airberlin Devaluing Miles September 1, Since Everything Else About Them is Falling Apart Anyway

oneworld member airberlin’s topbonus frequent flyer program is not primarily a loyalty program. It’s a financing mechanism and backdoor way to control the airline itself.

In 2012 the topbonus program was spun off as a separate entity with 70% sold to Etihad for about a quarter of a billion dollars. Etihad overpaid. On purpose.

  • It was valued about 50% more per member than the spinoffs of Gol’s program and TAM’s and three times as much as Aeromexico’s.

  • It has financially underperformed, like the airline itself.

However it was a way of infusing additional cash into the airline without running afoul of foreign ownership limits on the airline itself. And by taking majority control of the frequent flyer program it was an additional mechanism of control without majority shareholding in airberlin.

For awhile airberlin topbonus had one other purpose, at least for US frequent flyers: status matches. American Airlines elites matching status in the topbonus program could get oneworld status which would give them complimentary Admirals Club access when flying domestically. (topbonus now requires US-based members to have booked a flight on airberlin before they’ll consider offering a status match.)

airberlin has among the worst-performing financials of any airline in the world. In the first quarter its operating margin was -42%. Disastrous investments in airberlin and Alitalia led to the ouster of Etihad’s CEO.

When you’re at bottom there are two ways to go: cut your frequent flyer program to conserve cash, or invest in your marketing program to attract customers. Since airberlin is attempting to stabilize itself by cutting back its airline operations, it’s not surprising they’d cut back the generosity of the loyalty program too.

Via @SpencerForMiles the current award chart ends August 31.

They’re raising mileage rates and offering new more expensive awards that include fuel surcharges and taxes.

  • Business class between North America and Europe goes up 50%, from 40,000 miles each way to 60,000 miles each way.

  • Or pay 110,000 miles each way for what they’re calling a ‘free’ flight (isn’t that what award tickets were supposed to be) — no taxes or surcharges.

Here’s the new award chart for September 1 onward:

I do like offering awards that don’t incur surcharges. However programs face a dilemma when doing so. Members value miles at more than programs book the cost of those miles. So when a program wants to remain financially neutral, they charge way too many miles (from the member’s perspective) to buy out of the fuel surcharges.

Put another way, fuel surcharges are a junk fee that’s a lucrative tax for programs to collect from members who have nowhere else to go to spend their miles. Giving up that tax is costly.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. They’ve also reduced surcharge on award tickets effective 6/1, so arguably the next three months will be the best time to get an award ticket.

    BTW, status match requests are completed within the 24-hour ticket cancellation window. Just sayin’.

  2. Gary – is it true that they cut their English language call center and that all TopBonus transactions need to be conducted in German?
    If so that is a huge disadvantage for non-German speakers

  3. @tom, Yes they have greatly restricted non-German locations from using the site. You can’t redeem for non-travel awards or take part in many of the earning items on the site. It also seems to restrict some promotions. In addition you can no longer earn AB miles on the HolidayCheck hotel review site unless you hack it AND post them in German.

    All this and they have a terrible mile expiration policy.

    Come on Air Berlin I want to love you but you won’t let me.

  4. Given their financial situation I can almost understand that they are cutting back everywhere they can. Unfortunately this won’t help to attract new customers…

  5. I have noticed much the same thing Gary. “Since Everything Else About Them is Falling Apart Anyway” is one of the best opening headers you’ve come up with.

    Now, Air Berlin does offer good business class fares overseas. But I have noticed things run on the cheap, which is not a good thing when you think about it at 35000 feet.

  6. Excellent analysis, Gary. Plus a great withering conclusion: “Put another way, fuel surcharges are a junk fee that’s a lucrative tax for programs to collect from members who have nowhere else to go to spend their miles.” That’s precisely how I look at my remaining Avios, none of which I ever used on BAc

  7. While the airline is a financial mess, I would note that they are currently expanding their transatlantic services to the USA. I recently flew one of those flights, in coach, and it was fine. So while I wouldn’t be keen to loan this airline money, there’s no particular reason to avoid flying them if that’s otherwise your best option.

Leave a Reply

Your email address will not be published. Required fields are marked *