The Brancatelli File



April 20, 2006 -- Big, dumb companies like, oh, say, the Big Six airlines, try to bury bad news by releasing it on Friday because it once meant that the unhappy tidings would appear in the seldom-read, seldom-purchased Saturday newspapers. When they have particularly bad news, big, dumb companies like the Big Six airlines announce it after the New York markets close at 4 p.m. And when they have unbelievably rotten information to own up to, they release it on a Friday before a major holiday when they think no one at all is paying attention.

At 5:10 p.m. last Friday, Good Friday, United Airlines announced a new package of fees and higher award levels for its Mileage Plus frequent-flyer program.

Since we know what United thinks about the annoying new fees and jacked-up reward levels by the timing of its release, there's no reason for us to waste any space formulating an analysis of the specifics. As you can see for yourself, the changes are at least as horrible as United's tortured attempt to bury them would seem.

We're better served by discussing what the changes say about United and Mileage Plus in particular and about the increasing devaluation of Big Six frequent-flyer plans in general. Herewith some thoughts about those very topics.

With their total seat capacity down sharply since 9/11 and paid travel demand roughly back to year 2000 levels, the Big Six airlines have precious few seats available for frequent-flyer redemption. And judging from the howls of protest from flyers who never quite realized that the Big Six were serious when they said the cheapest-priced awards were "restricted," the airlines are gearing up for a summer of discontent about restricted-award availability. But rather than own up to the shortfall, United Airlines said this at 5:10 p.m. on Good Friday: "United has reserved a percentage of Saver Award [restricted] seats on every flight to every international and domestic destination."

What's the percentage? United doesn't say. How many seats on each flight are we talking about? Again, United is mum. But let's do a little math, shall we? A United Airbus A319 in domestic service is configured with 120 seats. If United reserves just two of those seats for restricted awards, that would be a "percentage" of 1.66. A United Boeing 747-400 in international service is configured with 347 seats. If United reserves just four of those seats for restricted awards, that's a "percentage" of 1.15. See how easy it is to manipulate the "reserve a percentage" game when you don't commit to something tangible?

If you look at United's new award chart, which goes into effect on October 16, you'll see that most of the award levels have increased. An unrestricted first-class ticket to Hawaii, for example, will cost 190,000 miles, up from the current 160,000 miles. That's an increase of 18.75 percent. An unrestricted first-class award to Australia has jumped to 270,000 miles from 200,000 miles, an increase of 35 percent. An unrestricted domestic coach award will cost 50,000 miles, up from the current 40,000, or a 25 percent jump.

It's useless to try to compute the "average" Mileage Plus award cost increase because no one claims the "average" award. But one thing we can say: Any United miles you have in your Mileage Plus account are going to be devalued by around 20 percent when the new award charts become effective. So now do you understand why I've been telling you for years not to treat your frequent-flyer accounts like bank accounts? There simply is no, er, "percentage" in allowing miles to sit unused in a Big Six frequent-flyer account. Use them now or watch them continue to devalue like a third-world currency.

I mentioned that most awards are going up. Guess which aren't going up? If you said the lowest-priced restricted ones--25,000 miles for domestic coach, 35,000 miles for coach to Hawaii and 50,000 miles for coach to Europe--then you understand the nasty game that United and the Big Six airlines play. These are the loss-leader awards meant to seduce the infrequent flyer who has saved for five or six years to reach those levels. Besides, airlines don't have to cash these restricted awards except for those mysterious "percentage" set asides.

United's Good Friday night massacre makes much of its so-called Short-Haul Saver Awards. Introduced by the Big Six for limited periods in recent years, these awards have typically required just 15,000 miles for a restricted roundtrip on routes of up to 750 miles each way. But in extending its program through 2006, United capped the applicable routes at just 700 miles. What purpose is served by looking petty and knocking 50 miles off the 15,000-mile award? Plenty. A slew of routes are no longer eligible for the "short-haul" award, including those from United's Chicago/O'Hare hub to New York/LaGuardia (731 miles), Newark (717), Montreal (745) and Winnipeg (706).

Come October, United will charge a fee of $50 if you book an award seat less than 14 days before departure. Book within six days of departure and that fee jumps to $75. These surcharges won't apply to United's ultra-frequent customers (Mileage Plus 1Ks and Global Services members), but all other elite flyers and regular travelers will pay. What rationale can United have for these fees other than it is an opportunity to beat more revenue out of customers who have already paid for the right to claim the award?

Finally, this must be said: The new fees and award levels that United is imposing are not onerous if you compare them hypothetically to the fees and award levels charged by the other Big Six carriers. Mileage Plus award levels and fees starting in October will generally be in line with other big U.S. airlines. (And those huge new mileage increases for Australia awards are designed to put United on a par with what Qantas charges its frequent flyers for free seats.)

But there is a reason why United has traditionally kept Mileage Plus somewhat richer and somewhat less expensive than the competition: United hasn't been as good an airline. The more liberal Mileage Plus program was designed to keep flyers loyal to a demonstrably inferior carrier with a demonstrably inferior product. But now United is telling the flyers who stuck with the carrier through the 2000 meltdown and the three-plus years of bankruptcy that they are suckers.

Copyright 1993-2006 by Joe Brancatelli. All rights reserved.