Q&A: United Mileage Plus chief discusses upgrades, award blocking

USA TODAY's Ben Mutzabaugh recently sat down with Graham Atkinson, the president of United Airlines' Mileage Plus frequent-flier program. Atkinson also agreed to take questions submitted by Today in the Sky readers.

Among the topics from today's installment, Atkinson addresses reader questions on upgrade policies and about whether United blocks some award availability on other Star Alliance carriers. This is the third part of our Q&A session; see below for links to parts one and two.

Ben Mutzabaugh:Speaking of United's frequent-flier partnerships, Star Alliance partner Lufthansa now owns a stake in JetBlue. Conceivably, could that create a scenario where United would have to cooperate – in some way – with JetBlue, a carrier that's clearly a rival for United? Do you know of any plans that Lufthansa might have to eventually bring JetBlue into the Star Alliance?

Graham Atkinson:As far as we know, there are no plans either to invite or for them to be interested in joining Star Alliance right now. They remain a vigorous competitor to us in the U.S. And, obviously, you'd need to speak to Lufthansa bout their investment in JetBlue and their plans in exploiting that, if you wish.

I would say that the entry requirements and the obligations on Star carriers are very clear. We haven't had any concern around what that might mean, in terms of any conflict of interest. Obviously, from a regulatory point of view, I'm not the right person to answer that. The questions as to whether there is technically a regulatory concern or not have been sort of aired by competitors and are being dealt with – as we would expect – by the DOT and the DOJ.

Mutzabaugh:For Continental frequent-flier members who will soon become part of the Star Alliance group, what elite benefits will they get? What will Continental's elite fliers be able to do when they book a ticket on United and vice versa? We've heard from many Continental elites asking about this.

Atkinson:Elite fliers on Continental will become Star Gold members in the Star Alliance. And as Star Gold members, they will earn EQMs (elite-qualifying miles) when they travel on United or other Star partners.

They will have – over time, the functionality won't be in place from day one – ... a product called "Star Alliance upgrade awards." They will certainly be part of that program over time, which is a program designed for high-yield economy fares to give them optionality of not only upgrading on themselves, but on other carriers as well.

They will also get priority boarding, priority check-in (and) priority security – where we offer that at key airports. They will get what we call Star Alliance privileged status. So they will get that on United. They will get access to lounges on us and (throughout the Star system). So they will get all the privileges that a ANA customer or an Air Canada customer gets on United.

Mutzabaugh:That leads to another question from a reader who has Star Alliance Gold status. The reader's question is: "We used to automatically be upgraded to Economy Plus seats, but now we have to pay for them." That's obviously a change for Star Gold customers. Any chance for back-tracking on that? Or, if not, what's behind that decision?

Atkinson:The rationale behind that decision was essentially part of the creation of our "Options by United" programs and products. We identified an opportunity and an interest by customers who were loyal to United, but maybe didn't fly enough to (earn) Premier (status) or above and therefore get privileged access into it at no extra charge. We felt it was a good business decision for us. It's become a very interesting revenue stream.

(Economy plus has been) highly popular, by any measure, with people who are United loyalists. And that caused, obviously, some dynamics in terms of prioritization and ability to get access to that cabin. At that time, we actually made the decision that the Star Gold get a range of benefits – in EQMs and (other) privileges when they travel with United.

United Economy Plus is a peculiarly unique product to United, among which we felt was genuinely earned by United customers … earned or available to United customers. So, it was – as seen by a US Airways member – a takeaway. Obviously, they still have the ability to access it by paying $30 or $40 or whatever the fee is on the day (of travel), but it really was a prioritization issue. And I don't think that anything that's happened since has made us believe that that prioritization wasn't right. (But) I understand their frustration – having to now either pay for it or lose it as a right (of elite Star status).

Mutzabaugh:The next question involves the recent series of articles by The Washington Times…

Atkinson:It must be Star Alliance …

Mutzabaugh:Yes, it is. So, I'll read the question from the reader and we can take it from there. "How can United continue to justify filtering Star Alliance awards when other members of the alliance make them available for their members?"

Atkinson: Right. So, it's a great question … and I think it's not as simple to explain as I wish it were.

The foundational answer to the question is every time one of our customers redeems a flight on another carrier, we actually have to pay the other carrier. Now we have more members than any other Star carrier has in their program. And therefore, you can imagine and understand there is a balance of trade here that has to be managed. I don't know – as a fact – that other Star carriers don't manage availability. That's a statement that's being made in the press. I don't know that to be true.

There are many different ways to manage availability of redemption awards, but I can only speak for ourselves in saying that I have a fundamental interest in making as much availability for United members – wherever they want to go – as I possibly can. And that's something which is in my both my short-term and long-term interests in terms of keeping members in the program and having a healthy program.

The fact (is) that we – at the margins – would prefer people to fly United in redemption rather than Star carriers. And in some cases, (that we) don't necessarily make all the availability that a Star carrier may on particular day and a particular route I think is something I manage and I'm aware of. And (that) is not a static close-out.

It is not a true statement to say we "close off" carriers or close off availability in a sort of carte blanche method. It's done to manage – like any business would – the cost of doing so. And if you look at our performance in terms of our awards over the past year, our awards on Star Alliance have actually gone up. I don't think we are failing our customers, but there will be occasions on which someone could call the carrier and find there is availability and (then) call us and we would say that there wasn't availability. (That) might fall into that category of (customers) feeling that we're behaving in a way which they don't understand or is not consistent with the offering in the program.

Mutzabaugh: That leads us into another reader question. "Why can you only book United and not Star Alliance partner award travel online? Other Star programs such as Miles and More and ANA allow broader Star Alliance booking across the spectrum?"

Atkinson: It's a very good question. And it's a very easy answer. It's a technology issue. Our technology capability doesn't allow us to do that right now. That is something that customers want and it clearly is on our list of enhancements for the program. I can't promise – given the world of constrained resources right now – as to when that will come, but I absolutely hear that customer and there is no secret reason why we're not doing it. It's simply technological capability.

You know, you need to remember that the systems that airlines have and the way they talk to each other are designed to protect proprietary information and only allow connection on very clearly defined basis. In this case, we're trying to work to bridge that technology, which – depending on who the customer his – may sound as though it must be very easy. It actually isn't quite as easy as it may sound to actually put that technological fix in place.

Mutzabaugh: A reader asks: "What is the active number of Mileage Plus members? And how does it break down by 1K, Global Services through Premier Associate?" Is that something United would be willing to make public?

Atkinson: It's actually not. I'm sure (the reader) will understand when I say that it has got real competitive advantage and it's not something we share for competitive reasons. We're not trying to be opaque. We do publicly confirm the number of people in the (Mileage Plus) program — (more than 54 million) — but we don't typically break it down. It's interesting to people. (At) the top end of Global Services, (they may wonder) how big that is and "how many people am I competing against for my upgrade?" (Just) as it is for general members in terms of just wanting to understand the sort of scope and scale of the program.

Mutzabaugh: One complaint – and it's not specific to United – is that as frequent-flier programs have grown and matured over the past 25 years, airlines increasingly advertise frequent-flier benefits as a big reason to stay loyal. But customers don't ever actually see the number of awards that are available, and I think many feel like that information is being withheld from them. What would you say to people who raise that concern?

Atkinson:I would say that they're right. I'd say that some of the perceived concerns they have are not born of us trying to withhold information; They're born – again – of technological limitations, given that we're dealing with legacy systems here. And I would say that in almost all cases, it is in our interest to actually be straight-forward and honest with customers ... and to try to be as transparent about what is available and what's not available as you can.

Certainly, some of the work that we've been doing over the last three months is to try to see how we can meaningfully address that issue – both in terms of the display of products more effectively on United.com and in other mediums – and also to look at ways in which we can actually be more creative about making a broader ranger of offers and more timely promotional-type offers that give people the chance to get more value out of the program.

So, if you would (pick) one of my goals for Mileage Plus over the net couple of years, it's actually to improve the value proposition – not to take away elements of the program. And to deliver (options and offers) to customers in a way that they want to see it at a time that the want to buy. And not ... trying to be opaque or take things away. I think that ultimately is actually going to lead us to success – not only amongst our airline competitors, but because there are some very other creative products and programs that are emerging all the time. So the competitive bar is being raised and we need to respond to that.

Mutzabaugh:Could there be a day, for example, where the technology enhancements will allow United to show customers that on a given flight from – say Chicago to Heathrow – that there are five award seats available in Economy and three in first or business? Is that something that we might ever see? Or, are there reasons you would shy away from that level of specificity?

Atkinson: You know, at the moment, we are so far away from that, that might be an aspirational (idea). But there might be a lot we can do between here and there – both increasing the range and showing the availability more. I think it's high on my priority list of things. We need to really push ourselves to make available seats that we truly believe are going to be surplus or available (and) offer them to customers in as timely a fashion as we can. And we need to do that in ways that people understand and actually helps them make decisions as a key part of the value proposition of being a Mileage Plus member.

Mutzabaugh:But, even there, could there be a risk to that? For example, if United says there are five award seats available for a flight several weeks out, but then the bookings swing one way or the other — then you might have to adjust your availability. So, if that happens, you might have to put additional award seats into play or take some away. Any fear that could stoke customers' concerns about transparency?

Atkinson:There's a real challenge between giving complete information and not. Because as circumstances change and you give information in good faith, it turns out to be (something like this example): "Oh, the flight is delayed two hours because your flight has gone mechanical – but then half an hour later we've actually found another plane that's come in early and we can now use that one to substitute for your flight, so the plane's going in 45 minutes." (So, when something like that happens), you delight 50 people and you infuriate 50 people by the process.

So, it's always a dilemma for us. I think exactly to your point, we work very hard (in) looking at: "Have we predicted the demand on a particular flight wrongly and are there going to be more empty seats now than we thought there were? And, therefore, can we offer more seats up? "

One of the messages I'd say to customers is: It may be frustrating going back and checking the Web every day, but we do open up seats on a dynamic basis for redemption. (That's) based on changing demand patterns. We have some pretty sophisticated computers that measure demand patterns, but even they – closer in – often need to be overruled by manual intervention.

Mutzabaugh:A reader writes in: "Where other airlines offer complimentary and unlimited upgrades, why does United continue to use the more-limited 500-mile upgrade point system?"

Atkinson:That's a great question, and I would say it's something we do need to look at. (If) you look at competing programs, in most of the programs you can pick out one or two items that are better in one program than the other program.

We offer systemwide upgrades which many of our major competitors don't. They're highly appealing. They're quite costly for us to actually deliver, but they are highly sought by our super-elites and are a core part of our program.

So ... part of the answer is, like any program, it has to be fiscally responsible and you have to make your choices where the customer value is. On the other hand, … in the context of upgrades, it's very much sought after and a very emotional subject and it's not something we look at in a static world. We are always looking at whether we're in line (with competitors) or whether we need to change the way we do things. This is one of those (items) that sort of sits in the "active" inbox rather than the "deferred and not-looking-at" inbox.

Mutzabaugh:On the subject, I would think the 500-mile upgrades have varying degrees of appeal. If you're flying a 1,400 mile route – like Washington Dulles-Denver, for example – they probably seem like a good value. You redeem three 500-mile upgrades for the 1,400-mile flight, and it's a good match. But if you are flying 600 miles – say Washington Dulles-Chicago O'Hare – it may seem like a waste to use two 500-mile upgrades when it's so close to being a 500-mile flight. What would you say to customers who raise that concern?

Atkinson:I think it's a valid concern. I think it's – again – so many things sound which may sound very easy to fix from a consumer point of view, (but) can lead to not-insignificant technological challenges and changing systems to allow it to happen. But that's something we've heard (and) know is a concern. We don't have a fix for it right now.

The 500-mile concept was born in a different age when competition dynamics were different and – indeed – schedules were different. It's clearly something which will be part of this sort of holistic review we're going to do with the program.

Mutzabaugh:So, it's safe to say that even if you can't commit to a change, you are saying this policy will at least get a second look?

Atkinson: Exactly. I hear that customer. It's a good question. I know it's a concern. We have to put that into our business mix and decide whether it surfaces above the line of below the line in terms of the most-important things we need to work on.

Mutzabaugh:We've heard from a lot of people who are looking forward to Continental's addition to the Star Alliance. What is the latest timetable for Continental's integration into the alliance and are there any benchmark timelines that have been established at this point?

Atkinson:The fourth quarter (of 2009 remains) the timeline. That is largely driven by hook-ups of systems that, of course, Continental (doesn't) have to make just to us, (but) they have to make to (the) 20-odd other carriers in Star. So it is a pretty big job of negotiating frequent-flier agreements, setting technology, creating airport systems, training and the like.

But, we're having regular meetings with them, obviously, in making sure we're set up. We're well ahead of schedule. They're telling us they're absolutely on track to meet the requirements Star requires of carriers joining. So they'll definitely be a Star member before the end of the year.

Mutzabaugh:And, I would assume that Continental disengaging from SkyTeam has its own challenges – that it's not just as simple as pulling a plug or flipping a switch?

Atkinson: I think it's not without complexity. We've built up a huge respect for their team since we got to know them. I know they want a seamless transition for the benefit of their customers as much as for the benefit of their business. I have every confidence that they'll (do that).