United Airlines MileagePlus is somewhat less lucrative for the airline than American’s and Delta’s frequent flyer programs. You can get some insight into the economics of their loyalty program from their latest SEC 10-K filing as well as disclosures made around raising debt backed by the revenue from its mileage offering.
While 10% of miles flown on Delta were from passengers redeeming SkyMiles, and 15% of miles flown on Southwest were from passengers flying on points, at United that was just 7.3%. That’s comparable to American Airlines – a real laggard though.
In part that’s because of the fundamental differences in the American and United programs compared to Delta and Southwest.
- At Southwest miles have a fixed value, there’s no opportunity for outsized redemptions, so no reason to save miles. They offer a fixed rebate, and it makes sense to use points as soon as you have enough for travel. And with only domestic and short-haul international coach, those mileage thresholds are low.
- At Delta they’re having the greatest success minting miles from credit card spending, a result of doing a better job converting passengers into credit card holders. They’ve been aggressive in their acquisition campaigns, and that’s translated into more revenue from American Exprss to Delta and ultimately into butts in seats on Delta planes (regardless of the value of those redemptions).
Still, 5.6 million flight awards were redeemed for United travel by MileagePlus members (no distinction is made between one-way and roundtrip awards). Most MileagePlus redemptions are for travel or upgrades on United (92%).
1.2 million awards were redeemed for partner awards, merchandise, hotel and car awards, and United Club memberships – representing just 8% of miles redeemed (merchandise is cheap). United Club and lounge pass redemptions, while a small portion of the total, were up in 2022.
Although partner awards in premium cabins represent the best value for United miles most of the time, that’s not how most members use their points.
In total, United has deferred $6.675 billion in revenue as liability for outstanding miles. That’s up $393 million over end of 2021.
United, like other airlines, recognizes a majority of the revenue from the sale of miles to third parties (mostly banks) right away rather than deferring it as travel liability. That’s in contrast to miles awarded when you travel, because the accounting rules are different.
- They consider most of the money to be for ‘marketing, advertising and travel benefits in the current year’ rather than for future travel.
- United recognized $2.4 billion this way in 2022, up from $1.8 billion in 2021.
Historically there has been less spending on United credit cards than on American or Delta cards. It doesn’t look like United’s new credit card deal with Chase closed the gap between MileagePlus on the one hand and AAdvantage and SkyMiles on the other. Prior to the pandemic it appeared that the entire growth in the program stemmed from revenue earned as a result of Chase Ultimate Rewards transfers.
Redemption values just aren’t there with UA. If I can book a seat on Star Alliance partners, I’d rather just book through Aeroplan since their points are easier to come by and have the same or better pricing.
When a flight from Chicago to Minneapolis costs 32.3k miles, what’s the point?
United miles are just a big Scam.
Airlines are really banks in or nation states that fly. They control the value of their currency (miles). They do not make money off of the redemption of those miles. They keep kicking the can down the road. As stated above, 32.5k miles for an hour flight is BS.
Duh, they stopped offering saver awards on most routes on almost all dates and flight times.
Another great data driven comparison that lets the facts speak for themselves.
Well done Gary
Remember how we talked about UA MileagePlus several years ago, and mentioned that the ONLY reason UA was better than DL because MileagePlus offered better awards (lower business class redemption pricing)?
Well, guess what. United destroyed MileagePlus by moving to “SkyPesos-style” award redemption pricing. Thus, the sole factor that made UA worthwhile was wiped out. I mean, nobody flies UA because they have such great working inflight entertainment, right?
And absolutely no one flys United for their premium class prison food, which is only compounded by their C-street’s tone deafness about their catering.
Back on point, United’s MP value proposition continues to violently plummet. Upgrading to premium class is no longer a realistic benefit. “Unlimited complimentary upgrades.” Oh, they’re quite limited (by revenue management) or are only available as leftovers if United’s app can’t upsell unsold first class.
I think 2023 will be different, as trips with miles now count for status. Anyone who marginally qualified for status had a hard time using miles, as that would be a trip that wouldn’t help for maintaining status, so the miles just accumulated except possibly for an end of year trip where the cost wouldn’t be enough to move the needle on the next status level. But in the other side, family trips are harder to manage, as one doesn’t want to use miles for a family member, as that’s just a waste of miles that could go for status. United could take advantage here by allowing a miles plus cash for a family trip, by allowing the miles to be spent on first the account holders ticket, and cash for the rest.
Simultaneously, this change also encourages moving up to higher priced cards which allow more spend to be translated to PQP. It even makes paying transaction fees on things like real estate taxes, as the value for someone who doesn’t quite fly enough to get 1k or lower organically exceeds the cost when accounting for both the PQP and miles.
On the downside, United will see less spend on non-travel redemptions, as they also don’t work for this class of customers. The deals never seemed that great, or were for things I didn’t really need, so it won’t affect me. It also doesn’t help encourage more spend by people flying enough with other people’s money to get Global Services, as they likely have enough miles to pay for family trips.
“Simultaneously, this change also encourages moving up to higher priced cards which allow more spend to be translated to PQP. ”
Why? We just concluded that status is worthless on UA.
The only cards you should get are those with transferable points.
Prior to this year, the only thing I used my MileagePlus miles for was United Club access. They were there, they were doing nothing, why not use them? I also have this intense dislike for annual fees on credit cards, so paying for a United-branded card was a non-starter with me (despite the fact that I bank with Chase). However, now that points travel applies to status, I booked an ORD – DUB – ORD flight using points. It was 60k in Economy and eye-wateringly expensive in Polaris, so Economy it was (well, Economy Plus thanks to my 1K status).
So, in the future, I’ll put aside my United Club fee and enough for a long-distance trip in my MileagePlus account and let the rest accrue, because there is literally nothing else for me to spend it on. And if they do another devalue for points travel, I’m going to start dumping half of my points into Aeroplan. I’ve already transferred the hotel points I wasn’t using into Aeroplan.
Did you ever try to book a first class seat to Europe using FF miles? You have a better chance of winning the lottery unless you willing to fork out aprox triple the miles. The only worse thing then their milage program is their website. Let’s not even tackle the poor inflight service. The only advantage is they partner with Lufthansa and if you lucky, you can score a SFO to MUN or FRA. Those options are fewer and fewer.
I have had no experience with Delta, nor Southwest, but I do have tens of thousands AA and UA miles. I can tell you they are virtually worthless as far as I am concerned.
Made it to Gold last year. Might be able to get there again this year, but am putting my wife’s miles into Turkish M&S. We have at least one trip a year to the region, perhaps two. With a status match we might be able to parlay that into *A Gold. At least I hope. It would be nice to see strategies for managing miles for couples, as we have to designate who banks with which bank and who takes the lead for which programs, as this matters even for the transferrable currencies.
I still find decent value with United miles, though never in the USA. In the last year I’ve flown Fiji-Sydney-Tokyo for 15k in economy, Orlando-Newark-Zurich-Warsaw-Colombo for 80k in Business, and a one way Barcelona-Newark for 21k in economy. This year I’m taking a 10 day Guam-Micronesia–Marshall Islands–Micronesia-Palau-Guam trip for 65k in a mix of First and Economy.
Interesting, but there are many plausible explanations:
(1) UA fares were so low for most of pandemic that people bought cash tickets and saved miles
(2) UA flyers could not redeem for aspirational travel during pandemic (most of Asia still closed in 2022)
(3) Partner awards have been more challenging to find, so people are sitting on miles.
(4) Why would anyone charge anything on UA and DL airline cards when the bonus categories and earn rates are so much better on other Chase/Amex transferable points cards? Clearly this is bourne out by the stats for UA, but strangely not for DL.
I’m guessing DL flyers are so beaten down they just redeem for whatever they see on the screen, whereas UA flyers are still holding out for awards that may never return.
Personally I find this strange as I have no trouble burning UA miles for high value awards. It does take some patience and flexibility
Please exactly state what “10% of miles flown on Delta were from passengers redeeming SkyMiles” means, as % is inherently a relative measure. With a DL economy award ticket at times costing 300K or more Skypesos, 10% could simply reflect the higher costs of DL awards rather than the “volume” of passengers redeeming Skypesos…
It all depends on what “%” means in that claim…
DCS
Revenue passenger miles or RPMs are the basis of traffic comparison between airlines. One RPM is one passenger flown one mile. Delta carries a higher percentage of its RPMs on award tickets than American or United as Gary notes. The value of the award does not affect that calculation but does the value of travel redeemed
@Tim Dunn — Got it. A quick search of ‘rpm’ returns the following, though the data may be outdated:
Is there a point at which too many miles unredeemed out there becomes an accounting problem? Or do the just assume they can devalue their way out of it? (Damaging their card business, though.)
United is minor one step better than Delta
That poor value has me in AA Alaska & Southwest
Int BA & KLM
Delta never United a once in a blue moon when they fall to earth based on empty flights
DCS,
no US airline reports traffic statistics including RPMs on a monthly basis any more.
Load factor is a measure of efficiency in how well airlines fill planes but it doesn’t take how well airlines balance revenue generation.
Revenue per available seat mile (RASM) incorporates revenue generating efficiency and how well flights are filled. The ideal formula might be less full but more revenue per passenger for one airline but another might be involve more load factor and lower revenue per seat.
Loyalty program redemptions don’t generate revenue at a flight specific basis as “paying passengers” do.
As gary has noted, Delta fills a higher percentage of its seats with award passengers than either American or United – which is actually contrary to what alot of people seem to think.
That is the counterintuitive part…
Delta just manages to find a better balance of awards and high value paid tickets
I flew the US to Buenos Aires last November in C for 66K miles and that was the most I needed in 10+ years of regular flying to BA. The lowest in the current calendar for the same trip is 155K! E has risen from 30K to 70K.
MP is pretty much a write-off for UA metal at this point.