The Brancatelli File By Joe Brancatelli
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Surprise! There's No Free Lunch
March 28, 2017 -- It was May of 1981 and I was checking in at Chicago/O'Hare for a United Airlines flight to New York/LaGuardia. I noticed a short stack of white cards at the podium and, almost as an afterthought, I grabbed one and stuck it in my carry-on bag. On the flight, I read the card. Not very informative. Something about a new United Airlines promotion for frequent travelers.

The card was United's hasty way of alerting flyers to Mileage Plus, the loyalty program it launched days after American introduced AAdvantage on May 1, 1981.

Skip ahead a few years and Frequent Flyer came calling. It was the companion magazine to the OAG Pocket Flight Guide, a digest-sized monthly compendium of flight schedules. No frequent business traveler could be without them. I was jazzed that a publication I already read and valued wanted me to write for it.

The oddest thing about Frequent Flyer in 1983 was that it barely covered frequent flyer programs. Launched by Martin Deutsch almost a year before AAdvantage and Mileage Plus, the magazine was obsessed with flights and hotels and rental cars and the seismic events following the Airline Deregulation Act of 1978. But none of the smart writers and editors there foresaw the rise of frequent flyer plans. In fact, almost no one did, including the airlines themselves. After all, American's initial goal for AAdvantage was 400,000 members, which, perhaps not coincidentally, was about the circulation of Frequent Flyer magazine at its zenith.

And, no, you did not guess it. Frequent Flyer was not coming to this young frequent flyer--I was 30 years old in 1983--to write about those newfangled loyalty plans. The managing editor, Coleman Lollar, wanted me to cover personal computers and telephones. That's not as odd as it seems. I was an early "expert" on PCs and telephone deregulation and wrote frequently about both for publications such as Newsweek. And the topics were remaking frequent travel at least as swiftly as frequent flyer programs.

After writing the first two non-travel stories to land on the cover of Frequent Flyer--one each on PCs and a new wave of phones--I had the editors' confidence. When I expressed the desire to understand frequent flyer plans beyond the hey-we-get-free-stuff level, they readily agreed. No place, not The Wall Street Journal nor the business magazines, was writing anything insightful about frequent flyer plans.

I started deep-dive reporting on and writing about the programs late in 1984. Some airlines were willing to share information. Others were not. Some airlines knew what they were doing. Many didn't. And the carriers weren't moving in lockstep. But that was no surprise: There were almost two dozen U.S. airline programs at the time. And remember: In the 1980s, corporations and frequent flyers fought over the spoils of frequency plans. Our bosses wanted the awards. We wanted to keep them.

By the time this package of stories and charts appeared in the November, 1986, issue of Frequent Flyer, it was the most complete and most concentrated overview of the programs ever published. It came at a seminal moment in the history of frequent flyer plans, too. Continental Airlines had just struck a deal to create the first miles-issuing credit card.

Nothing would ever be the same after 1986. The airline industry was already embarked on the first of what would become several rounds of consolidation. (As I wrote these pieces in early September, I remember waiting for Northwest Airlines to fax me the details of WorldPerks, the new program created for the October 1 merger of Northwest and Republic Airlines.) In 1988, the major programs changed dramatically. (That first-ever industry-wide devaluation and retrenchment led to a lawsuit and a useless class-action settlement nearly a decade later.) The credit card that Continental launched altered the entire concept of earning and burning miles, for the airlines and for us. (Ironically, Banc One, quoted in my story, never issued the promised Continental card. Marine Midland did. But Banc One and the Continental credit card portfolio both landed at Chase in the fullness of time and consolidation.)

Yet this extraordinary package--six stories and 22 charts consuming 22 printed pages--still has value because it was the first to explain to frequent flyers--and the outside world--that the programs were a canny, profit-making operation. Until then, as Continental's Steve Grosvald noted in my lead story, pundits had been blinded by the "fluff side" of easy miles and lavish awards.

Coleman Lollar's wonderful double entendre of a headline for the lead story, The Object of Our Affection, explained it all. We business travelers thought we were beating the airlines, but the fact of the matter was that the carriers were using the programs to control our behavior and extract additional revenue from our wallets.

Much has changed in the intervening decades. But that hasn't. The objects of our affection still dominate our travel habits, alter our flying and lodging patterns and, all too often, monopolize our frequent flying sense of worth.

THE OBJECT OF OUR AFFECTION
Let 1986 be marked as the year frequent flyers once again learned there are no free lunches. Airlines finally have offered a glimpse of what bonus programs are really about. And--surprise, surprise!--the truth of the matter is that they are hard-nosed marketing strategies designed to sell more seats, capture more market share and turn more profit.

FIVE FREQUENT FLYER PROGRAM MYTHS DEBUNKED
Now that frequent flyer programs have been around for more than five years, it's time to debunk some myths about them. They aren't short-term promotions, they do make money and they aren't about to disappear any time soon.

SMALLER PLAYERS MAKE THEIR BEST CASE
On the surface at least, the smaller carriers use bonus programs for the same purposes as the major airlines. Yet frequent flyer programs also are troublesome for the little guys. Their effectiveness as a competitive weapon against the major airlines is limited. In fact, frequent flyer programs tend to enhance the strength and traffic-pulling power of the major airlines and exacerbate the weaknesses of the smaller carriers.

MILEAGE PROGRAMS AND THEIR FOREIGN RELATIONS
Why have so many foreign airlines joined so many U.S. frequent flyer programs? To hear the international carriers explain it, playing the frequent flyer game has become one of the most effective ways to compete for the international business of America's frequent travelers. Airlines that have tried to avoid the U.S. programs have lost American flyers to carriers that do play.

WILL AIRLINES AND CORPORATIONS FIGHT IT OUT?
Is corporate America really on the verge of all-out war with the airlines over frequent flyer programs? No, because the war is already over. Corporations may continue to complain, but they've given up trying to recover awards from their frequent flyers.

WHO'S OFFERING WHAT? THE 22 PROGRAMS COMPARED
If no one knows for sure where the programs are going, at least we can judge where the frequent flyer bonus plans are now. Immediately following this text is a series of charts describing the frequent flyer bonus plans offered by the 11 major U.S. airlines, as well as the nation's other jet carriers. Here are some things to keep in mind as you weigh the relative merits of the 22 programs.

THE MAJORS: AMERICAN, CONTINENTAL AND DELTA
Here are the rules, regulations, partners, earning structure and award structure for American, Continental and Delta airlines.

THE MAJORS: EASTERN, NORTHWEST, PAN AM AND PIEDMONT
Here are the rules, regulations, partners, earning structure and award structure for Eastern, Northwest, Pan American and Piedmont airlines.

THE MAJORS: TWA, UNITED, WESTERN AND USAIR
Here are the rules, regulations, partners, earning structure and award structure for TWA, United and Western airlines and USAir.

JET CARRIERS: AIRCAL, AIR ATLANTA, ALASKA, ALOHA AND HAWAIIAN
Here are the rules, regulations, partners, earning structure and award structure for five of the second-tier U.S. airlines.

JET CARRIERS: JET AMERICA, MIDWAY, OZARK, PEOPLE EXPRESS, PRESIDENTIAL AND PSA
Here are the rules, regulations, partners, earning structure and award structure for six of the second-tier U.S. airlines.

This column is Copyright 1986 by Joe Brancatelli. JoeSentMe.com is Copyright 2017 by Joe Brancatelli. All rights reserved. All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.