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 The Brancatelli File

joe THE DOG DAYS
OF FREQUENT-FLYER PROGRAMS


BY JOE BRANCATELLI

July 30, 1998 -- As we head into the dog days of August, business travelers have only two questions on their collective mind: Why the hell is it so hot? And, What the hell is happening to the frequent-flyer programs?

If you wanna talk about the weather, surf on over to the Weather Channel. I don't even have air conditioning, so don't come whining to me. But I think I finally have a handle on this frequent-flyer thing. And does it really surprise you to learn that the airlines are screwing us again?

This egregious marketing gang-bang whereby half the nation's airlines are joining forces with the other half has us all running in circles like dogs in heat. The carriers announce program alliances and start-up dates (American-US Airways launches Saturday, United-Delta on September 1), then give absolutely no details. Even now, no one knows the mechanisms and the formats of the alliances. The airlines ain't talking specifics.

The airlines like it this way. Since they are totally unregulated, frequent-flyer programs exist solely at the largesse of the carriers. So if they don't want to tell you details of how to redeem your miles, or how to combine your miles, or what your chances are of claiming a free seat or an upgrade, they don't have to tell you. You're just the customer. Why should they tell you?

And if they don't tell you what the rules are, we keep guessing--and that takes our eyes off the big picture. We're so busy trying to figure out rules the airlines haven't announced yet that we don't look at the totality of things. The devil may be in the details, but so is diversion, and that, too, works in favor of the airlines.

I say the hell with the details. Since the airlines won't tell us the new rules, I say we make judgments based on the facts we know and the eternal truths of the marketplace.

LESS COMPETITION IS BAD
It may not have struck you, but all these alliances have struck a body blow to the concept of a competitive national airline system. Before the alliances, we had ten major carriers. After the alliances, we will be reduced to three gigantic consortia and two independents.

The American-US Airways alliance will control about 27 percent of the market when you include their commuter-carrier slaves, and Reno and Midway, two vassals of American AAdvantage. United and Delta will control about 37 percent of the domestic skies when you include their commuter carriers. Continental and Northwest, whose frequent-flyer link date hasn't been announced, will control another 26 percent of the pie when you include allied carriers such as America West, Alaska, Frontier and their commuters.

To fight these flying Godzillas, who together control 90 percent of the U.S. skies, are the nation's two remaining major airlines, TWA and Southwest, and a puny brigade of niche carriers.

The truth of the marketplace has always been that more competitors mean more innovation and more competition. Allowing the U.S. market to shrink to three hideously large alliances and two independents is a frightening prospect.

YOU'LL PAY MORE FOR LESS
It's not even worth fretting over whether these alliances will make it harder or easier for you to claim an award ticket or an upgrade because all the rules will change. It might not happen today or even next week, but, by next year, all the carriers will make substantial changes to their programs. And you know what will happen then: Upgrades will cost more miles, free tickets will cost more miles and there will be fewer and harder-to-earn perks.

We've already seen evidence of this: American recently raised the price of many of its upgrade awards. Delta, which is expected to link airport-club networks with United, has announced the end of its free-drinks policy. Northwest and Continental will be revising their frequent-flyer plans completely come January 1, 1999.

YOU'LL BE LESS IMPORTANT
Let's be honest: Travelers like us aren't particularly interested in the so-called "base" level frequent-flyer programs. Our interest is in the "premium" levels, where all the recognition, perks and upgrades are offered.

Guess what? If every frequent flyer is suddenly funneled into five marketing programs instead of ten, the definition of a "premier" customer will change. Fewer and fewer frequent flyers will qualify for the elite levels because the airlines will change the rules to keep the programs rational and ensure that their most frequent flyers get the upgrades.

We already know how this will pan out because word has leaked about the new top-tier class in the revised Northwest and Continental programs for 1999. At the moment, Northwest and Continental's top tier is Gold, achieved when you fly 50,000 (Continental) or 60,000 (Northwest) miles in a year. Next year, the top level for each program will be Platinum and it will require 75,000 miles of flying. The benefits of Platinum? About the same as what current Gold members receive. Gold members will receive less in 1999 than they did in 1998.

Geez, this is depressing. Maybe we should have talked about the weather after all.

This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.