Alaska Airlines is arguably running both the best airline operation (based on mainline on-time statistics for a non-Hawaiian U.S. carrier) and the most profitable one (based on operating margin). That’s in spite of their intense ‘Battle for Seattle’ with frenemy Delta, the partner that’s been building up a hub in their home town. Alaska has been growing significantly, and rewarding their Mileage Plan members.
At a time when everyone else is cutting back marketing spend through less generous frequent flyer plans, Alaska Airlines has been doubling down with a generous rewards program.
It wasn’t always going to be that way. Three years ago there was speculation that the first US airline to convert from mileage-based accrual to revenue-based accrual would be Alaska Airlines if it wasn’t US Airways or Delta.
Delta had gotten the most speculation, at least since they put up a job posting for someone to work on the project back in March 2012. US Airways had a program on the shelf before they got distracted by the American Airlines acquisition. Remember of course that Alaska Airlines was the second carrier, after Delta, to adopt a three-tier award chart (to better approximate ticket cost for redemptions).
So it was interesting to see — as Delta had announced its revenue-based program and United followed suit — Alaska Airlines explained a little over a year ago what was obvious to most members, that the majority of frequent flyers would do worse under such a system.
- Alaska believed only 5% of flyers would earn more miles under a revenue-based program.
- 79% of flyers do better under their mileage-based system. In other words, 79% would do worse with revenue-based.
And that’s before even accounting for gutting the value of points, which Delta, United, and American have all done along with their shift in how miles for flights are earned.
Alaska Airlines of course,
- Hasn’t gutted its award chart (yet?)
- Allows one-way awards with a stopover
- Partners with airlines in both Skyteam and oneworld like Cathay Pacific, Air France, and Qantas. They partner with Emirates as well.
You cannot combine partners in a single one way award (one partner plus Alaska Airlines only) and they do not publish awards for all possible routes. As a very US-focused airline they have no awards for travel like Europe-Asia or intra-Asia.
With full planes, airlines haven’t needed to spend as much in marketing to fill incremental seats. There aren’t very many incremental seats. Nonetheless, Alaska sees their more generous mileage-based program as a competitive differentiator. And they aren’t about to change at least unless evidence convinces them in the future that they should.
Brian Sumers highlights comments by Alaska Airlines at the JP Morgan Aviation and Transportation conference:
“We like where we’re at,” CFO Brandon Pedersen said at the JPMorgan Aviation, Transportation & Industrials Conference. “We’re sticking with the traditional model. It gives us an opportunity to look at how we perform versus how others perform. And we wouldn’t say that we would never go to that, certainly.”
CEO Brad Tilden suggested Alaska may try to advertise its program as a competitive advantage, similar to what Southwest Airlines has done with checked bags. You’ve probably seen Southwest’s “bags fly free” campaign.
“It is a lot like Southwest with bag fees,” Tilden said. “We could argue about its merits five years ago. Today, it’s very differentiated from what the other guys offer. So I think its value actually has gone up.”
Alaska Airlines deserves your business, and of course will only continue to invest in their program if it demonstrably earns them that business.