Frequent flier plans lose luster

DALLAS — Airline customers are cashing in more frequent-flier awards this year, looking to avoid higher fares and believing that miles just aren't worth the same anymore.

With so many new ways to earn miles — on everything from car rentals to groceries — savvy travelers fear it'll soon become harder to go where they want, when they want for free.

"The glamour of the frequent-flier award has faded," says Jay Sorensen, who ran the loyalty program at Midwest Airlines and is now an airline consultant. "People are realizing that using miles to go to Hawaii is a difficult objective."

The economy and high fares may also be pushing people to spend their miles.

Randy Petersen, who tracks frequent-flier programs as publisher of InsideFlyer magazine, says recent fare increases are leading many passengers to burn up miles on humdrum trips instead of vacations to Hawaii or Europe.

"They're going to Boise, Decatur and Bakersfield," Petersen said. "They're spending miles on family emergencies or visiting grandma."

Airlines have been raising mileage requirements and imposing fees to use them, but plenty of people are still cashing them in.

Continental Airlines reports that through July, customers had cashed in 1.34 million awards this year, up 21 percent from the same period last year.

At Continental, the only major U.S. airline to disclose monthly redemption figures, officials credit changes in their Web site that let customers see available seats on partner airlines, which they can book with miles from Continental's OnePass loyalty program.

American Airlines has the oldest and largest loyalty program in the industry, AAdvantage, with 60 million members who racked up 200 billion miles last year.

Use of awards on American was flat from 2006 to 2007 but is up 10 percent to 15 percent this year through August, said Rob Friedman, American's president of marketing for AAdvantage.

Like Continental, American credited Web site advances that let customers see at a glance when they can travel a particular route and how many miles it will cost.

"They can look at the calendar and make trade-offs," Friedman said. "They can be flexible and shop around for flights (that require fewer miles), or they may need to redeem more miles for travel on a specific date."

For example, last week American's Web site showed available seats from Dallas to Honolulu on most days around Thanksgiving for 35,000 miles. But for travel on a Saturday, it would require 90,000 miles.

That indicates American is more confident of selling out those Saturday flights. Airlines want to fill their planes with paying customers, but they must balance that against the clamoring of frequent fliers who want to redeem their miles for free trips.

About 6 percent to 8 percent of all passengers fly on award tickets, according to airline documents.

Most U.S. carriers have raised mileage standards and shortened expiration periods in their loyalty programs.

Delta now offers members a guaranteed ability to redeem miles for a free trip but at the cost of many more miles. This month, American began charging $50 plus 15,000 miles to upgrade from economy coach on a flight within the United States.

"Those decisions are never easy or popular, but in light of fuel costs, they were necessary," American's Friedman said of the new fee.

Those fees and tighter expiration rules might themselves be driving the increase in redemptions.

Shaun Black, a software consultant in Atlanta, burned all his Delta miles on a trip he and his wife will take to Greece next spring. He booked the seats just before Delta began imposing a fuel surcharge on reward tickets in August.

"We weren't even looking to take a trip," Black said. "It was more out of spite. I wasn't going to pay that fee."

Black said he worries that Delta will soon double the miles needed for free trips because so many people now earn miles by using credit cards, renting cars — everything but flying.

Only half of miles earned by American's frequent fliers come from flying, with half coming from using a special Citigroup credit card or making purchases from the airline's 1,000 retail partners.

And that is precisely the problem with these programs, said Tom Farmer, who runs a small marketing company in Seattle: too many miles chasing too few seats. A longtime elite-level flier, he's had enough.

"There is a crisis in faith with miles. They're constantly being devalued," he said. "A lot of people, me included, have decided the game has peaked and they're getting out."

Farmer said he spent 450,000 Northwest Airlines miles to book business-class seats for a family vacation next summer to Australia and Tahiti and has only 2,000 miles left. Lately, he's taken several trips on JetBlue, but doesn't plan to redeem the miles before they expire. The "game" isn't worth it anymore, he said.

Airlines are looking for ways to make loyalty programs more appealing. American and Southwest recently announced they would set up separate check-in lanes at some airports to help program members pass through security faster.

"It's giving our customers greater utility, especially business travelers," said Ryan Green, director of customer loyalty at Southwest. "Our surveys show that frequent-flier programs rank highly with business travelers."

And the programs often serve the purpose for which airlines created them: to keep their best customers from bolting to another carrier.

Mark Pankow, a sales executive from Wisconsin, used American Airlines miles to get eight business-class seats to Germany last Christmas, six tickets to Orlando in August, and recently booked two trips to Costa Rica.

Other major airlines offer schedules that meet Pankow's needs, but he values his executive platinum status with American.

"It would take a life-changing event for me to switch to United," he said. "I'd have to fly coach for a year just to get back to elite status."