Thursday, August 9, 2012

The rapid erosion of lower-tier elite airline status

Good article yesterday in The Middle Seat, the Wall St. Journals travel blog....

Silver Status Loses its Luster for Frequent Fliers. Scott McCartney,

Airlines have cut and crimped perks awarded to the silver-level frequent fliers—the lowest and most populous tier of elite status, which typically requires 25,000 flying miles a year.

Both travel message boards have threads going as well.

Flyer Talk (not much conversation here)

Mile Point (A little more conversation, and where I first found the story)

Conversation around this has been bubbling up on message boards for a while now, especially with United Airlines who overhauled their Premier program post merger, although the changes weren't as bad as some feared.

My position on this for a while now is that anyone who is comfortable qualifying for Silver Elite would be better served getting a credit card and taking advantage of the benefits that way, instead of flying 25K miles or 30 segments to qualify through the airlines.  This also allows you the option of choosing another airline at a lower cost without the opportunity cost of lost qualifying miles.

That's for the Silver (or lowest) level, what about the levels above?  This little tidbit caught my eye:

Even gold has lost some value. Steve Heller has lifetime gold status on United but found that it wasn't high enough to avoid some of the pitfalls of weakened elite status. His travel agent found two first-class seats to Bangkok for Mr. Heller and his wife priced at 140,000 miles round-trip. But gold status wasn't high enough to book those first-class saver awards. He could get two business-class seats for 120,000 round-trip—still a bargain, he figured.

"I called and they said, 'Your level allows business, but you can't get first on that flight,' " said Mr. Heller, a retired scientist from the Washington, D.C., area. "I discovered what a low-level person I am."
United confirmed that it gives better access to business-class and first-class "saver" awards to its top two tiers—Platinum and 1K—of its four-tier MileagePlus program. "In developing the MileagePlus program, members consistently emphasized the need to create distinction between the Premier-branded levels. This is one of those distinctions," a United spokesman said.

I can't help but wonder which "members" emphasized the need to create distinction?  It certainly wasn't the Gold and Silver members who are now relegated to second class citizenship under the new rules, and I doubt many Platinum and 1K members were really all that put out about it.  I have a feeling the "members" that really mattered were on the executive floor in Chicago.

Of course, all of that exclusivity goes out the window (especially on upgrades) when a lower-level elite decides they're going to by a full-fare (Y or B) economy ticket and then try and upgrade.  With United the first qualifier is NOT elite status level, but the amount of money you're willing to spend.  So a Plat or 1K on a S fare could find themselves (potentially, not likely because they can clear earlier however) losing out to a Silver Elite on a Y or B fare.  For all of United's talk about distinctions, what this really boils down to is a slow creep by the airlines to revenue based Elite programs.

What the airlines have come to understand is that loyalty is not a profit engine.  In today's hyper-competitive world many FF'ers are looking for price and value and will jump for a status match once an offer comes along that's to their benefit.  There is no real loyalty these days in the airline business.

I think it will be a long time before the upper-tiered loyalty program members realize a serious devaluation in their plans however.  But it is coming.  I predict that it won't be long until a bank figures out there are people out there who want a card that pushes them up to a level of equality with the top elite levels.  Granted, they will probably have some pretty high annual fees but customers will be willing to pay those in return for upgrades, F class award bookings etc.

Some pundits have speculated that we're starting to see the beginning of a sea change in how airlines treat their customers, especially those who, in the past, have been courted as being the 'most loyal'.  I really think that we've moved past the beginning into the implementation phase of several of these changes.  We've already seen the devaluation of the Silver level, now the perks are creeping into the next (Gold) tier, and I don't think it will be long before you see the third tier (Platinum) start to be encroached upon as well.

Airlines will, for the foreseeable future, continue to operate their FF plans and they will still provide the customer some small advantage (they will still, inevitably, market these programs as being 'more valuable than ever before' this will be, of course, not true), but the size of that advantage is going to get smaller and smaller as airlines move away from a loyalty-based plan and toward a revenue-based plan.  It's possible that customer outcry could stem this tide for a small time but I doubt it.  The box has been opened, there's little chance of closing it again. The best strategy now is to figure out how to best position yourself for the coming change.

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