Seriously, is anyone surprised? And if you are, why? What were you really expecting?
United announced today that they’re going with a spend-based earning program for most United-operated or sold flights. The numbers essentially mirror the changes Delta announced earlier this year for the SkyMiles program. The multiplier numbers for the different status levels are the same and there will no longer be a bonus for earning based on premium cabin travel; that’s baked in to the fare price (premium cabin sale fares will be the most significant losers on this aspect of things).
And then there’s this interesting tidbit in the details United released:
Tickets for flights operated by a Star Alliance™ or MileagePlus partner airline that aren’t issued by United (ticket numbers that don’t start with “016”) will still earn award miles based on distance flown and the purchased fare class.
Partner flights purchased through United – a necessary bit to get credit for elite qualification – will apparently earn based on the fare, not distance flown. That is an important distinction (assuming it is true) which adds complexity to the program. And that’s after getting to the point where the program (and all of them, really) is unnecessarily complex. I understand the technical issues of making it happen. Heck, I have seen first-hand the technical issues associated with United properly (or, all too often, improperly) crediting PQDs which is the same basis for the upcoming earning rules. And that certainly sucks. But at some point it seems that making the internal systems work reasonably reliably should come before upending everything and changing the way the entire program functions when it depends on that. Or maybe that’s just me being naïve.
I’ve said for several years now that spend is a smarter basis on which airlines should reward passengers versus distance flown. My view on this topic has not changed, despite the negative implications it has on me personally. And I truly believe that we would have seen this sooner had it not been for the technical limitations, those which the airlines haven’t completely solved but which they’re getting closer on. I don’t particularly like it, but the game has shifted from one where a customer works to fly cheap and earn miles, arguably screwing the airline, to one where there is manufactured spending where one is likely screwing a merchant or bank to earn miles on the cheap. On the one hand, I suppose the part where the airlines get a bit better paid is nice since I need them in business to continue having fun. But I really do enjoy flying, even if it is just to earn some miles one day.
I do know that my spend and travel pattern has already diversified significantly this year, even more than I expected it would after United’s announcement related to status-based earning. And there are some real costs to that for me as a passenger. But those costs are not such that shifting my spend to an airline where I can “profit” from status are smart.
Just like with Delta there will be some winners and some losers with this change. There are some high fare customers who will be very happy to see the new rules take effect. And that’s great for them. Must be nice to mostly spend other peoples’ money, huh?
As for the rest of the industry, I figure this is likely part of AA’s new program when they announce it later this year. They’ve got very little to lose by making such a change and plenty to gain. That leaves Hawaiian and Alaska Airlines as the holdouts in the US market. Those are two small dominoes left to topple over.
And for those suggesting that United should have had some creativity and done things differently than Delta did, what would you actually change? Unless there are plans to drastically revamp the redemption chart (probably a few years off yet) there isn’t really much I can see as reasonably useful with alternate numbers involved.
Related Posts:
- Delta ties elite status to spend
- Why spend is a good qualifier for airline status
- United Airlines adds spend to elite qualification requirements
- Are we looking at a shift towards revenue-based loyalty programs?
- Why the Delta SkyMiles changes don’t really matter
- Winners and losers with Delta’s new revenue-based SkyMiles earnings
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I’m one of the loners who aren’t against this — in fact, it works in my favor. United is stupid expensive to most places out of Houston, but the timing/routing is impeccable. There have been many $400-500 flights to Denver, and $800 SFO runs. I’ll earn some more miles (even when Elite expires in 2015), and not have to sacrifice time/convenience to boot.
Shouldn’t you be wasting your time attacking Gary or something? Nobody actually reads your blog to learn about earning miles… Only about finding award space…
Good call, but Seth seems to actually be the rational voice in the travel-blogger world. And for most of us this isn’t going to matter much, so other blogs like Gary’s are just whining now about those who not only play the game but can leverage it with business travel. So good work, Seth, keep it up. I love rational thought and really, the damage was done to my award travel on United back in Feb.
So, if I’m getting this right — say you’re a 1K at the beginning of 2015’s award year, and so you have to get $10k PQDs and 100K PQM for next year.
You’ll now have 110k award miles (11x10k) at the end of that qualifying year (assuming you hit the goal on the nose) instead of 200k (100k + 100k bonus miles).
Incorrect because PQMs will still be earned based on distance not cost.
I love your insight. It is always intelligent and well-constructed, if not sometimes irreverent. Your perspective always shines a different light, and I like that.
Whether you think this is good business or not, it’s unlikely to be enough to save United. In fact, if all UA does is copy DL, I’d say it’s a recipe for getting the C-suite cleared out. Investors are specifically concerned that UA is following the same formula as DL and AA but has specific structural disadvantages. This change does nothing to allay those fears.
This was not the right time to make this change.
Problem is that there aren’t just 3 airlines in the world. The rest of the world may not see a need to switch. For my family flying US-Asia multiple times a year, this move eliminates the remaining reason to stay with a domestic, unless they are significantly cheaper than OZ, KE, QR, TK and the like. How are they going to fill the back of the widebodies other than reducing fare? How’s that going to help their bottom line?
The customers considering those other carriers were already only competing on fare. And it isn’t like they’re generous with low fares either.
I don’t think that is correct Seth. I suspect that many, like me, have endured UA on international routes because of the mileage program not because of cost. Overall, I find flying them internationally to be a substandard survice compared to many other options TALC or TPAC. Destroy MP+ and it free customers who pay more to leave for greener pastures.
Indeed. We’ve used CO/UA often when it’s not the cheapest option, but we do treasure the benefits of being elites.
Having said that, I will admit think we’ve already given up on the US-based programs with the PDQ requirement. The latest change really isn’t that significant – just to confirm our decision as being the right one.
Not surprised at the fact that UA switched to spend based but a bit surprised at timing. It still seems like they are trying to figure out how to get through a ton of issues and decided to take on a huge project before even getting through those issues. Like you said, I would’ve liked to seen things work reliably internally (and externally) before they do something like this.
In defense of this argument that things need to work before making the change, I work at a company who has had years to make things work yet we haven’t fixed anything. And by delaying rolling out new product, even on broken infrastructure, we’re now hobbled by broken AND outdated. Sometimes you have to make the change and then force your IT into fixing the problems. I know, it’s a terrible way to operate, but United needs to do something to right the ship. And this kind of move may just show their desperation to fix things; the ship might be sinking faster than any outsider knows…
United is a mess now. Hard and soft products are far worse than AA and Delta, yet they copy Delta. I hate Delta but I still think Delta is smart because they offer excellent in-flight products. United? Still living the era of 8 seats in a row in their newest business class. People at United all seem to be unhappy, so the service is really bad. Now there is nothing left in their FFP, so what is United trying to do? Why do we choose United?? I think United is confused. I mean the management…
I’m DL hub locked so usually only fly DL. I’ve been happy with the flights, service, and hard product. I recently flew United to Maui and had horrible service AND a sketchy hard product. I agree completely that my DL flights were much more enjoyable and something I’ll choose to buy more often than not. UA only pushes me further and further away.
It’s always fun to watch rats in a perfect storm. Scurry about fellas. Get on with it.
I’m not surprised at all that UA has gone through revenue-based mileage earning. I was just surprised they had the technology to support this new model so soon! I thought UA management would at least observe and see whether DL’s strategy is successful for 2015 and then make a decision whether to revamp its mileage-earning program.
My thoughts are that they risk losing the middle class. Those who aren’t in the top 2% income bracket, don’t have a unlimited expense account and whose boss goes ballistic when you buy a $1100 fare to Chicago, but who have up to now been otherwise fairly “loyal” United fliers. They stand to lose a bunch of those fliers and they are a much bigger group than those who spend more than 20C per mile all the time. Anyway I guess they will get what they want. I’m just not sure how well they have thought it through.
Where are those passengers going, though? It isn’t like they were getting a great deal before, so why is it any different now?
All they did was reinforce that only higher spend customers matter in the FF world. The middle will now buy tickets solely based on price, they’ll eliminate any thought process about FF mileage earning. At least they will over time, they’ll probably stay loyal until they try to redeem said miles or until they see that earning miles is taking a really long time. Do the Frontiers/Spirits of the air world benefit most by this?
The Southwests, Virgin’s and Jetblue’s I guess. I think there was some value to being “loyal” to UA even at the lower to mid level – they were actually getting decent value, $2000 to $3000 of travel spend could easily result in a ticket to Hawaii. Now it’s basically triple that amount in order to get a free ticket to Hawaii.
All my thoughts exactly. Thank you finally for a resonable reply after 24 hours of blind fury.
Aside, a typo in the article is that “form status” should be “from status”.
Really appreciate the level headed response on this – everyone else is having a mental meltdown because their magical <$300 transcon flying isn't going to be worth nearly as much in the future with UA.
I hope they enjoy their next, brief, honeymoon with USAAirways until they get their IT folks around to following this model.
Let's not forget that America's most successful airline (historically) was the first to adopt this, and America's most successful airline (currently) is who UA is following. Southwest and Delta are good examples to follow, if only UA could figure out how to actually operate an airline profitably and well.
Also, since travel typically consists of both flying and sleeping, I'm a little surprised at the near zero coverage of those dastardly hotel companies, who all shifted to a spend based earning model last… century? Can't we just view this as the airline industry following the hotel industry, rather than freaking out?