Frequent fliers aren't going as far

An airplane

TEXT OF STORY

Doug Krizner: Frequent flyer programs were designed to build passenger loyalty. The free tickets were a nice bonus. Maybe you're a member. But those miles might not be worth quite as much as you think. Here's Stacey Vanek-Smith.


Airline ad: We're giving you full service no matter what you pay, with first-class leg room, free cocktails for everyone . . .

Stacey Vanek-Smith: Oh, how times have changed for air travel. Discount carriers like JetBlue are part of the problem. They've pushed ticket prices and profit margins down for the airline industry.

Mark Ashley edits the travel blog Upgrade. He says there is one part of the airline business that's still flying high:

Mark Ashley: The airlines make a heck of a lot of money by selling frequent flyer miles to credit card companies, restaurants.

At the same time, airlines have made it harder to redeem those miles. In Delta's Skymiles program, flyers usually hand over 25,000 miles for a domestic ticket. But it's subject to restrictions.

If you're willing to burn 50,000 miles, you can get a seat on any flight you want. But starting December 1, certain Delta flights will be off limits for rewards, no matter how many miles you're willing to pay.

Mark Ashley says that's a snub to Delta's customers:

Ashley: If you make it harder and harder to cash in your miles, then you risk losing those customers as frequent flyer loyalists.

But these days, most travelers aren't loyal, says Airline business magazine's David Field:

David Field: If you ask a customer, what are the most important considerations in your choosing airline A or airline B, they'll mention four things: Fare, fare, fare and schedule.

Other airlines will be watching Delta closely, says aviation analyst Richard Aboulafia. They'll want to see if the airline loses customers.

Richard Aboulafia: You don't want to kill the goose that lays the golden eggs, you just want to strangle it 'til it gives you every last egg. You don't want to alienate people who are part of a customer loyalty program. On the other hand, you want to maintain profitability on this loyalty program.

Perhaps to make it more attractive to potential buyers. Aboulafia says many airlines are considering unloading their frequent flyer programs could be a good idea.

Earlier this year, Bear Stearns priced the United Airlines rewards plan at nearly $23 billion. That's roughly four times the value of the carrier itself.

In Los Angeles, I'm Stacey Vanek-Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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