American Airlines canceled more than 1,000 flights -- nearly half its schedule -- to fix faulty wiring that could cause a short-circuit or even a fire and explosion.

Executives at American said safety was never compromised, and they suggested the nation's biggest airline was the victim of suddenly stepped-up scrutiny by federal regulators.

American estimated that more than 100,000 travelers were booked on the canceled flights. Many had to scramble to book new flights and were stranded at hotels far from home.

The airline had already scrubbed 460 flights on Tuesday after federal inspectors found problems with wiring work done two weeks ago, during the first set of shutdowns.

A top executive said the cancellations would be a "significant" cost to American, and shares of parent AMR Corp. fell 11.1 percent, down $1.15 to $9.17.

The issue stems from an order that the Federal Aviation Administration gave airlines in September 2006 -- and gave airlines until last month to meet -- about the bundling of wires in the backup power system for the fuel pump of the MD-80 airplanes. The fear is that improperly bundled wires could rub, leading to an electrical short or even fire. However, no serious incidents have been blamed on the bundles, the FAA said.

American officials thought they had fixed the problem last month. But this week, FAA inspectors found problems with the work done on more than a dozen planes. American said it had no choice but to ground all 300 of its MD-80s to deal with the wiring bundles.

American operates about 2,200 daily flights, more than one-third with MD-80s. Nearly half the cancellations were concentrated at two airports, in Dallas and Chicago.

At New York's LaGuardia Airport on Wednesday, hundreds of passengers stood in check-in lines or milled about, using cell phones to get updates on their flights. The airline offered free doughnuts, coffee and orange juice, but there were few takers.

"They should be able to predict these kinds of things," said Laura Goodman, whose flight home to Dallas was canceled. She said would miss an important meeting because the airline couldn't rebook her until Thursday.

New Yorker Michelle Soss had hoped to steal a few days in Albuquerque, N.M.

"I covered my kids' schedules, I covered my work schedule to get away for a few days," she said. "I don't know if I'm getting anywhere."

American's cancellations came after similar delays at Southwest, Delta and United. Last week, hundreds of travelers were marooned when Aloha Airlines and ATA Airlines shut down and filed for bankruptcy protection.

Alaska Airlines said Wednesday it canceled 14 flights to inspect the wiring on its nine MD-80s.

For travelers, the bad news might not be over. Daniel Garton, American's executive vice president, said flights would be canceled Thursday -- he said it was too early to say how many -- and possibly on Friday, too.

A return to normal operations depends on how quickly mechanics can inspect and fix the wire bundles. As of Wednesday morning, only 30 MD-80s had been cleared to fly by the FAA.

Garton acknowledged that the bundling of wires had not met FAA standards, but he said "these were not huge errors" and posed no threat to safety. He said the agency used to give airlines "latitude" in interpreting safety regulations, but no longer.

The FAA began looking more closely at airlines' compliance with safety directives in recent weeks, after it was criticized for letting Southwest operate planes that had missed inspections for cracked fuselages.

In the past few weeks, the FAA levied a $10.2 million penalty against Southwest and conducted new inspections at all U.S. airlines, leading to flight cancellations at Southwest, Delta and United.

FAA spokeswoman Diane Spitaliere said inspectors found problems with the wiring bundles at 15 of 19 American MD-80s that it checked this week.

The 2006 safety order from the FAA directs airlines in how to pack and stow wiring to a hydraulic pump in the wheel well to prevent the wires from rubbing together.

According to the FAA, shorted wires could ignite fuel vapors and cause a fuel-tank explosion that could destroy a plane.

The explosion of TWA Flight 800 off New York's Long Island that killed all 230 people aboard in July 1996 was blamed on fuel vapors ignited by wiring. But it was a Boeing 747, not an MD-80, and investigators believe the disaster involved different wiring from the bundles now under scrutiny.

Brian Stirm, an aircraft-maintenance expert at Purdue University, said airlines had plenty of time for the inspections and that even an untrained mechanic could spot a problem.

The cancellations could hardly come at a worse time for American. Its parent, AMR Corp., is scheduled to report first-quarter earnings in two weeks, and analysts are forecasting a loss of more than $300 million. High fuel prices and the downturn in the economy are hurting the industry.

American officials said the company would give $500 travel vouchers to anyone stranded overnight. It also paid for hotel rooms and meals for an undisclosed number of passengers.

Bob McAdoo, an airline analyst, said passengers might soon forget the debacle, especially since several other major airlines have canceled flights recently. But he said passengers who missed big events like weddings might avoid American again.

Kathy Neer of Santa Fe, N.M., was caught up in both waves of cancellations to and from a vacation in Paris. She and her husband were stranded in Dallas on Tuesday on the final leg of their journey home. American gave the Neers a voucher for a hotel room and seats on another flight home Wednesday.

"They say our flight is leaving at 3:55 p.m., but do you think we trust them?" Neer said. "After being burned twice, we're a little skeptical."