I first read it over at Wandering Aramean yesterday, that JetBlue points would no longer expire.
Previously you had to either fly or charge something to their co-branded American Express card every 12 months to keep an account active. That’s a rather stringent policy. In my post last month on how to keep your miles from expiring I surveyed the major frequent flyer program expiration policies and most allow you to keep an account active with any kind of activity every 18-36 months.
Delta miles do not expire, and when they rolled out the change they framed it as a ‘moral issue’ and yet they captured the financial benefits of having led the charge to shorten account expiration times and did not restore any of the miles they had taken away. Some moral stand.
In fact, I don’t think expiring miles are all that unreasonable. From a loyalty program’s perspective they want engaged customers. Asking for some kind of earning or redemption — even an online purchase, in some cases a single iTune through their shopping portal, or crediting one rental car — every year and a half is a fairly de minimus level of engagement. For the truly passive buying 1000 miles every year or so works too. Although I gave a list of 10 easy and inexpensive ways to keep accounts active with many programs.
But the truth is that since these programs are businesses, with budgets, they have to decide how to allocate their expenses cross their members and types of redemptions.
One kind of investment is to change expiration policies since that increases costs both at the accounting/balance sheet level (keeping big liabilities on the books due to loss of breakage assumptions) and at the cashflow level (more awards ultimately redeemed from accounts).
Increased costs for ending expiration of miles means not investing elsewhere in the program.
Choosing to invest in infrequent, unengaged members means not investing in more frequent customers.
So unless JetBlue’s model tells them — contra what the rest of the industry’s analysis concludes — that not expiring miles is revenue-positive because of future business from unengaged members that they wouldn’t otherwise receive, then this is a cost that could otherwise be spent improving the program for JetBlue’s loyal customers.
Now I’m not a regular JetBlue guy. This keeps the couple thousand points I’m tracking in my Award Wallet account active, and in fact they would have expired next month. So I suppose I should be happy, and selfishly I am. But people that actually pay attention to the JetBlue program are also the people least likely to benefit from this change. And are also the ones who should lament what else they aren’t getting from the program as a result.
Lucky has the most skeptical take I’ve read on this change, and even he says, “Look, this is obviously good news and a positive move.. So let me be clear, this is an extremely positive and customer friendly change.”
It may be obvious. I’m just not sure it’s accurate.
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Sorry Gary, but sometimes being contrarian for contrarianism’s sake results in illogical and incomprehensible posts like this one.
They are getting some publicity from it. Are they hoping that will give them enough of a bump to be worth it? Never expiring points seems over the top, but then again…it’s not really true that they’ll never expire…they won’t expire until JetBlue changes the rules again. How many years will that be?
Not everyone is able to travel weekly/monthly. Many folks who are only able to afford a vacation that requires air travel once every year or two. Eliminating the expiration might possibly give folks a chance to use miles some point in the future, which could promote loyalty. There is minimal cost for the airlines to maintain the data, so why not help out the occasional traveler?
Not hard to make the argument you have in the abstract, Gary. But I’m not so sure it works that way in the real world. The points in TrueBlue already have a limited and reasonably fixed value. They’re also relatively hard to earn (near impossible compared to Delta) which means that the outstanding balances/liability aren’t that huge.
I doubt we’ll see the conversion value of the points drop as a result of this change and that’s basically the only way it could be a negative for customers in the real world.
I agree with B-Rad. This is contorted logic. Non-expiring miles is as plainly positive as it gets.
If you use the logic in then post, then if Jetblue granted all members 10k free points, you’d say that that was a negative.
I think JetBlue in particular is difficult to earn, and doesn’t reward you with the huge trips that American would reward you with for stockpiling. So I’ve seen two sorts of behaviors in JetBlue-type fliers–those who use their free trips immediately for regular flights, and those who fly so infrequently, they are hoping to get one free domestic flight *eventually*. I don’t think there are people with huge stockpiles of points who are going skew the value in an extreme manner the way I think would happen if American adopted this practice.
If American Airlines had made the same announcement, Gary would probably be telling us how this was a great thing, a watershed moment in the industry and the tipping point that is going to make ‘no expiration’ the new normal.
I can understand an argument that would have said, non-expiration means more supply of miles so by definition they are worth less. However, with Jetblue’s fixed earning-reward system, that is not necessarily true.
Jetblue knows their core customer is not a business customer or mileage runner/tracker like us. This move builds a lot of loyalty and goodwill and good press and most TrueBlue people will never redeem their points for a flight anyway. I think its a positive change for flyers.
You’re ignoring the one driver that you’re always mentioning, incremental revenue. If enough infrequent flyers choose JetBlue because they know they’ll eventually get a free ticket then the policy makes sense.
I am not so sure that non-expiring miles have such a large increase in cash costs, and potentially there is even a way to mitigate the accounting cost.
Here’s why: If members are non-engaged and not earning, then they probably don’t have enough miles to redeem an award anyway, and the balance just sits there. Since no program mails out paper statements anyway, it doesn’t cost the airline much to just keep the miles sitting there, and in fact for people who have larger balances, it gives them additional potential not to redeem them (whether for flights or magazines) – I don’t need to do anything to preserve the miles (even though the airline could later devalue them….)
How could they manage the accounting cost? Well perhaps the accounting cost is whatever the marginal cost or foregone revenue is, but perhaps multiplied by a factor which discounts non-use or future use. If a smaller percentage of points are being used, perhaps the value per point is less or it is discounted.
Finally, there is some advantage to the airline from keeping your points active – you are somewhat more likely to purchase from them again if your next award is nearer, or they haven’t screwed you out of your miles.
I’m not saying that some programs aren’t better off expiring the miles, but certainly Delta must have decided that they could manage the accounting issue, and that marketing value and perception were worth it, and probably the costs of non-expiry weren’t that high.
@AS no, this was the same thing I said when Delta made the announcement, I see this as trading off in favor of unengaged members rather than loyal ones.
@Seth Miller – not saying they spend less on redemptions, there are other areas of investment whether technology or benefits in their non-elite elite program they might make. It raises costs, and trims margins, so that has to come from somewhere. Though I agree with you it isn’t as extreme an issue as with Delta.
Glass half empty kind of guy, eh?
Why can I not search just on your blogs within boarding area. I am looking for a post that I had seen about award wallet, but I cannot find it. I get the option to search within the blog or the entire boarding area, but the former does not give me any results.
I remember you had said that you are using award wallet. Have you given your passwords to the site. How secure is it. Or are you forwarding the statements to their email address so that they can update the current miles balance
Gary is wrong this time. JetBlue, like Southwest and some other carriers, realizes that it is not likely to be the first choice for heavy business travelers. It hopes that non-expiring points will keep JetBlue in the running as a second choice carrier for trips where its schedule is superior. Frequent flyer program addicts will suffer connections and even regional jets to fly their preferred carrier, but the less obsessed may be swayed by the ability to accumulate JetBlue points over a period of years without worrying about expiration.
Leisure travelers have a choice of airlines at similar prices. Infrequent travelers will prefer an airline with non-expiring points. If these customers have any experience with capacity-controlled redemption, they are likely to prefer a program with price-based redemption. This change puts JetBlue on a par with Southwest for these customers, and JetBlue has a better in-flight product. (Southwest recently compressed its seat pitch but Southwest retains the advantage of full re-use of travel funds without a change fee.)
For these two classes of customers, JetBlue’s move should be profitable. I believe that these customers far outnumber the ultra-frequent JetBlue customers. That would not be true of AA or UA. Airlines are different and their optimum FF program structure is different too.
@nsx at flyertalk – “Infrequent travelers will prefer an airline with non-expiring points.” But how many infrequent travelers care about miles/points at all?
Unbelievable. I did not think anyone could spin a clear positive as a negative, but here it is. Why would anyone care if the FF programme has thousands of dormant accounts on the books? Presumably the value of miles is so low as to make the potential liability almost nil for balance sheet purposes. And none of these people will be clawing into your elite benefits anytime soon. Do you really begrudge the occasional traveler the loyalty benefit of a free short haul trip every few years? I really think you should retract.
So anything which raises costs is bad then, right?? Offering some free EML upgrades to Mosaic members is bad for the others because it increases the cost of servicing the customers, right?
Beyond that, your point about “just buy an iTunes song” may work for some programs but it didn’t for JetBlue. Their policy was revenue flights or co-branded AmEx only. This is a major reversal of policy to be certain but suggesting it is bad for their FF members is quite a ridiculous assertion IMO, especially if the only basis is that there will be a liability on the books for the outstanding points versus spending that money (which isn’t necessarily actually real money rather than a line item in the books) on some other, unknown option which may not really exist.
Gary, I’m just gobsmacked at this post. It simply doesn’t make any sense to me.
These points were earned. Why should they be taken away?
By this logic… the bank that gave me $100 bonus for opening a checking account should claw back that cash from me 3 years later if I don’t continue to be one of their customers.
And there are already incentives with nearly every airline for consumers to be loyal: membership tiers (*S, *G, etc.).
Just my luck… several thousand of my JetBlue points just expired within the last 60 days. Oh well, wasn’t planning on flying them anytime soon anyway.