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 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
silver members getting 7 miles a dollar and top-level 1Ks getting
11.
These awards mirror a change by rival Delta Air Lines Inc.,
rolled out for its SkyMiles members in February and to 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.
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.
The changes to loyalty programs come in response to research
that indicates that passengers who fly often and spend the most
often feel they aren't rewarded enough. These people drive an
outsize portion of airlines' revenues.
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.
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. That means 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 it would disclose its redemption options
at a later time. 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 both cases, 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, and so on.
Write to Susan Carey at susan.carey@wsj.com
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