ON BOARD WITH RANDY PETERSEN

Randy Petersen ANOTHER DEFEAT FOR THE ELITE
November 2003
by Randy Petersen

In case you hadn't noticed, change is in the air when it comes to elite-level frequent flyers. These battle-tested road warriors, once rewarded with extra perks for flying thousands of miles a year, are finding the proverbial red carpet being yanked out from under them.

Continental's OnePass program, for example, has recently announced some significant changes. Beginning in 2004, OnePass members flying in higher fare classes will earn 150 percent of mileage flown, to be counted toward elite status. Those flying on the lowest fares, however, will earn just 50 percent of actual miles flown toward elite. In addition, OnePass has upped the "price" of a one-way domestic upgrade by 50 percent—from 10,000 to 15,000 miles.

These are remarkably similar to the changes Delta introduced to its SkyMiles program earlier this year, and may foreshadow changes to Northwest's WorldPerks program (though Northwest has always marched to the beat of a slightly different drummer, so any changes there will probably be moderate). Most importantly, the changes reflect a growing trend in the industry that rewards passengers by how much they pay, not by how often they fly.

With pressure from the low-cost carriers, and with the demise of high-yield business travelers as we knew them, airlines are having problems justifying the expense of maintaining a first-class cabin— there are simply too few big-spending passengers willing to pay for the privilege. As a result, a growing number of airlines are convinced they need to make first class so exclusive that only the wealthy—or those who travel an obscene amount—need apply.

Ironically, this comes on the heels of an unprecedented period in the history of loyalty programs, when miles were easy to accumulate, and even the "average" member could scrape together the miles needed for an upgrade. Not only did the vaunted Platinum and Gold members have to worry about the pesky Silver members sneaking in to upstage an upgrade, but suddenly any schmoe with the right credit card and long-distance service could compete for the seats in the front of the plane. The end result was a major imbalance between the number of elite-level members and the limited number of awards available to them, not to mention a congested first-class cabin.

The new focus on revenue over loyalty is certain to reduce the number of elite-level members, and, by extension, free up the availability of awards for those who do qualify. It should also effectively limit access to the luxury cabin to those who pay for it—either through first-class fares or frequent travel at pricier rates. The difficulty is that those with more modest budgets can and will feel slighted, and as a result, lose the loyalty that the "loyalty" program was intended to foster.

Even Alaska Airlines' Mileage Plan, winner of the 2003 Program of the Year Freddie Award, is tweaking its elite-level rules and regulations for 2004, raising the threshold for elite qualification and doubling its upgrade award level. I'm starting to wonder if each month I'm writing a new obituary for frequent flyer life as we used to know it.

But I think there has got to be some program that will get it right. Would they now please step forward?

You can contact Randy Petersen at randy@insideflyer.com.

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