United Imposes Revenue Requirements for Elite Status

Chris R. emailed me this morning to bring a Milepoint.com post to my attention where United announced changes to elite status qualification beginning in 2014.

The following revenue requirements — in addition to the standard mileage or segment flying to reach status — apply to accounts with addresses in the United States only.

  • Silver: $2500 minimum qualifying revenue
  • Gold: $5000 minimum qualifying revenue
  • Platinum: $7500 minimum qualifying revenue
  • 1K: $10,000 minimum qualifying revenue

In addition, you can’t earn status entirely on most of United’s partners. Earning status will require flying at least 4 qualifying segments operated by United, United Express, and/or Copa Airlines

U.S. members who charge $25,000 to a co-branded United Chase credit card during the calendar year are exempt from the revenue requirement for that year if qualifying for Silver, Gold, or Platinum status. But there’s no spending exemption or US members reaching 1K status.

So far they are only promising this exemption for earning status during 2014 (which is either because it’s a test period or there are contractual elements with Chase involved).

An alternative, just idle speculation, is that for 2014 the threshold is set at $25,000 regardless of elite tier. Perhaps future years they would tweak the threshold amount, or create a sliding scale for different elite tiers.

Although the $25,000 amount really is not a surprise — higher amounts feel unattainable, while lower amounts likely mean the co-brand product isn’t really top of wallet for the median elite frequent flyer.

This component of the new requirements reminds us that United is an airline that was at least once more or less in effect a wholly owned subsidiary of Chase, and flew through its bankruptcy in order to support the underlying credit card business.

What revenue counts?

You’ll earn credit for base fare and carrier-imposed surcharges. So fuel surcharges, which are really a part of the ticket price, count. But taxes do not.

This applies to all flights flown by United, United Express, and Copa Airlines — and to Star Alliance and United partner airlines when flying on a United ticket.

Like Delta, partner flights on partner-issued tickets won’t count. So a Lufthansa ticket across the Atlantic on a ticket purchased from Lufthansa won’t count — which in a way is odd considering United and Lufthansa are joint venture partners. So I have to assume that the reason here is technological, that United will get a report of miles from Lufthansa if crediting to a MileagePlus account. But they won’t see the revenue information, so the revenue can’t count.

Finally they’re letting economy plus purchases count, which in some way is a fare buy up but also underscores the importance of the revenue stream derived by their extra legroom seating. (Although existing elites won’t often pay for the privilege.)

When do these changes go into effect?

The change starts in January 2014. That means your flying in 2013 is how you qualify for 2014 status. It becomes a combination of flying and revenue you provide United in 2014 for 2015 status.

Who can get out of this requirement?

Anyone with an address outside of the 50 United States and the District of Columbia is exempt. Military and diplomatic (APO, DPO or FPO) addresses are exempt from the revenue requirement. I predict a mass exodus from the United States. Presumably United will then have some sort of account auditing, putting themselves in opposition to some of their elite members.

If your address subjects you to the revenue requirement, then you can become an elite still by:

  • Spending the required money with United
  • Spending $25,000 on a co-branded Chase United credit card — as long as you’re only looking to achieve Platinum status, this won’t help you with 1K.
  • Legacy Presidential Plus cardmembers, regardless of how much they spend on their card — as long as they’re only looking to achieve Platinum status, this won’t help with 1K.

These exemptions only apply to the revenue requirements and do not apply to the four segment minimum flown on United (or COPA) requirement.

How onerous are the new requirements?

United has set the bar at spending a consistent 10 cents per mile minimum. That’s the same amount that Delta is using with its tiers (Delta’s top tier is earned at 125,000 miles and has set the bar for that at $12,500.)

Interestingly this is a higher amount per mile than when United was rumored to be looking at making similar changes two years ago. I wonder how much of that is based on the current ticket pricing environment, rather than looking at the value of a customer over a longer time horizon.

Roughly speaking tickets do cost that much for most people. A cross country ticket most of does run $500, for a little under 5000 miles earned. Which means — and even though most elites probably don’t really it or add it up — that I’d imagine most customers won’t be materially affected by the change. They’ll fly their miles, and by virtue of having done so they will have spent enough money with United to achieve their status.

Still, in an aviation market different than the one we’re currently in — in a pricing environment that’s more like what the airlines saw 3 and 4 years ago — ticket prices are lower and folks aren’t just hitting these minimums. So it could be a real future problem, although in that case if elite numbers drop I would expect to see “double premier qualifying dollar” promotions the same way we’ve seen double miles promotions.

I don’t like penalizing people for buying the very tickets an airline is offering. Ben Baldanza, who now runs Spirit, used to describe customers flying cheap fares — buying what his airline US Airways was selling — as not the kind of loyalty they were looking for. It took a decade, but the industry has begun to agree. And in the current environment that means not rewarding the customers who fly only cheap fares.

Getting $25,000 spend on a United co-brand credit card isn’t hard. If you need a spouse’s help to do it, that’s fine — get them an authorized user card on your credit card account and their spending will count towards the requirement. Two people sending $1000 a month back and forth on these two cards via Amazon Payments can generate $24,000 per year in spend if need be.

Since this new regime doesn’t begin until January, there’s reasonable notice in my opinion. People haven’t flown half the year only to find their benefits changed for next year. If United wants to do this, I don’t think they’re being unfair.

As I said when Delta announced similar changes in January, “Ultimately though I don’t think the requirements are that onerous, especially with the choice to spend with Delta or on the co-branded credit card.

What should we ask of United in return?

If United is making elite status a more rarified thing, a higher value proposition for the airline, then I think it’s also reasonable to expect a better product in return.

MileagePlus is already a very good program, but I think they ought to respect status more. Currently they privilege full fare passengers over status for upgrades, so a Silver flying full fare trumps a 1K on a mid-tier fare. I didn’t like it (especially in DC with a huge concentration of YCA government fare flyers at the Silver level) but I at least saw the argument that higher revenue was more important than status which might be achieved cheaply. But now all elites with US addresses will have a high value. Treat them as such.

And at a minimum, invest some of this incremental revenue into the very broken IT infrastructure that can’t even manage to ticket partner awards correctly a not insignificant amount of the time.

What this will mean for interacting with United going forward

Thinning out some of the elite ranks makes those who remain a bit better off for upgrades. But that’s always true. They could say that upgrades are only available for customers flying full fare, and it would be true that those customers on those given days would have a better shot an upgrade. Ultimately this is a question of what loyalty is all about.

For now, the spend thresholds and the ability to buy out of them via a credit card relationship make this not a deal killer, but the architecture here certainly could change in the future.

It also means that Delta is unlikely to roll back their changes (not that they were going to), since United has effectively “matched.” It also increases the probability that the new American/US Airways program adopts some sort of revenue requirement for status.

Lifetime status also goes up in value, since lifetime elites are no longer on the spending treadmill (and they’ll be competing with marginally fewer folks for upgrades). It’s about time that Lifetime elites got some sort of a break from United!

And customers who aren’t going to make the spending threshold will probably be less loyal, at least on paid tickets, there’s no longer a loyalty program reason for them to stick with one airline.

In fact in some ways rather than doing away with gaming, these changes encourage it and with less revenue to the airline — it encourages members to do more manufactured spend, earn more miles by credit card, buy out of the requirements, and it encourages them to earn miles and redeem for free tickets instead of striving to earn elite qualifying miles through paid tickets.

And free tickets or using miles for confirmed upgrades actually cuts against the higher revenue flyers from getting complimentary domestic upgrades, at least given United’s current stance towards taking any revenue for a first class seat rather than offering that seat as a free upgrade. Perhaps that’s another thing that United’s high revenue elites should now demand change.

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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 »

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  1. What is not clear yet is whether the $10k requirement will apply to 3MillionMiles who get 1K for life, for them to get their GPUs. At present if you don’t fly your 100k each year you are 1K but get no GPUs.

  2. As a business flyer whose tickets are bought through AMEX travel agent, I believe I am going to get screwed on spend requirement. Even though I am with United, tickets on non-united flights (but still star alliance) are almost always booked with the respective companies. So even though my spend is easily >$10k, I think United will be lucky to see more than a quarter of that.

  3. Also as a business flyer my tickets are purchased by the company travel agent will that count towards my year spend?

  4. 2 thoughts:
    1) Are some people going to start doing “revenue runs” in addition to “mileage runs?”
    2) I know that airline loyalty programs already encourage business travelers to travel on a particular airline, even if the fares are higher. The new revenue-based requirements will incentivize travelers to not only travel on a particular airline but to buy higher fares to meet their spending requirements (and avoid paying as much out of their own pockets). It’s great for the airlines but bad for everyone else.

  5. I received an email the PQD requirement is waived for Presidential Plus Cardmembers up to Platinum with no mention of minimum spend on credit card.

  6. AA is coming next. Delta’s CEO is a hero to all of upper management. Hey I don’t like it but don’t blame them, business was lousy for a good number of years and it is time to milk the fat cows.

  7. @Raj – that’s my 3rd bullet under ‘Who can get out of this requirement?’

    @ffi so far they have just said 2014

  8. @MilesFromBlighty – you are not correct. The PMCO Infinite Elites who got the 1K lottery ticket DO NOT get annual GPUs – but 3MMs definitely do get them. However (where you’re probably confused) – the 3MMs get GPUs whether they fly 0 miles or 100,000 miles, or anywhere in-between.

  9. Thanks for the analysis Gary. Your last 2 paragraphs are key. I just don’t see how this encourages spend with the airline and further dilutes the award and upgrade inventory by printing even more miles. I don’t mind them doing it, it is their business, but just seems a bit odd. Of course, i am of the opinion that upgrades will become fewer and fewer over time anyway.

    But as far as demanding some offsets from UA in terms of better customer service, re-prioritizing upgrades and the like, i don’t see them doing that. I don’t recall Delta throwing their Elites a bone when they went to revenue elites and remember that 1K is not even top tier, so not sure i would spend my way to getting it.

  10. I have long felt that, when push cones to shove, people who achieve status on uber cheap fares are more opportunistic than loyal.

    Seems that UA thinks that 10 cpm is a fair metric. That translates roughly to $500 for a JFK-LAX r/t. Yes, it can be had for less. Sale fares, corporate contracts, and government fares come in lower. But the folks buying those fares are not “loyal”. Rather, they are typically required to accepts the carrier on account of factors beyond “loyalty”.

    I may not like it, but I will live with it.

  11. @ Carl, you say: “I don’t recall Delta throwing their Elites a bone when they went to revenue elites”.

    Well, perhaps they did – they threw their “revenue elites” a bone by excluding mileage run mileage run elites (known in some circles as cockroaches) from their ranks. The pie is fixed; Delta gave their revenue elites a bigger slice at the expense of mileage run elites. Where one stands on this depends on where one sits, of course.

  12. “>>Like Delta, partner flights on partner-issued tickets won’t count. So a Lufthansa ticket across the Atlantic on a ticket purchased from Lufthansa won’t count — which in a way is odd considering United and Lufthansa are joint venture partners.”

    The REVENUE portion will not count, but the MILES will. So if you have already hit the need PQR and are short on PQM, the PQM on an alliance partner will still help you in the miles side

  13. Fine with me if they weed out the low fare mileage runners from the 1K ranks. But the notion that UA will somehow enhance benefits is fantasy. Pretty much all “enhancements” over the past 10 years have been detrimental to the frequent flyer. Sure, it’s nice to dream, but not logical based on history.

  14. When Jeff Smisek spoke at Stanford Biz School a few months ago, he commented “I’m not running an airline; I’m running a business”. He also mentioned the importance of “maintaining capacity discipline” several times. This change is certainly consistent with his philosophy.

  15. @jfhscott – you mean the folks that travel on the company dime and pay nothing. Then yeah, i guess those folks were thrown a bone.

  16. First off, if I didn’t use my foreign address, I’d be affected by the $10k minimum because I fly to and from about the world’s most competitive market (LHR) where, even with the high taxes (which don’t count towards spend), 10c per mile on long haul is generally considered quite expensive. I have to fly but I effectively pay for my tickets so I do my best to ensure I avoid weekends and peak seasons – it’s not leisure flying, but it is flexible.

    What worries me is that the US address requirement is not there because UA is recognizing that MP offers less to those abroad, but rather because they don’t have any decent cc arrangements overseas. I see it coming overseas as well.

    Gary – I’m with you on this: I can see it not generating the loyalty intended but unintentionally damaging the rest of the business. UA, without status, must be one of the worst airlines flying so has to sell on price alone. They need to offer something to encourage the next generation of frequent flyers to sign up to them: too many moving targets (requirements changing annually – inevitable with $ amounts instead of Tier Points or the equivalent) just introduces uncertainty to someone contemplating a multi-year investment. Were I starting again, the easy decision of 10 years ago to focus on UA would now be a very different decision and I would probably go elsewhere.

  17. I wish I had signed up for the Presidential Plus card when I could, with these changes the value of Platinum should increase, especially if they reduce the Govt flyer benefits.

  18. Gary, if UA was ever putting Y class fare-holders with low status ahead of higher-tier elites with lower class fares, it doesn’t seem to be doing so now. My family and I were all traveling on Y class gov’t fares, and all but one of us (the new baby) are silvers. We didn’t get to go to the front of the plane on the domestic (CLT-ORD) leg, nor were we anywhere near the top of the standby for the points upgrade on the ORD-PEK leg. I asked a UA rep about this, and she told me it went by tier first, and then by fare class. Strangely, though, I realized the new baby hadn’t been added to the upgrade list (even though we paid the points, so he should have been on there somewhere, presumably behind all of the rest of us), so I called, they fixed it, and the new baby somehow jumped us and everyone to the top of the standby list. No worries, though, he wouldn’t get the seat, because they said Business is confirmed full. However, we get on the plane, and get all of us situated, and some young lady comes up and shows us a ticket for a seat we’re in, and also had a ticket for. I have to get off the plane, and they tell us he (the new baby – and only the new baby) had been upgraded, and his seat offered to someone in standby, who was now already on the plane and had a ticket. We simply couldn’t have a six-week old by himself (and away from Mom, the food supply) in First while all of us are back in Economy Plus, so we offer the Biz ticket to the same nice young lady. Flight attendants nix that idea right away (why?), so we end up having to send mom to Biz with the baby as a lap child, and Dad’s stuck with the other three kids in Econ Plus – for 14 hours!

  19. Here is one group who really get screwed:
    1k flyers who earn most of their miles on international flights.
    A typical flight to Europe costs me $1500 and earns 15,000 miles, or .10/mile. But half of it is taxes!

    To qualify under the new rules, I’ll have to fly twice as many international trips (up to 200k miles) or switch to all domestic travel (not likely).

    I’m a MP member for 31 years and have earned 2.3 million lifetime miles. Now I’m being shoved aside.
    This is not nice, and does not make me feel more loyal.
    I’m definitely looking for an alternative.

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