Airlines Get Serious About Nonflight Awards

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Got frequent flier miles but can't find an award seat? You're not alone.

The airlines have never made public any performance data that would allow consumers to judge the generosity of their award programs. And barring an injunction from the federal government, they never will.

But anecdotal evidence and a least one survey-based report (IdeaWorks, May 2010) suggest that award availability remains the programs' festering Achilles heel, both in reality and as perceived by many of the 100-million-plus members of U.S. airline mileage programs.

The airlines are keenly aware of the public's eroding enchantment with their travel rewards programs, and of the potential for government regulation if consumer sentiment continues to sour.

Alternative Awards

One approach increasingly adopted by the airlines to mitigate the problem of too few award seats has been to expand their rewards catalogs to include nonflight awards.

Over the years, various airlines have allowed members of their programs to use miles for hotel stays and car rentals, typically with their preferred marketing partners, as well as for miscellaneous consumer goods and magazine subscriptions.

What those nonflight rewards had in common was a negative -- with the exception of magazine subscriptions, they all offered poor value, especially when compared to the free flights that implicitly function as a value baseline for most program members.

The lackluster value of alternative awards was not lost on consumers, who stayed away in droves. (Here again, the airlines are mum on specifics. But feedback from my readers indicated that the popularity of flights was never seriously compromised by other award options.)

Now, however, nonflight awards are back. And unlike previous appearances, it could be for the long run.

What's different this time?

Best Ways to Use Frequent Flier Awards

While the airlines have always been ambivalent about giving away seats, they're especially reticent to do so in today's operating environment.

With flights running at historically high load factors -- more than 80 percent full year-round -- there are simply fewer unsold seats than ever. And the financial viability of airline loyalty programs is predicated on using "distressed inventory" (seats that were destined to go empty) for awards.

That explains why United and Delta, the two largest U.S. carriers, have included hotel nights and car rentals in their awards catalogs for some time. But as with previous incarnations of alternative awards, the value was underwhelming.

Old Option, New Value

During the first week of November, American launched its own version of hotel and rental car awards.

At first glance, it looks a lot like Delta's and United's offerings. The online award booking application is almost certainly the same one used by Delta and United, just rebranded in American's corporate color scheme.

And searches for hotels or cars tend to bring up the same results, in the same order, in all three apps.

What isn't the same is what matters most: the prices. And American's handily beat those of both Delta and United. By a lot, in some cases.

A double room on the same night at the Millenium Biltmore in Los Angeles, for example, would cost 24,530 Delta miles or 15,150 United miles but only 9,600 American miles.

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