United announced today that they are moving to revenue-based frequent flyer earning next year.
They say this is part of making their program better. More faux changes you’re gonna like.
Here’s how many miles you will earn for flying United flights and crediting miles to United’s frequent flyer program starting March 1 of next year — based on the cost of your ticket.
It’s not actually that simple, of course, since
Actual mileage posting will be determined by the actual ticket price, purchased ticket routing, fare class, Premier status, residency and ticket issue date. For tickets purchased in a currency other than US dollars, we will convert the purchase to US dollars and then calculate the number of miles you will earn.
Got that?
United already devalued their award chart. This change is earning only, the redemption side has already been gutted. So here they’re making changes to earning by flying.
Should You Care? What Does This Mean to You?
The only people who should care are those who fly United and earn elite status.
Here are the key things to know, if you are not a United elite frequent flyer:
- This doesn’t affect credit card earning. All of the United miles I need I will get through partners, like transfers from Chase Ultimate Rewards or through hotel stays with Rocketmiles.
- This doesn’t affect the occasional United flyer who pays attention to their miles. Just credit miles earned from flying United to partner airlines.
- This doesn’t change anything for flights on partners when the partner issues the ticket. Buy a partner airline ticket and fly that partner airline, credit the flight to United and you’ll still earn miles based on distance flown.
For United elites flying mostly international, this shouldn’t matter a whole lot
- Premier status will still be earned based on miles flown (just as it still will be at Delta)
- You can earn miles flying on partners, so fly the limited number of United flights required to earn status and do the rest of your flying on partners. Buy your tickets on partners and mileage-eanring doesn’t change.
- If your address is outside the United states, then United spend (partner tickets don’t count) won’t apply to you. If you’re in the United states, $25,000 spend on the United Visa still exempts you from the spending requirement for elite status up to Platinum (75,000 mile status).
United elites living in the U.S. and flying domestically need to understand that they will earn fewer miles unless their average airfare is 20 cents a mile. (Like at Delta, short haul high fare flyers will benefit, paid international premium cabin flyers will also benefit somewhat.) That’s double the fare level required to earn elite status under the new revenue-based requirements for recognition. For many of you, it’s time to dump United as an airline.
- You may think, where do I go? American has said they won’t be making major changes until they complete integration with US Airways. Switch to American (or Alaska, which has considered a revenue-based program) and tell them why you are doing it. If American can make money under the current model they won’t have a reason to switch. And integration with US Airways gives them a reason to wait and see.
Why is United Doing This?
United CEO wanted the MileagePlus program to become more revenue-based. And so it is.
The usual arguments in the industry for revenue-based programs is “Delta is doing it and Delta is really profitable.” There’s tremendous Delta-envy. Although Delta has been profitable and has not had a revenue-based frequent flyer program. Revenue-based at Delta doesn’t start until next year. And Delta knows well that while they have been running the best airline, going down the list of things and how they rank against other carriers, they are at the top of US airlines in almost every category but would concede (and have conceded to me) not in Skymiles. Still, ‘Delta see United do.’
(Just like Delta, United is even capping the number of miles you can earn per ticket to 75,000 — so not really rewarding the highest spend; members can game this on expensive tickets by buying one-ways instead of roundtrip, but still perverse.)
Delta introduced revenue-based elite qualification. Then United followed.
Delta then went to revenue-based mileage-earning for flights and then announced a new five-tier award chart both to begin in 2015.
Delta’s program means less mileage will be earned from travel. And in some sense, that makes flying less important in the program. Meanwhile, United’s earning structure — nearly identical to Delta’s — will mean fewer miles from travel too.
Delta didn’t go all the way — scared off by how it would hurt them with their most valuable customers.
For an airline losing $600 million last quarter, this is management by ‘doing what Delta does’. Even though United knows darned well the downside risks.
Revenue-based earning does not unequivocably reward the right people. Rewarding based on spend is often misguided, what you want to do is incentivize more spend not give people more who spend a lot.
- A flyer may buy one expensive ticket with you because you are the only airline who flies non-stop on the route. Does it make sense to reward them? You’re essentially just lighting money on fire if they’re going to pick your airline anyway.
- The same hold holds for business travelers who are part of managed travel programs, if they aren’t choosing their airline then what are you rewarding?
- A high fare passenger may trade off with another high fare passenger (for instance they both buy the last seat available on a flight). That high fare customer wouldn’t actually be profitable in an economic sense (opportunity cost basis).
- On the other hand a low fare passenger may fill empty seats and be pure profit — or they may ultimately displace a high fare passenger and be very costly if the airline didn’t get their revenue management right.
- Low fare customers may also engage with an airline’s ancillary products. Base airfare isn’t the only contribution to revenue that matters, and other products are often higher margin than the actual airline seat.
- Meanwhile third party partner customers are profitable too. A member who carries an airline’s credit card and uses it, credits points for their non-air travel to the program, and uses their shopping portal may be a profitable customer.
- And ultimately the program needs to try to influence incremental business. You may reward a high spend customer but not get additional business from them than you would otherwise have gotten. But you might be able to move the needle with some of your other customer segments.
What Other Changes Were Announced?
Revenue-based mileage earning wasn’t the entirety of the announcement. They’ve also let you know that they’re providing more ways to waste your (harder to earn) miles.
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Currently 1K and at nearly 900k BIS lifetime flown, I’ll be VERY curious to see what happens to the MM program…
that said, I’ve been a happy MVP (lowest tier) customer over at AS for 2 years now 🙂
Even after the devaluations one could justify flying United based on the strength of Mileage Plus. Sadly this is no longer true. If you are not a hub captive corporate flyer spending other peoples money, why would I want to fly them now? I mean their service certainly isnt close to Delta. Their frequent flyer program is now bottom of the barrel. Why?
The two reasons I have had a dalliance with UA this year are to have status for 2015 as a counter to Delta for use on cheap flights, and to work toward UA Million Miler which is still pretty good for the spouse benefits. There is still some attractiveness with UA for flying partners in regions such as Asia compared to DL earning, but those don’t count to Million Miler so not much reason to slum it on UA for me. Too bad I am flying them tomorrow. Time to credit to Aegean.
Hmmmm for those of just racking up united miles from credit card spend this could actually be pretty good. Less competition for reward seats!
Disagree that the only who should care are those who earn elite status.
It’s a big blow to leisure flyers within the U.S. For example, what partner option do you have to Hawaii? The Caribbean?
South America for that matter now that TAM is gone.
And who wants to take a connection when they don’t have to? So leisure flyers internationally who take the United nonstop lose.
I’ve flown every US based airline and without a shred of doubt, Delta is by far the most rude and over entitled corporation on the face of the earth. To say that “Delta” is profitable is to condone the killing of baby seals and to say well it’s ok to do anything you want so long as you are able to continue to operate your business.
I wouldn’t fly delta with your money. Yes they are that rude and over entitled. I avoid Atlanta at all costs and really just try to completely stay out of the Delta “Meniverse”. I guess Chicago and Houston want the same treatment. No skin off my back. Have a great week.
@greg – my point is that even hub captive leisure flyers not earning status, fly United and credit to a frequent flyer partner to still earn miles based on travel distance. (But watch the program you choose’s earning per mile based on fare class you are buying)
Will mileage still expire after 18 months of inactivity?
@Gary. You say that Premier Status will still be based on actual miles flown. I have looked at the UA announcement and all I have seen is a statement that 2015 Premier Status will still be earned on actual miles flown. Have I missed something, or are we assuming here?
I get that, but what do you do with miles earned from a Chase card?
You can’t mix and match them if you credit to a partner. And the value of miles increases when you have bigger balances.
It’s a loss.
Great analysis- they really are killing off a valuable part of their business. I really hope American sees this as a way to be a differentiator, but if they go down this route too I’ll just go over to Southwest for my flying, as I’ve had better treatement with zero status from them than having status at UA or DL.
Good post. Two comments. I think this, in facts, rewards egregious spending patterns by businesses or people who work for them, by encouraging folks to pay a ton of money close in. This just seems like a stupid way to run a business or to always think “oh, well, I can just expense that.” Just egregious billing practices in say consulting, business, or law that may get worse. My other point: I don’t think this is as bad for the average flyer as some of the bloggers think. Most bloggers talk about how transcontinental flights are pretty cheap. However, not everyone lives on the coasts. I live in Dallas, so my tickets are nearly always 300-350 for about 2000-2500 miles round-trip. Yes, I’ll be coming out behind still, but it’s not as bad as the bloggers make it out to be. Don’t forget the other 35 states in the US!
@greg – sure you can, transfer chase points to singapore, transfer amex points to aeroplan, ana, singapore..
@A Kimyai – yes
@NB not sure I follow?
This is surprising to me because this isn’t following Delta. Delta has a lock down on business travel, and United wants a piece. But screwing people who book cheap flights doesn’t mean you’re a great business airline. I don’t get it, they aren’t innovating.
Unless I’m completely underestimating how many businesses are drastically over paying for flights. I mean, you really have to paying $1800 on a RT to Europe in economy without status to start doing better under this program? Is that target audience, of people who have their companies over pay that bad, is that big of group?
Seems ridiculous.
@Gary, what program do you recommend for occasional Star Alliance flyer that doesn’t have status in any program, and has been crediting to United? I know you’ve mentioned various foreign alternatives. Maybe do a comprehensive post on this?
Also, what happens for tickets on UA issued by partners?
thanks!
As long as they don’t touch redemption, I don’t see revenue based earning as a huge deal. DL was already crap for redemption, their changes just made them even worse. As long as UA doesn’t go to revenue based redemption, I’m OK with this.
perhaps a campaign is in order
My name is Erich and I travel 50-100k miles per year. I switched from UA to AA in 2014. AAdvantage #flyerfriendly
Eh where in the world did you get the idea that DELTA has a lock down on business travel? HUH?
Only if you work for Coca Cola… or eh DELTA. See what I mean about the attitude. Delta has no such lock down. And there is no such thing as “business” money and any other money. 2008 should have taught a lot of people this lesson. Obviously not.
This idea that there are “business” and personal expenses and they are not related is an antiquated concept left over from bad episodes of Mad Men.
@Erich – EXACTLY
@AM W fares and higher credit 100% to Avianca Lifemiles and to Aeroplan.
All fares earn 100% miles with Turkish Miles&Smiles http://www.turkishairlines.com/en-int/miles-and-smiles/partners/when-you-fly/mile-table-united-airlines
In fact @Drew, I know you probably didn’t intend it, but I actually find your comment to be one of the most offensive bits of nonsense I’ve ever read on the Internet and god knows we’ve read a ton of them.
The only business that can claim they have a “lock down” on anything are those who are getting government employee fares and my guess is they aren’t a lock either. When businesses make a decision, it’s made by human beings and not computers. Human beings decide whether another corporation is part of your yearly budget. There is no blind faceless business like this moronic concept people like to display as if every budget decision is made by some guy in a back room who looks like some goofy caricature of a bad 80’s max headroom ad campaign.
If you’re making business decisions, the decision is the same. Spend your money where the company receiving it appreciates your spending. End of story.
If they don’t, keep your money. For god’s sake, you would’ve have thought the advent of technology would have fostered a movement by certain corporations now that travel is not so “essential” to be more customer service oriented. To award your travel dollars to any company who goes the COMPLETELY other way and tries to make you as faceless and insignificant as possible is your own form of suicide. And alas, it’s your life.
The criticism about losing potential loyal customers will be moot if AA goes revenue based. Then all three majors will effectively be the same. For all the teeth gnashing about Delta, their multiple credit cards and ability to stack MQMs to earn status without flying looks better and better.
Net effect is lower miles for lower profit customers. Just how it should have been all along. The days of mileage runs are going the way of the Dodo. And that’s good news for all but those few who had the time to waste on pressurized tin cans seeking status and gaming the system on mistake fares.
@Paul, so are we dealing with Airlines or banks here Paul? If so , it’s time to recruit some offshore banking interests I guess. I’ve heard there’s a couple interested parties.
What always amazes me personally is the ability of the downtrodden to claim victory at the drop of a tissue . hehehe
Paul – agree with your posting, although Delta’s reward redemption opportunity is a travesty (at competitive rates). AA will eventually move to this model, but if smart will drag their feet on an announcement to see if they can steal some loyalty from UA.
UA and DL should not base their economic decisions on mileage runners interests. While it can be argued that they are filling seats that would otherwise go empty, it is not a business model that should be encouraged. Companies should focus on developing high margin business.
Gary,
I don’t usually agree with you, but I do agree that this is not enticing the right people. Unless 95% of their revenue is derived from GS/1Ks (I don’t think so), they’re burning everyone else here. I’m stuck in DEN.. UA or F9, and F9 is doing their own crazy Spirit-like cost “decreasing”.
I’ll requalify for UA Gold this year. I thought about pushing up to Plat, but I’m thinking elsewhere..
I might match to Turkish and start crediting there..
Wait for it. CC churn is the next scam to go. And good riddence!
United has always been a crap airline and playing “me too” is just confirmation.
This is basically going to incentivize me to open some credit cards for airlines I don’t usually fly, and then make my decisions solely based on cost going forward. Even though I spent $20K on flights last year on United, I just don’t like how this revenue based system works. It’s not a loyalty system now it’s a rebate payment.
As long as you don’t care about domestic upgrades you can just as well switch to another FFP as Gary suggested. Aeroplan makes some sense depending on the route, Turkish is still ok, Aegean if you are after status only.
While it’s quite possible to construct scenarios under which revenue-based earning is not the optimal rewards system for the airline it’s much easier to construct scenarios in which distance-based earning “misrewards” customers.
Constructing a perfect rewards system (within the parameters Gary described) is so context dependent that the user would actually have to price out the ticket to learn how many miles they’d be entitled to and even then the system would have to say something like “This ticket will earn 4,500 FF miles if purchased within the next 90 minutes”.
As a best approximation, I think the revenue-based earning better meets the airlines needs to reward “more valuable” fliers. Certainly it’s less prone to being gamed by people like us.
@Girth nobody’s asking anyone to do anything according to anybody’s interest. Here’s how this works.
Each transaction exists on it’s own merit. People like to mistake loyalty for some other concept. Yes so long as the buyer is getting a better deal , he or she will remain loyal even if the immediate cost may be marginally higher. But the tricky part is this. People think you can do one or the other. They think well you’re either a walmart bargain basement shopper or you don’t care and you’ll go to Pottery barn. The truth of the matter is the money is in the middle. And if the middle votes to keep Delta’s dream then they deserve their fate.
As I’ve said, it makes little or no difference to me personally but unless you’re land locked to a delta hub, you should understand the impact of your decisions. If you don’t that’s fine, people who drink too much sugar are surprised they have to later treat diabetes, and people who smoke too much are often bitter when diagnosed.
Your lives and wallets are your own. If you do everything based upon what the number says, you get what you deserve
United, like Delta, has gone Full Retard
(starting at 1:23)
Gary- Why are you pretending this is a nonevent for non elites?
Crediting to Singapore is a net loss with fuel surcharges.
Non elites definitely lose if flying cheap fares.And crediting to Lifemiles means you can’t mix with Chase points.
Avioni
http://youtu.be/X6WHBO_Qc-Q?t=1m23s
Lol you notice nobody ever complains about the system being “gamed” when they think ( in their own minds of course) that they are winning. Great stuff.
That’s why I still love Charile Sheen. Love the guy # WINNING Duh #WINNING
WN Companion Pass for those who fly a lot of domestic is looking better all the time. If your UA upgrade gets TODed out from under you, coach is coach after all. And moot if on an RJ anyway.
And for international, just do manufactured spend and redeem.
Not that I ever spend that much, but the 75K cap is even more stupid on UA as they still sell F which regularly will result in top value spenders reaching the cap on base fares. Why you would ever want to penalize someone giving you $7000+ for a ticket is beyond me.
The sheer lack of strategy coming out of UA these days is mind boggling. It is all copy cat, but they only are copying select pieces and seem to be missing the big picture.
UA use to have a decent fleet but even that is lagging now as DL and AA remove the MD-80s and replace them with A321s, A320s and well equipped 737s along with e190s on the express route. UA meanwhile is removing very comfortable 757s and replacing them with more cramped 737s. RJs are everywhere, on longer and longer flights and airports are being staffed with outsourced help who are anything but help when a little storm moves in to disrupt the UAX domestic fleet. UA use to have the crown jewel with their PS product, but they have no future vision of what that route will hold and even with their most recent hard product update they have extremely tired aircraft and virtually no soft product. Heck as of today even B6, a low cost carrier, has a better J product in every way.
I only buy business or first class tickets. Before Smisek I always bought UA. Even since Smisek took over I only buy B or F tix on the cheapest business or first class fare both domestic and international.
As such, you’d think I’d be excited for a revenue-based system….
BUT
I did the math on some of my upcoming trips on both UA and others. EVERY SINGLE ONE under the new system resulted in fewer RDM for me. And if that’s the math for me, I can only imagine what its like for a typical domestic-only coach fare-only flyer! Thank God only one of those booking is actually ON UA!
So this new system screws not just low rev flyers, but high rev flyers too!
It’s a CRAZY bad business decision!
@LarryinNYC you do realize that “people” like us does not include all Americans, only all New Yorkers.
New Yorkers sometimes forget that NYC and LAX exist in their own paradigm which is completely and distinctly different from the rest of us when it comes to this so called “field”.
Simple Econ. Costs and benefits. etc.
I’m trying to decide whether to blame this on Jeff Smisek’s inability to understand basic economics, or on the DoJ’s lax enforcement of antitrust laws in the case of airline mergers — or some combination of the two.
In any case, I’m seriously angry, and I’m considering moving my roughly $10K/year in ticket purchases over to AA. But I worry they’ll be the next domino to fall. So maybe I should just stop being loyal to any airline, and cut back a lot on my travel. Either way, United is going to lose a lot of business.
http://stream1.gifsoup.com/view6/4567593/alderaan-explosion-o.gif
My company allows Y fares for travel door to door over 14 hours. Usualy my tcikets cost from 3-6K to fly to Asia or Europe so I will get out abhead especially since I am top tier FF. Usually these are more expensive than business but oh well.
AA would be smart to soak up all the DL and UA deserters and then switch to a revenue program in 2016. That way we can all fly Southwest in 2017 and then when legacy low cost carriers lose their charm we can all fly Spirit in 2018 and be grateful it only costs $25 to wear your coat.
Hey Bob, what company is that? Please share so I’ll be sure to sure with all my clients and friends some sage advice.
But Oh Well lol
Also new for 2015. Your ticket is no longer a guarantee of travel. You also must , if requested, perform any one of 4 pre choreographed Smisek circus acts or they may not invite you back for an encore performance. As stands, you can either twirl 23 copies of the United Way magazine on a stick, feed yourself feet first to a lion, strap yourself to the horn of a rhino, or do a triple somersault quadruple 720 front sided Ollie and Stan from the emergency exit in the rear toilet without a net.
One of the major advantages of M+ For me is that they don’t add fuel surcharges to redemptions. Most of my redemptions are transatlantic economy flights so hardly worth doing with fuel fees. Gary, perhaps you could do a rundown (or point to one that’s already been done) of the redemption fees for various FFPs, especially *A. If I remember correctly, Avianca don’t charge for fuel either; are there others?
Thanks for all the info!