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Posts tagged airlines

Delta and United at PDX

Scott McCartney for the Wall Street Journal:

The big three U.S. airlines—American, Delta and United—match each other more closely than ever. The three were created from the merger of six large airlines over the past eight years and now each has the profits to spend upgrading its product. They’re all intent on not letting one rival gain a cost or product advantage.

[…]

Airlines say the similarities just mean they are all coming to the same conclusions about what customers are willing to pay for and what they aren’t. “The market dictates what your product will look like,’’ says Brian Znotins, United’s vice president of network.

Three mergers later and we are just now figuring out that the three remaining major U.S. carriers are basically copying each other. The “race to the bottom” language is appropriate at times but really the carriers are simply competing for the passengers who do not necessarily care who they fly. With the low cost carriers like Spirit and Frontier offering a no-frills experience, the majors are happy to follow suit and charge for the privilege of more legroom or early boarding. The majority of passengers simply want the lowest fare available that fits their schedule, add to that analysts who want to see profits, and you have what is driving airline decisions.

Remember, they are reporting record profits, all while customer complaints increase. The result is a form of collusion by following. The airlines are not meeting in back rooms to decide what amenity should be cut next, instead they just wait for one to cut an amenity and then follow suit. The latest way of trying to compete with low cost carriers like Spirit and Frontier is the basic economy fare. Delta, American, and United are all working to offer a fare that has zero perks, including no pre-reserved seat assignment and no mileage earning. These fares are not necessarily cheaper than fares of the past, but when you compare them to fares that do earn miles they appear cheaper.

This is not a trend that will be changing anytime soon. With new low cost airlines like Norwegian entering the U.S. longhaul market, the reduction of amenities on the three major airlines while charging for perks will continue. It will take a spike in oil prices along with a reduction in travel before anything changes.

Delta Airlines is currently recovering from an outage that delayed and cancelled hundreds of flights around the world.

From their statement on the outage, two points:

Noon ET UPDATE: Delta has canceled approximately 365 flights due to a power outage impacting Delta operations systemwide. As of 10:30 a.m. ET, Delta operated 1,260 of its nearly 6,000 scheduled flights. While systems are improving and flights are resuming, delays and cancellations continue.

5:05 a.m. ET UPDATE: Delta has experienced a computer outage that has affected flights scheduled for this morning. Flights awaiting departure are currently delayed. Flights en route are operating normally. Delta is advising travelers to check the status of their flights this morning while the issue is being addressed.

At first the outage was reported to be a computer outage, whatever that means, and then it was updated to “power outage”. My guess is that a data center lost power, a generator or other backup power system did not kick on, resulting in an outage that continues to linger. What is interesting is that Delta had no problem throwing their power provider under the bus without first figuring out what happened.

There is a travel waiver up and it is in effect until August 12, 2016. My recommendation if you are flying Delta today or tomorrow? Use their app to rebook for another day, go home and wait this out. Even if they start running more and more of today’s flights, this outage will ripple through the system for at least a few days.

Alaska Airlines Boeing 737-400 "Combi"
In the exciting or “happy to hear it” news department, Alaska Airlines and Japan Airlines announced a partnership this morning. The partnership will start on June 29, 2016 and will allow customers to earn miles on each carrier and other partner benefits. However, the press release does not go into detail on earning rates or the redemption rates, but it’s clear from Alaska’s executive vice president and chief commercial officer, Andrew Harrison, that those details are coming.

“For the first time, our members will be able to earn and redeem miles within Japan, taking advantage of 600 daily flights on JAL’s broad domestic network.”

I have always thought that Japan was a gap for Alaska Airlines. You could fly Delta or American but in a lot of cases it required a connection, sometimes two. The Japan Airlines partnership opens up a number of California non-stops into Japan. There is also the Japan Airlines flight from Vancouver, B.C. though that means going through Canadian transit immigration. In any case, I am excited about not having to overfly Japan to just fly back on Cathay Pacific. This partnership also opens up a bunch of connections out of Tokyo. Off the top of my head it makes parts of China, Japan, and some southeast Asia destinations really easy to reach.

Alaska Airlines continues to impress me with their growth and planning, let’s hope it carries into the merger with Virgin America.

Delta has been growing their Seattle hub operation over the last couple of years, trying to cultivate a west coast hub that can serve Asia as well as some domestic U.S. destinations and parts of Europe. They released a new commercial recently, that you can watch below, that is directly targeting their Seattle market.

The general consensus is that the commercial doesn’t really get Seattle or the Pacific Northwest. I can see that. The ad doesn’t say much except to give a nod to Seattle’s proximity to both Tokyo and London and how the city has momentum (whatever that means).

More concerning than the commercial is a recent article in the Minneapolis Star Tribune where Delta’s new CEO had some interesting thoughts on the airline’s future plans in China.

In September 2014, then-CEO Richard Anderson told a group in Minnesota that Delta hoped to explore a new nonstop route from MSP to China “in the next three to five years.”

Bastian, who has served as president since 2007, succeeded Anderson, who formally retired Monday. Bastian said he also believes an MSP-to-China route “would be an ideal opportunity” once Delta receives its new Airbus 350 planes — which will replace the retiring Boeing 747 aircraft — next year, and if U.S. carriers are granted more traffic rights in China. Foreign governments negotiate how many flights from each country it will allow to operate within its borders.

So why is Delta focused on building their Minneapolis hub’s reach in China when they have a rather large presence in Seattle, where they can use aircraft that don’t require ultra-long ranges? I am not sure. It seems like the complete opposite of what they were originally trying to do when they opened the hub in Seattle. United has started flying to non-top tier airports in China out of San Francisco, capturing a part of the market that Delta will quickly lose unless they make a move soon. By spreading their transpacific flights over multiple hubs I am a little worried that they are diluting themselves and not really building up the Seattle base. There has already been a slight withdrawal with the reduction of Seattle-Hong Kong and threats to stop flying to Tokyo from a number of U.S. airports if they are not granted certain slots at Tokyo-Haneda. One has to wonder how much more Delta’s presence at Seattle will retract all while they release commercials touting its awesomeness as a hub.

The New York Times posted an article titled, “Avoiding the Dreaded Middle Seat May Now Cost You” and it is a pretty accurate depiction of the landscape of commercial air travel. Most major U.S. airlines will soon have a “basic” economy fare that is essentially only the price for a seat on a plane between origin and destination. No other benefits. Want to check a bag? That’s $50. Want to select a seat? That’s $15-30 depending on the route. Want that seat to be an aisle? That’s another $10.

Recaro Slimline Seat 1
Some would argue that the unbundling of airfare into different components is good for the consumer because they can purchase just the items they want for the trip and save money. But that would imply that the different services airlines provide, seat selection, baggage handling, etc. are things that are completely unrelated, which is far from the truth. When you travel you need a seat and you might need to check a bag. Neither of these is a cost that is unaccounted for by the airlines. They are going to have to handle cargo/bags/mail whether you fly or not. A seat selection, in simple terms, does not cost the airline money. This is the illusion of unbundling. Yeah, if you and your family do not mind sitting in random middle seats around the plane, you will probably save a few dollars. But, if you don’t want your mother seated at the rear of the plane while you’re ten rows up, that’s going to cost you. This is the illusion of cost savings. Sure you might save $100 in airfare but as soon as you check a bag or select seats that cost savings dwindles and it is hard to tell where the equilibrium is between that “basic” economy fare and the regular fare that would have included the items you paid for. If you do not check bags, travel with family, or care where you sit, then unbundled fares are probably for you.

There is also the illusion that unbundling items from airfare will keep the airfare low. Well, that would go against the basic argument of unbundling, which is that the airfare and the ancillary items can act independently of each other. So, if the airlines decide that $60B in ancillary fees is not enough, they can adjust those prices, leaving airfare untouched. Or, they can manipulate airfare to fit a market and leave the ancillary fees alone. I am not against the airlines making money but it is disingenuous to paint the unbundled fares as “saving customers money” when the basic facts point to the scheme as being solely about revenue generation. And that’s fine, airlines are businesses, they are supposed to make money. Just don’t promote a revenue generation tool as mystical cost savings awesomeness, because for a lot of people, it means they will be sitting in a middle seat, delayed at LaGuardia.

The Economist has an interesting short piece and infographic on international airlines and the price you pay versus the service you receive. They used customer satisfaction data from Skytrax and lined that up against flight-volume data from FlightStats.com.

At the bottom of the satisfaction list? United and American Airlines.

Another interesting tidbit was the “worst airports to sleep in” category. Port Harcourt International Airport in Nigeria topped that list… And that isn’t a good thing.

I needed to buy a last minute ticket for work recently and Delta was the only option left that had seats and a schedule that matched what I needed. After I bought the ticket, Delta gave me an option to buy-up to first class. The price was right and I had wanted to compare what I had read about Delta’s first class product being great to what I had experienced on United, so I purchased the buy-up.

Time to examine the hype.

The App

For work travel, I rely heavily on airline iPhone apps to keep me updated and to do basic maintenance on my reservations (change seats, make reservations, etc.). The first thing I noticed using the Delta app is just how clunky it is. Sure, picking a seat is relatively easy, but making a booking in the app is a frustrating process. The app does validation before you submit a flight search and will pop up an error if your origin and destination are the same. So, if you need to reverse your search, you have to put in a third airport code to be able to switch the origin and destination without error. There are quirks like this throughout the app. It is the same thing for flight information as well. Some items are clickable and lead to more info, but there is no visual way to know that an item has that feature without clicking on everything so you end up sitting there, hitting random parts of the screen, looking for what you want. Compared to United’s app, which is powerful, yet relatively easy to use, Delta’s app seems to need some serious work.

The Trip

Before traveling, I had added my known traveler number to the reservation and on check-in received PreCheck. Knowing I have PreCheck allows me to show up at Portland’s airport about an hour before boarding and have plenty of time to grab a cup of coffee and do some work before getting on the plane, so that’s what I did. I walked up to the security area, opened up my mobile boarding pass and saw an orange icon indicating that my flight had been delayed. Knowing that an agent would be able to help me at the gate, I proceeded through security.

Making it through security, I look at the delay one more time and realize I will miss my connection because of it. I proceed to the gate and get in line to speak with the gate agent. An agent comes over and asks if I need something, to which I reply, “I believe my flight to Minneapolis is delayed and I will miss my connection”. She says, “I am closing out this flight and I’m not working that flight, walk down the hall and there are phones where you can call Delta”. Ok, that makes sense, so I walk down the hall and sure enough, there are phones. They’re all taken by people trying to fix their plans as well but there is a sign with a 1800 number so I dial it. The prompts ask if I am in the airport and when I reply yes, the wait is no more than 2 minutes to speak to an agent. The agent tells me that she cannot find any options on the same day but that she will see if she can find something on another carrier. A few minutes later she tells me my only options are to spend the night in Minneapolis or take a redeye via Atlanta. I ask if the hotel in Minneapolis will be covered to which she replies, “you would need to ask the agents in Minneapolis”. I am not willing to take that risk so I ask her to explore the American Airlines flight to Chicago that is showing an F seat for sale. She can’t find it. I run to the AA gate to see if they will simply sell me the seat (I’d refund the Delta ticket). Nope, they just cleared a standby into it. Sorry.

Back on the phone I accept the redeye option, simply because I was not comfortable spending the night and trusting that Delta would take care of the hotel (there was weather that night in the area). Well, time to head home because I have another nine hours before my new flight leaves. Here is what I originally booked (red), versus what I was rebooked on (navy).

Nine hours later I was back at the airport for the red-eye to Atlanta. I had hoped to review the meal options on the original flight but the delay squashed that idea. Now my goal was to get as much sleep as possible but I knew that would be a challenge. Onboard there was a bottle of water, a small pillow, and a blanket at the seat. The seat pitch was pretty standard but what I noticed was the lack of an adjustable headrest on the seat. It seems that most of the Delta domestic fleet is the same, missing the adjustable headrests that you can manipulate to rest your head to one side. The flight attendants come by asking if passengers would like anything before we take off. I order a whiskey and water, a nightcap if you will, and it’s quickly delivered.

The safety video comes on. It’s cute but man is it lengthy.

The pilot makes a quick announcement that he won’t be making any other announcements until our descent into Atlanta and that our flight time will be four hours (OUCH!). A few minutes later and we’re in the air. I put on an eye mask and attempt to get some sleep, but, to be honest, it didn’t go well. The seats are comfortable but there is not a lot in the way of lumbar support and without an adjustable headrest I can’t really lean one direction. The entire flight was spent with me readjusting to try and get comfortable and I ended up getting maybe 1-2 hours of sleep.

We landed in Atlanta on time and that gave me about 35 minutes to use the restroom, brush my teeth and make my connection. I walked from concourse A to concourse B and made it to the gate right as they were starting to board. I looked for a coffee shop nearby but there was nothing, the upside being I could try the much touted Starbucks coffee that Delta serves in first.

Legroom in First on the Airbus A320.

Onboard the flight attendant greeted everyone with a friendly “Good morning!”. She then came around first class asking if we would like anything before takeoff. A few minutes later and I was tasting the coffee. It wasn’t bad. Not great, but drinkable, which says a lot about airplane coffee. The taste was much more of what you expect in coffee and less of that metallic and chalky taste you sometimes get from airplane coffee. I was in the bulkhead seat on the Airbus A320 and found the legroom to be fine. There is a little cut out for your feet and that makes it comfortable. If I was a little taller the legroom would have been tight.

There was no overhead entertainment so the safety demo was done by the flight attendants and it went by much faster than the video shown above. A short time later we were in the air.

It was a quick flight to Milwaukee so the only service was beverages and a snack basket (I had a banana and some Biscoff cookies, if you were wondering). I tried to use the Delta Studio streaming entertainment but could not get it to work. Every time I connected I received a screen like below and could never get to the list of shows.

Failed attempt to try the streaming entertainment

An hour and half later and we were on the ground in Milwaukee and I was on my way to work.

Conclusion

Overall, there was nothing about the experience that blew me away making me want to switch permanently to Delta. The boarding process was just as chaotic as United’s, with people blocking the boarding lanes 15 or 20 minutes before the flight is scheduled to board.

Boarding. Just as chaotic as on other carriers.

The way the delayed flight was handled left a lot to be desired. I didn’t want to go into details above but the agent was not proactive in finding other options and I had to suggest a number of things. She also insisted on putting me in coach until I pushed back about being in first class. I am not an elite on Delta so I wonder if that had something to do with it.

For flying a relatively old fleet, the Airbus I was on is 23.3 years old, Delta does a pretty good job keeping the interiors clean and well kept. I didn’t see any panels loosely hanging or build ups of dirt and grime anywhere. The lavatories on both flights were the cleanest I have ever seen on an airplane.

I was happy to finally get to try Delta on a mainline flight in first. I am planning a few more flights on them since some of their schedules to certain destinations are better than what United offers. I am also flying Alaska back to Seattle at the end of this week and hope write a review about their new E-175 service as soon as I can.

EVA 777
In March I had a three week work assignment in the Los Angeles area. My Sundays were free so one weekend I headed to LAX and took photos of the mid-afternoon arrivals. The planespotting at LAX is a lot of the same traffic day after day but the experience of it is always a blast. If you have a long layover in Los Angeles I highly recommend making a stop at the In-N-Out on Sepulveda Boulevard, grabbing a burger and fries, and watching the planes come in. You can do this by catching the Parking Spot parking shuttle (Sepulveda location). The Parking Spot is well aware of people doing this and they are happy to oblige. Hop on the bus and at the drop off point inside the garage, just head for the single door, you will be able to see In-N-Out through it.

If you have a bit more time, there is another spotting area called Imperial Hill that is just as great for spotting but does not have the In-N-Out (or restrooms).

Below are a few of the shots I was able to get while at LAX. It really is a fun place to watch really large airplanes land.

American Airlines 77W

Cathay Pacific 77W

Aeroflot A330

Korean Air A380

An OpEd in the December 12, 2014 Houston Chronicle by a United Airlines employee really has me scratching my head. In it, Mark Segaloff posits that Emirates’s status as an airline hinges on them being state owned and that they are able to hurt U.S. airlines because of their use of the Import/Export bank to finance their aircraft. He continues, stating that state-owned airlines cause domestic U.S. carriers to lose business and suffer, costing jobs. While my heart is with Mr. Segaloff, my head is not.

Emirates A380 - Mark Harkin

Emirates A380 – Mark Harkin

It is true that there has been some concern about state-owned airlines coming into the U.S. and hurting domestic carriers. Even European carriers have stated that the Middle East carriers pose a serious risk to their business in the region. Here’s the kicker though, the European carriers are really the only ones with skin in the game. They are the ones with multiple flights to multiple destinations in the Middle East. U.S. carriers fall well behind when it comes to service to places like Dubai, Abu Dhabi, Doha, Kuwait City and others. In fact, United could not make their Washington-Dulles to Doha, Qatar (with a stop in Dubai) route work, so they pulled that service.

Mr. Segaloff’s key point is that the Emirates flight will cost Houston jobs. I fail to see any facts in the article as to why that would happen. United offers a once daily flight to Dubai from Dulles. If they want to compete directly for those dollars from potential customers out of Houston, maybe start non-stop service? Maybe offer a product that is not being degraded by installing slimline seats, reducing seat pitch, and generally making the travel experience sub-par. I know that Mr. Segaloff would probably retort, “But they are a state-owned airline with all the money in the world to make service improvements.” to which I would simply give him a link to United making a record profit in Q3 of 2014. There seems to be some money for improvement there, yet United offers 2-4-2 seating in business class on the Dubai flight. No thanks, I would rather take the non-stop from Houston (avoiding Dulles) in 1-2-1 seating on the A380. United does offer a number of one-stop options to a number of Emirates destinations via their antitrust immune joint venture with carriers such as ANA and Lufthansa. Granted, the service standards are not the same as Emirates but there are options that make money for United and their partners.

Something that Mr. Segaloff fails to mention is that the Emirates service to Houston is not new, it is simply bigger now. Truth be told, Emirates used to offer two daily flights to Houston from Dubai and with those two flights they actually had more seats (532) flying to Dubai than they do now with the A380 (489/517 depending on version). Where were the complaints when Emirates was running that second flight?

There have been a number of announcements of service to Houston by carriers that are not state-owned and not from the Middle East but these seem to do little to upset employees. But from an airline business perspective, these new routes are the worrisome ones. Korean has started non-stop service to Seoul, which I had heard was off to a rocky start but is doing better now. ANA announced service to Tokyo, EVA has schedules loaded to Taipei, and there are rumors that British Airways wants to bring an A380 to Houston for one of their two flights a day. ANA and EVA are Star Alliance partners with United, but Korean brings a good product and a fantastic network in Asia. Where is the uproar against that?

The Import/Export Bank is actually a valid concern, especially when the money is not spent the way it was meant to be spent, helping a foreign company grow by buying American goods. However, I do not think Emirates has any problem letting that money fall away. In fact, that money is specifically for Boeing jets, not for the Airbus A380 that Emirates is bringing to Houston.

I think one place where Mr. Segaloff could apply is argument is to the new Emirates flight linking New York City with Milan, Italy. This is a city pair that is served by two U.S. carriers, Delta from JFK and United from Newark. Now you have a third foreign carrier on the route who is trying to bring down the prices but not having much success. But I do not think it’s a question of letting foreign carriers operate routes from the U.S. to their respective hubs but whether or not those foreign carriers should be allowed to operate so called “Fifth Freedom” routes like New York-Milan ad infinitum. A number of carriers do this but use that fifth freedom flight to connect to their hub at the end. Out of Houston, Singapore Airlines flies to Moscow and then onward to Singapore. They are allowed to sell tickets to Moscow or Singapore out of Houston and they fill their plane. It’s a win/win. But when do those flights become anti-competitive? That’s for the FAA and DOT to sort out.

It is one thing to cry wolf when there is a valid concern but to say that Emirates and their A380 is going to hurt Houston is simply fiction. If anything, the Emirates service is helping strengthen the Houston economy by offering one-stop service to places that were previously unreachable without 2 or more stops. It will also continue to keep prices relatively competitive, which is good for the consumer. Sure, United may not like that, but how many passengers are they really flying a day to Dubai? How many are they flying to Europe for Middle East connections? United has a choice to make, they can up their game and focus on becoming a world class international carrier or they can relegate themselves to a middle-tier domestic focused carrier with a product that just barely keeps up with the competition. That decision will dictate the fate of those jobs that Mr. Segaloff is concerned about, not a single Emirates A380 flight a day to Houston.

In January of 2015, Delta will move SkyMiles, their frequent flier program, from earning miles based on distance flown and your status with the airline to a new system that bases your miles earned on the cost of the ticket and your status. In March of 2015, United’s MileagePlus program will take an almost identical step and turn into a miles earned based on spend and elite status system. American Airlines will keep their current mileage earning system in place for the foreseeable future but when they are done with some of the technical aspects of their merger with US Airways, I see them going to a model similar to Delta and United.

The New York Times has an article about the changes, calling them the “fadeout” of the mileage run. It is less of a fadeout and more of the complete death of the mileage run. The piece does a good job raising the concerns about confusion between redeemable miles earning and elite status earning, which will take place under two separate umbrellas. The more confusion there is for the end user, the more frustration. And while the average flier may not care, someone who does a bit of travel without keeping track of all the news and changes will certainly be a little annoyed. I also agree with the point that Mr. Barro makes about calling them “miles” after these changes. They are no longer based on distanced and merely represent an amount of money spent, making it much more appropriate to just call what you earn “points”. And while the examples of mileage earning and the losses faced by frequent fliers are illustrated in the New York Times piece, I think there are some unanswered questions about if and how basing mileage earning on spend will really be perceived by travelers and also, what it means for redemptions.

The New Earning Charts

In Delta’s case, if you are a non-status flier you will earn 5 miles per dollar spent. A Silver Medallion status flier will earn 7 miles per dollar spent, and so on. This is illustrated below per Delta’s calculator.

United’s changes are almost identical.

United MileagePlus 2015 Changes

It is nice that Delta’s calculator shows what you would earn in the old program and what you will earn on the same fare in the program. It makes it easy for a flier to look at the numbers and see just how good or bad these changes are for them.

Examples

Below are a few anecdotal examples to illustrate the gains and losses that frequent fliers and non-statused passengers will experience with these changes. I took the lowest available fare a month or more out for the different routes. Also, I focused on United, simply because they are who I fly, but the math for Delta would be very similar. I did not include taxes in the calculations as those are not included in the mileage earning for either airline. The fuel surcharges on international trips was included, again, because it is included in the calculations for mileage earning by the airlines.

The first example is a Portland, Oregon to Newark, New Jersey roundtrip. This one is my typical route and while the price fluctuates on this route, the $466 is reflective of a typical 7-day stay.

Sample Route Distance Fare Class
PDX-EWR-PDX 4,866 $466 Coach
2014 (Current) Earnings Member Silver Gold Platinum 1K
4,866 6,082 7,298 8,514 9,732
2015 (New) Earnings Member Silver Gold Platinum 1K
2,330 3,262 3,728 4,194 5,126
Difference Member Silver Gold Platinum 1K
-2,536 -2,820 -3,570 -4,320 -4,606

In this example you see that there is a loss of miles, regardless of elite status. A 1K would need to spend $885 2015 to earn near the same amount of miles that they would have earned in the program in 2014. With lots of competition on transcontinental routes, I see fares staying rather competitive for coach seats, meaning low fares, meaning low mileage earning.

The other side of this is the next example, the exact same route, Portland, Oregon to Newark, New Jersey, but this time, in first class.

Sample Route Distance Fare Class
PDX-EWR-PDX 4,866 $1,068 First
2014 (Current) Earnings Member Silver Gold Platinum 1K
7,298 8,514 9,730 10,946 12,164
2015 (New) Earnings Member Silver Gold Platinum 1K
5,340 7,476 8,544 9,612 11,748
Difference Member Silver Gold Platinum 1K
-1,958 -1,038 -1,186 -1,334 -416

While anecdotal, this example shows that paying more cash and sitting in the comfy seat does not necessarily generate more redeemable miles under the 2015 earnings programs. In fact, if your goal is to earn more miles, you are better off paying for the $1,500 refundable fare and doing an instant upgrade (if an elite on the airline).


 

Next is a long distance business class trip. A San Francisco-Frankfurt roundtrip priced as the average of what I could find for different months. There are spikes in price some months, but I found the $7,060 price to be pretty close to average.

Sample Route Distance Fare Class
SFO-FRA-SFO 11,398 $7,060 Business
2014 (Current) Earnings Member Silver Gold Platinum 1K
17,096 19,944 22,794 25,644 28,494
2015 (New) Earnings Member Silver Gold Platinum 1K
35,300 49,420 56,480 63,540 75,000
Difference Member Silver Gold Platinum 1K
18,204 29,476 33,686 37,896 46,506

In this example, the new 2015 program is extremely lucrative. The business class fare is high enough that everyone sees a significant gain in their redeemable miles earned. The 1K member actually doesn’t realize the full potential of the 11x multiplier because earnings on a single ticket are capped at 75,000 redeemable miles.

I then took the above business class example and made it an economy class booking instead. It’s not a bottom of the barrel example, it’s a mid-tier typical fare to Europe purchased somewhat in advance.

Sample Route Distance Fare Class
SFO-FRA-SFO 11,398 $1,400 Coach
2014 (Current) Earnings Member Silver Gold Platinum 1K
11,398 14,246 17,096 19,946 22,796
2015 (New) Earnings Member Silver Gold Platinum 1K
7,000 9,800 11,200 12,600 15,400
Difference Member Silver Gold Platinum 1K
-4,398 -4,446 -5,896 -7,346 -7,396

Again, everyone loses out on miles. Not incredibly large amounts, but there is definitely a loss.


Lastly, I’d like to look the one place where people will make a mint on miles compared to how many they are earning under the current program: The short distance but relatively expensive ticket. These are usually refundable or flexible tickets but are shorter distances (say, less than 500 miles each segment). It’s a typical business scenario and one that I wanted to explore. In this example it is Manchester, New Hampshire to Washington-Reagan via Newark-Liberty.

Sample Route Distance Fare Class
MHT-EWR-DCA-EWR-MHT 816 $1,366 Coach (Flexible)
2014 (Current) Earnings Member Silver Gold Platinum 1K
1,018 1,220 1,424 1,628 1,834
2015 (New) Earnings Member Silver Gold Platinum 1K
6,830 9,562 10,928 12,294 15,026
Difference Member Silver Gold Platinum 1K
5,812 8,342 9,504 10,666 13,192

What Does This Mean?

In short, the majority of travelers regardless of airline elite status, who fly on discount or regular coach class tickets, are going to lose redeemable miles under the new system. The new system is going to reward those on very expensive business/first class travel and those who have to buy refundable or flexible tickets. The ones who will see some of the biggest increases in miles are the short distance fliers who buy those refundable tickets. They are spending less time in a seat but paying more money for the privilege and the airlines are rewarding that.

Some, who I respect, have this to say:

When asked why:

And while Mr. Harteveldt isn’t incorrect that there is an element of low-yield travel created by gaming the mileage run system, the idea that this makes the airlines completely unprofitable and those passengers are a huge cash sink for those airlines, is a stretch. Truth is, airlines need some of that low-yield travel to fill seats that would otherwise go empty. The difference now is that Delta and United do not want to hand out the same number of miles for that seat. However, this has less to do with “rewarding” someone than it does with simply not putting the miles on the balance sheet.

The Cost of Miles

Regardless of how the airlines word these changes the real issue comes down to cost. The miles that the airlines have a cost associated to them for the airline. The airline records the outstanding miles on their balance sheets as liabilities. At some point, someone will redeem their miles and the airline will either pay a partner for the flight the passenger takes, or they will remove a seat from their own inventory for that passenger to sit in. There is a tangible cost here. In fact, when the Star Alliance recently changed their rules on reward redemption charges allowing carriers to set their own price for their premium cabin rewards, United responded by making partner rewards very expensive. If someone wants to redeem miles for a seat that Lufthansa charges United $5000 for, then United wants to collect more miles from that passenger.

The fact that airlines have millions upon millions of miles outstanding on their balance sheet does not look good to their accountants nor their investors, so in the changes to reward mileage earning, we’re seeing a shift. The newly rewarded miles will essentially be “paid for” up front (at least partially) while the old miles are removed from the balance sheets over time.

Want more proof that this is at least some of the motivation? Look at United’s page discussing the changes.

Mileage Redemption Options

That’s right, you can redeem your miles for Economy Plus seats on a specific flight, an Economy Plus subscription, and a checked baggage subscription. None of those three things has any real cost to United. If you use your miles for an Economy Plus seat on a specific flight, United is only out the $39 or $49 they would have charged someone had no elite member been available to take advantage of that seat as part of their benefits. If you use your miles for a checked baggage subscription, there is no cost to United, simply a slight drop in ancillary revenue on that flight, though even that is probably offset by the fact you spent miles on it. The cost for the airline is minimal while the benefit for them is taking more of the liability off of the balance sheet.

Even more proof of this is Delta’s recent announcement that there will soon be a limit on how many American Express Membership Rewards points one can transfer into SkyMiles (250,000 Membership Rewards points in a calendar year). Delta wants to limit the incoming liability of miles even though American Express has been one of their best partners.

The airlines are tying miles earned to how much you paid for a fare not just because “it’s rewarding” but because it limits their exposure to liability. Plain and simple.

What Do I Do Now?

The answer to this question is simple: Mileage earning shouldn’t be the determining factor of your airline loyalty, especially with these changes.

The argument used to be that a person could put up with the bad aspects of a carrier if the rewards were worth it. With the rewards quickly becoming based on spend and less on miles flown, why fly that airline over another if the price is the same? For example, I give United my business, even with the terrible Recaro seats, on a transcontinental flight because I value those points. With the mileage earning changes, my comfort takes priority and if that means a flight on Delta, so be it.

This isn’t to say that for everyone mileage earning is the deciding factor, in fact, I would say it’s a small percentage of people who actually care about this piece of the frequent flier game. I remember a discussion a long time ago about how most travelers redeem their miles for simple domestic rewards, sometimes paying the higher mileage rate to avoid paying what they considered a high fare.

There is also an option to earn the original redeemable miles as you have all along, the catch is, you have to not care about elite status. In the terms and FAQs of each airline’s new redeemable miles program (United | Delta), there is a statement regarding tickets booked on partner airlines. If you book on a partner’s ticket stock, basically who took your money, then you are still eligible to earn reward miles at the 2014 rates, but you in almost all cases, you will not earn elite miles. So you have a choice, become an elite with Delta or United or earn the 2014 redeemable mileage rates.

You could also play the credit card churning game to earn redeemable miles. I find it too time consuming and a ton of work to keep track of what cards need what minimum spend and which ones I haven’t signed up for yet. Some people love that game but for me, it just isn’t worth the time or the energy.

Another choice would be to start flying American Airlines. They are the last of the large U.S. carriers to have a mileage flown is what you earn rewards program and it will stay that way. Well, until they are done with their merger with US Airways, then I would say the chances are very good they too will move to a points based on spend system. Sure, bloggers will post about how great American is and how they are using their miles to go somewhere far away, but that I feel will be a short lived game. There is a year, maybe two left for the greener pastures on American. Feel free to make that move if you are prepared to make another move or choice when American decides to go to a system similar to Delta and United.

Like I said above, the answer is simple: Fly places, do it affordably and comfortably, and worry less about the miles being earned. That was a little difficult for me to write. I used to see a cheap fare somewhere and say, “a weekend there would be nice and the miles would be nice too” and buy a ticket. The miles were an incentive for me to buy a fare to go someplace new that I may not have been inclined to pay for, now I’ll just go new places knowing the earnings will not be as high.

Is There Any Chance The Airlines Change Their Minds?

The airlines changing their minds on this is unlikely. Why would they? They can now reward fewer miles and even cap them for their most “loyal” travelers. The cap at 75,000 miles on a single ticket is something that blows my mind. You (or your company more likely) drop $8,000 on a business class ticket to Asia and you get capped at 75,000 miles. United and Delta find you loyal, but only 75,000 miles loyal.

I think the only real way any of this changes is if the airlines struggle in the coming years. If people stop flying due to the economy or because of fares or whatever, then I could see the airlines reeling these mileage earning changes back to what they used to be, but even that is unlikely. Another scenario is that corporate accounts start complaining to the airlines. These companies pay a lot of money for their employees to travel and if those employees start complaining, it’s likely the corporate travel sales folks will get wind of it. But, there is nothing keeping Delta or United from sweetening the pot and giving those contracts some kind of mileage bonus every year, so even the idea of corporate contracts getting pulled is a stretch.

Lastly, I do see this changing some people’s behavior and that’s not necessarily a good thing. People who have the freedom to book via airline websites for their corporate travel could get themselves into trouble pursuing more expensive fares to earn more miles. To combat this, companies may enforce their corporate policies more stringently, taking away some money from Delta/United if they are not the cheapest carriers in a particular market.

In Summary

Overall the biggest problem with the new mileage earning programs is that they not only earn less miles for the frequent yet affordable traveler, but they are confusing programs now. You will still earn your elite status based on two criteria, qualifying dollars and qualifying miles, the latter being based on distance flown, but you will earn redeemable miles based on fare paid. It is even confusing to type.

These programs change on a whim. There are rumors (see footnote at bottom of page) that Delta’s Medallion Qualifying Dollars minimum is increasing for next year. It’s unconfirmed but if true, means these programs will get tweaked and changed as the airlines see fit. They will look to cut out the chaff and focus on people who are spending a lot of money. Pundits can say this rewards more profitable fliers but even that doesn’t take into account the caps on what a person can earn on a single ticket. This is about reducing costs and liabilities for the airlines. As the airlines see fit, they will make more changes to reduce those costs.

Focus on the good stuff. See a cheap fare to a place you want to visit and you have the cash? Buy it. Stop focusing on the miles and get out there and see the world. Miles, upgrades, rewards, etc. are all fun things but if they hinder the actual visiting of places, don’t focus on them.

Recently a number of airlines have been offering decent business class deals to Europe during off peak seasons. I have a feeling that this will become a new normal. We will see $1,500 business class fares to Europe from Houston, San Francisco, etc. when the airlines need to fill seats that would otherwise go empty. Take advantage of that. You’ll earn some miles and you will get a nice seat across the Pond.

For me, I am bummed about the move. I loved having a small incentive for a weekend trip somewhere I wanted to visit anyway. I loved being able to burn miles on the few trips my wife and I were able to take longhaul. My plan going forward is to continue to earn elite status simply because I am on the road so much but as soon as I hit a level I am comfortable with, my plan is to switch to booking on partner airlines and earning the old rates for that level that I reached. It’s a hybrid plan but one I think may have some benefits for me. If I was to stick to just flying United tickets everywhere, just like I do now, then I would lose out on around 95,000 miles, possibly more once I do the math for my end of year stats. My company spent a lot of money for my work travel and I spent a fair amount of cash on personal travel but that is only worth so much to United. Clearly, I am a low-yield passenger.

In any case, I hope you make the decision that works best for you financially and travel wise. Happy flying!

Edit: It is now confirmed that Delta is raising the qualifying dollars required for 2016 SkyMiles Medallion elite status.