Five Signs of a Frequent Flier Rebound

The capacity controls that so bedevil consumers trying to redeem miles for restricted awards are an integral part of the programs operated by the full service carriers.

Under that model, you can get solid value from your miles by cashing them in for a restricted award -- 25,000 miles, say, for a round-trip coach domestic ticket -- if you're willing to endure the frustration of booking around the airline's capacity controls. Or you can resolve to let go of twice as many miles to gain access to all the airline's unsold seats.

There is an alternative approach to mileage-based loyalty programs that is gaining traction: the revenue-based program.

As the name suggests, members of such programs earn points in direct proportion to the price they pay for their tickets. And when it comes time to redeem their points, the award prices vary in lockstep with the fluctuating prices of paid tickets.

The benefit of such an earning and burning scheme is twofold. First, there's no need for capacity controls, since awards are simply priced according to supply and demand. And second, they provide a measure of transparency absent from mileage-based programs.

You may never get spectacular value by, for example, redeeming 25,000 miles for a ticket that otherwise would have cost $1,800, as you might in a traditional mileage program. But in a revenue-based program, you can count on predictably decent value, and unrestricted availability.

When Virgin America launched its Elevate program in 2007, vowing to start with a clean slate, it was as a revenue-based program. And when JetBlue overhauled its JetBlue program in late 2009, it converted to revenue-based earning and awards as well.

More significant, in terms of its potential impact on the industry, is the rumor (credible in my view) that when Southwest launches its revised Rapid Rewards program later this year, it will also be a revenue-based scheme.

Behind the Changes: Carrots and Sticks

The current trend toward enhanced mileage program generosity runs paradoxically counter to the nickel-and-dimeing and generally consumer-unfriendly behavior that have made commercial air transport the industry everyone loves to hate.

What accounts for the change in direction?

It's partly business. As consumers shake off the torpor of the recession and again take to the skies, airlines want to be better positioned than their competitors to benefit from the rebound. And better loyalty programs drive more loyalty.

Plus, a cynic might say, the more customers you have, the more revenue you can generate from nuisance fees.

There's also a political component to the intensified focus on award availability.

The new administration has made it clear that it's much more inclined to lean in the direction of protecting consumers' rights, implementing sweeping regulations when necessary. And in particular, Senator Chuck Schumer (D-N.Y.) has asked the DOT to look into airline loyalty program policies and practices, expressing concern that "airlines and credit card companies continue to fly off with hard earned frequent flier miles."

Whatever is driving the airlines' recent detour down the road to mileage beneficence, frequent fliers are left enjoying the ride, and hoping the acceleration isn't unintended.

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