Things I Learned at the Randy Petersen Travel Executive Summit

Randy Petersen opened things up with a retrospective on changes in frequent flyer programs over the 30 years since the American AAdvantage program launched at the beginning of May 1981. I think I know the ins and the outs of programs pretty well, but I don’t always have the history or context to put changes in programs, and comparisons between what they’re offering now and what the value proposition used to look like, into perspective. Randy did a great job if reminding of the time before capacity controls, of the introduction in expiration of mile sand howe that coincided with triple mileage offers around 1988, thus the ongoing cycle of printing large quantities of miles followed by award chart inflation (not Randy’s analogy, but if you don’t prefer to think in terms of monetary economics, it’s like Lucy, Linus, and the football).

Randy had an outstanding panel of the hedas of the United, American, Hyatt, Delta, and American Express Membership Rewards programs, he tossed them a few questions and then the floor was open. Maya Leibman reported that there was an office pool on whether what they’re planning to do with lifetime elite status was going to be the first question, or the third question. It was the first question. Asked by me.

Leibman confirmed that American is looking at changes to their million miler program. In answer to another question later on the propositon of elite level customers, she reported that her Gold and Platinum ranks were a bit more swelled than at the other programs as a result of the million miler program (one reason they feel they need to make changes). But she reported that the details of the changes were not completely final, most importantly though she assured that the changes would be clearly communicated to members in advance, that there would be notice rather than suggesting that the changes were either already in place (as some have speculated) or that the changes would go into effect in a metter of days or weeks. Bottom-line: folks should be able to learn about the changes, and then transfer in all of their Starwood points… or perhaps even that a credit card signup bonus now will make it possible to push members over the top for a given lifetime elite status threshold. Recall, of course, that the current method of earning American’s lifetime status is to obtain over 1 million miles from any source in your account for Gold, or 2 million for Platinum. Fortunately I received my 2 million mile status over the past summer, I’m guessing that the changes will prevent me from making 3 million miles (for another set of international upgrades, but not higher status) in the near future. Though we don’t know whether only flight miles will count or whether it’ll be flight miles plus some other miles although it will no longer be miles from all sources that count.

Maya Leibman is really quite funny, in another story that I’ll relay when writing about the Frequent Traveler Awards which were outstanding on Thursday night, the emcee Robert Wuhl made a joke about redeeming miles for sex (and his wife ‘wanting an upgrade’) Leibman promised to let him know when they introduce that as a redemption option.

Jeff Foland from United was a bit less revealing, he’s a corporate guy unwilling to share secrets with his counterparts on stage (unsurprisingly). He did make clear that they value high revenue flyers over simply folks with elite status, that there are certainly changes coming that they’ll be communicating clearly and in advance (most of which remain likely still about norming the Mileage Plus and Onepass programs) and the biggest corproate challenge involves the integration fo the two programs and two databases and all of the IT and programming surrounding those. Running two frequent flyer programs in parallel is no easy task.

Jeff Robertson from Delta came off as really candid, he spoke about the reason why Delta eliminated mileage expiration – he reported that expiring miles was the biggest complaint that they received, more so than even award availability. That they were spending millions just to notify members about expiring miles, the revenue from re-activation wasn’t especially great, and so they believed it was in their long-term interest to no longer antagonize members who would otherwise need to earn perhaps 20 miles to extend an account’s lifetime (not very profitable to the airline) or who would just redeem their miles in anger and walk away from the airline (creating a redemption cost and a lost customer). United and American report that expiring miles are not the top complaints that they receive, that they feel it’s incredibly easy to extend the life of an account, that they want to incentivize further engagement of members rather than dormant accounts, and that they would prefer to invest elsewhere in the program rather than end mileage expiration — but that of course they’re watching the results of what Delta has done.

Robertson wouldn’t comment on the Skymiles program’s international origination surcharges, and disputed that there are 100,000 mile flights between New York and Los Angeles, explaining instead their three-tiered structure. I suspect that there was simply a disconnect between Robertson’s answers on the structure of the program, and the person who asked the question, because it’s frequently the case that Delta’s booking engine will price awards absurdly — usually in my experience because there may be ‘low’ award availability for one flight, other award buckets for another flight, and instead of pricing at the higher level the system will actually price the flights additively, as separate awards. Now, some suspect that Delta ocnsiders this a feature rather than a bug, but it is an IT problem rather than a program rules problem. Clearly Delta has some IT challenges when Robertson mentions hearing that automating the mileage upgrade process would take 18 months and $3 million to accomplish, thus it gets de-prioritized. Still, many members found him to be the most candid panelist when he explains that they make their decisions based on “what is best for Delta.” Of course all of the programs make their decisions based on their corporate interests, executives are just rarely honest about that. And at the same itme he emphasized the importance to the long-term interests of Delta in doing the right thing for their customers, and their fees and expirations often didn’t seem like the right thing. He relayed a story about getting a note from the CEO of the airline about a customer who complained about being told he could buy back his expirated 800,000 miles for $8000 — which just seemed wrong and thus wasn’t helpful to the airline.

Hyatt clearly takes a different approach to their loyalty program, seeing it as a means to put “heads in beds” rather than selling miles for an independent profit. In other words, whereas United’s Mileage Plus has historically been the most (and sometimes only) profitable part of the airline, the Gold Passport program is seen as a complement to the program. And their decision to add a credit card, while certainly providing revenue from the sale of points, means that customers ‘carry Hyatt in their wallet.’ Interestingly, Hyatt has a lifetime status program for Diamond status but not for Platinum and they consider their lifetime program something to be thinking through.

American Express Membership Rewards had fewer points to make on the panel, though it was interesting just how many high spend customers redeem for toasters. I was aghast..

Overall it was a phenomenal event, with the opportunity to interact with the top leadership of the programs, to gain some perspective on their plans and the way they think about loyalty. I had several folks come up to me afterward and declare, “This is what it’s all about! This is why I came to New York! Thank you so much for organizing it!”

Everyone will have an opportunity to chat with the President of AAdvantage online on May 4. Don’t miss it!

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, 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 »

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  1. Great summary Gary, thank you!

    I wonder what they are smoking in Delta (or is it the water in ATL?). From what I am sensing, they are giving up on fixing the atrocious award search engine because it is not worth it and instead they throw us bones like no expiration of miles? I think I will make Gold again this year so I can be Gold until 2/13 and then it is time for me to come over to United or American because I just can’t take it anymore dealing with DL and trying to use my Skypesos. And I am not the only one….While they make happy someone who flew 3 years ago they have managed to piss off yet another loyal customer who will take his business to another airline where he can use his miles without feeling raped again and again. Being candid and doing what is best for Delta maybe is not working as the latest financial results show? And I was also very surprised (no, shocked) that Delta was getting higher satisfaction marks than Northwest!! As I followed the live tweeting from the event I was getting the feeling again that Delta top management is the complete opposite of being candid, how about slick dishonest people who lie in your face (of course IMHO).

    Long Live NWA:-)

  2. Good review of the major points. Hope others post their interpretations soon, it’s always good to compare who got what out of these presentations.

    Side question – Are you, Lucky and a few others 100% against spell checkers? Type it up in Word first if the blogging tool doesn’t have a spell check function – though I think it has one because the comments section highlights my misspellings. Everyone makes mistakes when typing quickly but it’s somewhat annoying to see several typos or more in a single post. 🙂

  3. I think if American just added a tier above Plat for 75k – call it Diamond, that will eliminate the problem of AA G and AA P lifetime clogging the system in numbers.

    Us has a simple and elegant way of upgrades priority – It is status, followed by the number of miles flown on US over the past year. So if I am a CP but my BIS is on UA, I would be at the bottom of th CP upgrade list

  4. @gpapadop,
    I welcomed the non-expiry change for delta and would probably fly with DL more (versus UA) on domestic routes (since their transpac-net is still so weak compared to NW and UA) less worry and simplicity works for me…

    keep in mind the economy have been in the dumps for the last 3-4 years (no thanks to some idiot of a family from Texas running the country) it will be another year or so before my traveling goes back to normal.

    award availability and mileage inflation is something I like the domestic airlines to address because the United Mileage rubles are equally bad versus Skypesos

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