Tag Archives for devaluation.
Emirates has instituted a ~ 20% increase in miles required for premium cabin awards on many non-stop itineraries to and from Dubai, while so far leaving connecting itineraries and fifth freedom routes unchanged, though that could change. This was done with no notice, and after already raising business class award pricing earlier this year. But they aren’t done, according to the airline.
Air Canada’s new Aeroplan program eliminated fuel surcharges on award travel and introduced a region and distanced-based award chart.
Two years after the new program’s award pricing was announced they’re making several changes, in general reducing the price of partner short-distance awards between different regions of the world while increasing the price of the longest trips in premium cabins. These go into effect September 1.
American Airlines’ own data shows that following devaluations of the AAdvantage program elite members moved flying away from the program. AAdvantage itself generated more revenue, because its credit card deals became more lucrative. That earn-burn program grew, while the most engaged members stepped back.
That may even be the right business decision! Flying has frequently been unprofitable for American while net revenue has been driven by selling miles to banks. Maybe they should reward flying less if they’re not making money on it.
Marriott is getting heat for eliminating award charts at the end of this month, but Hilton already did this in 2017 while claiming award prices wouldn’t go up. And every time a program has dropped published price lists, that’s meant an irresistible temptation to raise the cost of awards. They don’t even have to tell members that they’re doing it.
Hilton has just increased pricing at some of their best properties, though it will take a comprehensive review to identify just how many and how much.
The value of a currency is based on trust – how well it will hold value. So it makes me downgrade how much I value an Alaska mile. Although seeing the direction of award pricing with new partners I’ve begun to do that anyway, since they clearly appear to be on a downward trajectory (as I predicted would be the case as part of joining oneworld), and I tend to expect that as bilateral contracts for award redemption get renegotiated we’ll see more increases even for legacy partners
Imagine spending 190,000 miles roundtrip just to fly Alaska Airlines!
The cost of first class awards on Alaska Airlines flights may in some cases be 37% higher on March 1 than they are today and throughout the month of February. So if you redeem Alaska Airlines miles for Alaska Airlines travel in first class, potentially paying more than the lowest published mileage price for the flexibility of choosing your day of travel and preferred flight, you’ll want to do so now. Here’s what concerns me most, though —
Make the currency worth less, consumers chase it less at some margin. Reduced consumer interest is bad for the long run proposition of the currency, which is bad for the price of financial instruments derived from that currency. Now that airlines have issued upwards of $30 billion in debt backed by their loyalty programs, this is a new issue for them to manage.
The AAdvantage program is the annuity that’s been driving free cash at the airline for years. They’d be wise not to kill the goose, and the odds they’re good enough to extract even more value out of it for themselves without killing it seem less than 20%.
In the June 23 Airlines Confidential podcast, former Spirit Airlines CEO Ben Baldanza lays out his framework for the circumstances under which to expect airline frequent flyer programs to devalue. He sees strong airline credit card performance as working against devaluation, which I think is incorrect, and he sees the future of business travel doing a lot to determine the value of miles.
There are several scary stories out there about a coming frequent flyer apocalypse, but an underlying truth remains.
Now that airlines have moved towards more revenue-based redemption pricing, award price inflation is baked into the model. As demand rises and prices go up, so too do award prices for much of an airline’s inventory. And travel has picked up.
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 »
