Airline Frequent Flyer Miles, 30 Years Later


7. Credit Card Clutter

It was in 1985 that Diners Club introduced the first credit card linked to an airline loyalty program -- a move destined to have consequences almost as profound as the launch of mileage programs themselves.

Today, there are one or more credit cards affiliated with just about every travel loyalty program, and the number of miles earned for credit card charges is typically exceeded only by miles earned for actually flying.

The credit card companies have absorbed the lessons of loyalty from their experience issuing cards affiliated with the airline programs. All the issuers now have cards linked to their own travel-rewards programs, which compete head-to-head with the cards they issue in conjunction with their airline partners.

The proliferation of choices, and the competition it engenders, in theory amounts to a consumer benefit. In reality, the result is often confusion, as travel-rewards seekers find themselves overwhelmed by their options.

8. Hotel Programs Soar

For much of the three-decade history of travel rewards schemes, hotel frequent-stay programs have played second fiddle to the airline schemes.

But as hotel spend has come to account for an increasingly large portion of total trip expenses, more travelers are looking to the hotels' frequent-stay programs to earn free room nights. And the relative ease of redeeming points for hotel rooms versus airline seats has given hotel points yet another value boost.

While a recent report found that membership in airline programs still far exceeds membership in hotel programs -- 325 million compared to 177 million -- hotel memberships increased 37 percent between 2006 and 2010 whereas airline memberships only increased by 28 percent.

It's too soon to anoint a new winner, but we may be approaching a tipping point, where savvy travelers are more engaged with hotel points than with airline miles.

9. Revenue-Based Programs Gain Ground

America West's FlightFund program disappeared from view with the 2006 merger with US Airways, but its DNA remains in the programs of JetBlue, Virgin America, and Southwest's newly redesigned Rapid Rewards.

In its original incarnation, FlightFund was something other programs were not: a revenue-based program. That means that rather than rewarding customers on the basis of the number of miles they flew -- a poor proxy for the amount they spent on tickets -- FlightFund members were rewarded according to the number of dollars they spent on airfare. In principle, most consumers would admit that such a system was both fair and reasonable. And from an airline's perspective, it guaranteed that rewards were doled out precisely in proportion to a customer's contribution to the company's bottom line.

But there's a downside to such programs as well. The flipside of the predictable relationship between earnings and rewards is the inability of members to game the system and squeeze outsized value from the programs. The sure knowledge that you can reliably earn 1.2 cents in rewards, effectively a rebate, from a program like JetBlue's may be comforting; but many consumers would put up with the headaches of a capacity-hobbled scheme for the chance to get a 10 or 12 percent return on their spending, by, for example, using miles to upgrade on expensive premium-class international flights.

10. Loyalty Is Big

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