Thanks to the wonders of Google translation, this article in German provides an update on a court case against Lufthansa for changing their award chart without reasonable notice.
A regional court in Cologne ruled for the plaintiff, Lufthansa was unreasonable in offering only a month’s notice of changes, though they would have been reasonable to offer four months’ advance warning of their new award chart.
The Hamburg-based IT Professor Tobias Eggendorfer had accumulated in his account a total of 887 000 bonus miles. Early last year, changed the conditions from the Lufthansa so that in future an average of 15 to 20 percent more miles for the intercontinental flights in Redeeming should be required.
The judge stressed that Lufthansa is generally entitled to change the terms and conditions for their bonus program because it constitutes a voluntary service. However, the company would have had to announce it with a lead time of four months to give the customer an adequate transition period.
The court called an award chart devaluation with only one month’s notice a “trust shock.”
This ruling applies only to the individual litigant and doesn’t in and of itself require Lufthansa to make broad adjustments. And the airline can appeal.
Now, I don’t like courts getting involved. I know nothing of the relevant German law so can’t speak to the appropriateness of the outcome of the case. But I do think this underscores an important point.
Loyalty programs offer their members a value proposition. They induce members to behave a certain way on the basis of a suite of offers. After the members have done what’s been asked, but before redeeming their points, it’s not really reasonable to say “just kidding” .. like Lucy, Charlie Brown, and the football having the reward yanked away at the last minute after being told ‘trust us.’
The single biggest thing program can do to undermine the confidence of members is to, in effect, lie or destroy trust — the entire member relationship is based on trust, since it’s a long-term relationship in which behavior in one period is rewarded in another future period. Destroy the trust, destroy the value proposition.
Now programs certainly make changes all the time, and not just to their award chart, but also to earning opportunities. It becomes easier or harder to earn points. It becomes more or less costly for a program to secure the rewards that members want (though how often do award prices go down even when acquisition costs of those awards might go down?). And since programs tell you they may make changes, it’s not fair to feign shock that they actually do.
But each program is well-advised to make their changes in a way that seems fair, with adequate notice, rather than underhanded and without notice.
My biggest beefs with the Amtrak program are that they’ve made so many changes over time to their partners and redemption rules that I simply don’t trust them. It’s not the relatively poor earn from train travel, especially non-Acela Express travel. And it’s not that I can’t really use the points in ways that I personally consider aspirational (for some, sleeper cars across the country are quite aspiration!). It’s the trust issue. And it’s been several years since the program behaved that way, I just have a long memory.
For elite benefits, where members fly or stay all year long on the expectation of the benefits that will yield for them in the following year, I’ve always wanted a year’s notice. Programs don’t give that, but I really believe that’s what’s fair.
For an award chart, I think the court has a point. And many programs follow a standard where members do have several months’ notice for changes. Not giving that notice is underhanded, and Lufthansa deserved to be slapped. Not necessarily by the courts, I don’t think governments can effectively get involved in this space unless there’s a specific contractual element that’s been violated and they’re moving to enforce that. But I do have sympathy!
Very good analysis Gary–I agree 100%.
LH continues to be a bad value proposition overall, even for Senators–so much so that I successfully talked many of my German colleagues into crediting to United instead.
Slight mistranslation re: “trust shock”. The paragraph in question referred to a “ein gewisser Vertrauensbestand”, i.e. a “stock” of trust built up over the previous 8 years without award chart changes. Otherwise great find!
Ya beat me to it by like 15 minutes!! thanks for digging this out of Spiegel!
There’s now talk of other Miles&More members banding together to form a class action. Will be curious to see how German courts handle this. This could open a Pandora’s box for others, and not just LH!
On Amtrak criticism-good for you! One doesn’t have to wonder whether Amtak will change terms significantly with no notice as they’ve a
ready done it twice, so of course they may do it again.
Someone should sue BA! They gave no notice of the actual changes to their program until it was announced. I don’t think BA could have handled it any worse.
Don’t hate on the judiciary too much, they are often the only recourse left for the little guy! I’ll grant you that intelligent people can differ on whether miles are a privilege or a right, but the deck is already so stacked in the airline’s favor that it’s nice to see them get their comeuppance occasionally.
BA was my first thought as well. They announced that they were going to make changes, but didn’t give specifics until they were actually launching Avios.
Really, Delta however is the worst offender by far. Th
Things can and have changed overnight with Delta
What recourse does the professor have, other than the courts? It was a breach of an implied contract. LH might argue that its terms and conditions allow it to change its program at any time, but German law implies a covenant of good faith and fair dealing and that standard wasnt met here.
OTOH, you would think it would just be good common sense business practice to give plenty of advance warning before you stick it to your best customers.
@LK ” you would think it would just be good common sense business practice to give plenty of advance warning before you stick it to your best customers” MY POINT EXACTLY! 🙂
I think criticism of BA is a bit overblown — it was clear to even casual observers like myself that BA was planning a major devaluation. It would have been ideal if they announced their new reward chart, but most people had an opportunity to take advantage of the better values on BA’s award chart before the changes set in…
@NE Flyer – except that in fairness British Airways EXPLICITLY SAID that better than 95% of routes would stay the same price.
Turns out that referred to only non-stop routes from London.
But to everyone else in the world, they not only gave no notice but actually lied.
So even if many members were aware (and the vast majority of members were NOT, just those who read blogs or participate in online communities) that BA was likely lying, and even if it was more of an oversight or mistake on BAs part (umm.. yeah), BA’s statements even ACTIVELY MISLED members and then provided zero notice of having misled them.
@NE Flyer- I AGREE 100% WITH GARY. BA gave absolutely no notice of the ACTUAL changes and misled/lied to people.
If BA had any integrity at all it would have said here are the changes we are making in our program starting in 90 days. Instead it gave no notice of the actual changes until the day it was announced! And as Gary stated BA went on a campaign of actively misleading people.
Can we send Capital One to the German Courts along with Priority Club?
@lhflyer: German courts don’t have the concept of ‘class action’ lawsuits like the US. Everyone has to litigate on their own.