Airlines brace for bumpy holiday travel season amid labor shortage
The airline industry raises concerns over ramping up flight schedules to meet the demand. FOX Business’ Grady Trimble with more.
Frequent-flier programs really need a new name: Welcome to the era of the frequent-spender program.
Carriers increasingly reward spending over actual flying, and American Airlines is about to push this trend farther than any big carrier. The pandemic has accelerated the transition as many formerly frequent travelers have been earning more miles and points on the ground through credit cards.
"The pandemic gave us the opportunity to really re-evaluate how we define loyalty," says Heather Samp, managing director of AAdvantage member engagement at American.
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The airline will make it possible to earn elite status without taking a single flight starting in March. Credit-card miles will count more toward status than ever before.
Those who are true frequent fliers will get some added benefits, and business travelers who aren't taking as many trips will be able to boost their status with their spending. Small-business owners and others who use their credit cards a lot now can be a top dog at American before they ever lift the buckle on a seat belt.
Who stands to lose? Fliers who qualify only by flying long distances on cheap tickets. Spending requirements and credit-card use become even more important.
Loyalty programs have long been geared toward business travelers who typically pay higher fares and room rates than leisure travelers. Status tiers with special perks like upgrades and priority lines drive loyalty now for business travelers.
But business travel has remained depressed. That's left airlines scrambling to figure out how to maintain status for grounded customers so they remain loyal when they do resume travel.
"I think they are all trying to figure out what their new world looks like," says Gary Leff, a mileage expert, travel blogger and co-founder of the online community InsideFlyer.
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Other airlines and hotels have made it easier to hang on to status for next year. United lowered flight and spending requirements necessary for 2022 elite status and now allows miles earned on its co-branded credit card to count toward elite status as long as you take four flights.
Delta says it will automatically roll over status that SkyMiles customers have this year to 2022. In addition, it will pool qualifying miles earned this year and next together toward 2023 status requirements. Delta is also offering bonuses to qualify for elite-status tiers faster and is counting the flying that members do on award tickets toward status levels.
|AAL||AMERICAN AIRLINES GROUP, INC.||19.62||-0.21||-1.08%|
|UAL||UNITED AIRLINES HOLDINGS, INC.||48.44||-0.76||-1.54%|
|DAL||DELTA AIR LINES, INC.||40.47||-0.57||-1.39%|
Marriott, Hilton and InterContinental Hotels Group are all extending current status members have in their loyalty programs for another year and pausing points expiration until the end of next year.
Hyatt lowered qualification requirements for elite status by 50% this year, making it easier to attain status for 2022, but appears to be taking a harder line with members on keeping points current in accounts. Hyatt has been warning members that it will enforce the two-year deadline on points expiration. World of Hyatt members who haven't earned or used points during the pandemic may face the surprise of seeing accounts wiped out.
Hyatt didn't respond to requests for comment.
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Status matters to travelers. The usefulness of loyalty programs for many road warriors isn't the free trips with accumulated miles or points. It's the perks that come from qualifying for elite tiers: better seat selection, early boarding, free checked bags, upgrades, priority for rebooking and standby seats, special phone numbers and priority queues at airports.
|MAR||MARRIOTT INTERNATIONAL, INC.||154.16||+0.17||+0.11%|
|HLT||HILTON WORLDWIDE HOLDINGS, INC.||142.84||+1.17||+0.83%|
|IHG||INTERCONTINENTAL HOTELS GROUP PLC||67.39||-0.88||-1.29%|
Frequent-flier programs were created in the 1980s to keep customers loyal. Miles became a hot commodity and credit-card companies now buy them by the billion to give to customers as a reward. That turned loyalty programs into a profit center for airlines instead of just a marketing cost. And that changed how airlines run the programs — they focus on spending instead of travel.
American is creating a currency called loyalty points in an attempt to simplify elite-status qualification. Previously American, like other airlines, had three requirements for status: You had to meet requirements for mileage, number of flights taken and ticket spending. You couldn't get status with just a couple of very long, very cheap mileage runs.
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Under the new rules, it's all about dollars: You'll get loyalty points for ticket spending and you'll get loyalty points for co-branded credit-card spending. American will even give priority to where members are on the upgrade list by spending.
The airline thinks the change will expand the ranks of customers with elite-level status. Often that makes upgrades even harder to score — more people in the ranks competing for few seats.
Status doesn't come cheap. Gold status on American, the lowest tier, requires 30,000 loyalty points. Each dollar spent on a co-branded credit card earns one loyalty point. Executive Platinum, American's highest published tier (Concierge Key is by invitation only), requires 200,000 loyalty points.
But Ms. Samp says the new members in the status ranks likely will be occasional fliers rather than hard-core road warriors. And that means they'll be chasing upgrades at off-peak times rather than for typical business-travel flights.
"We don't really see that adding to the ranks is going to diminish anyone's service level," she says.
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The change also is likely to be a major boost for American's co-branded credit cards. Airline credit cards have seen a lot of competition from cash-back cards and high-end cards from Chase, American Express and others that offer their own lounge access, rewards on any airline or hotel and other perks.
"If you are just flying, it is going to be harder" to qualify for status on American, Ms. Samp says.
|JPM||JPMORGAN CHASE & CO.||163.63||-1.83||-1.11%|
|AXP||AMERICAN EXPRESS CO.||178.56||-2.35||-1.30%|
Mr. Leff notes that American isn't the first airline to offer status solely on credit-card spending. Frontier has a similar option. But American is the first huge program to fundamentally change the way status is earned, he says.
"It is a good deal for more travelers than it isn't," he says. "There will be people who are unhappy, and those are the people who would have earned higher status under the old program over the new one."
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