Frequent-flyer program

A frequent-flyer program (FFP) is a loyalty program offered by many airlines. Typically, airline customers enrolled in the program accumulate frequent-flyer miles (kilometers, points, segments) corresponding to the distance flown on that airline or its partners. There are other ways to accumulate miles. In recent years, more miles were awarded for using co-branded credit and debit cards than for air travel. Acquired miles can be redeemed for air travel, other goods or services, or for increased benefits, such as travel class upgrades, airport lounge access, or priority bookings.

History

The very first modern frequent-flyer program was created in 1972 by Western Direct Marketing, for United Airlines. It gave plaques and promotional materials to members. In 1979 Texas International Airlines created the first frequent-flyer program that used mileage tracking to give 'rewards' to its passengers, while in 1980 Western Airlines created its Travel Bank, which ultimately became part of Delta Air Lines' program upon their merger in 1987.^[1][2] American Airlines' AAdvantage program launched in 1981 as a modification of a never-realized concept from 1979 that would have given special fares to frequent customers. It was quickly followed later that year by programs from United Airlines (Mileage Plus) and Delta Air Lines (SkyMiles), and in 1982 from British Airways (Executive Club).^[3]

Since then, frequent-flyer programs have grown enormously. As of January 2005, a total of 14 trillion frequent-flyer miles had been accumulated by people worldwide, which corresponds to a total value of 700 billion US dollars.^[4]

Accrual

Flying

The primary method of obtaining points in a frequent-flyer program until recent years was to fly with the associated airline. Most systems reward travelers with a specific number of points based on the distance traveled (such as 1 point per mile flown), although systems vary. Many discount airlines, rather than awarding points per mile, award points for flight segments in lieu of distance. For example, a number of airlines in Europe offer a fixed number of points for domestic or intra-European flights regardless of the distance (but varying according to class of travel).^[5] With the introduction of airline alliances and code-share flights, frequent-flyer programs are often extended to allow benefits to be used across partner airlines.

Bonus Miles

Most, if not all, programs award bonus earnings to premium-cabin passengers and to their elite-status members based on tier status; earning an extra 25%-100% of miles flown are common bonuses. While these bonus miles don't count toward ascension to (or retention of) elite status, they count toward the member's total balance for normal redemption purposes.

Minimum Credit Guarantee

Some programs award a full 500 miles (or a similar minimum credit guarantee) for non-stop flights spanning less than 500 miles. An airline's program can either award this guarantee to all members regardless of elite status,^[6] or they can reserve this privilege only for their elite members.^[7]

Credit cards

An additional method of accruing miles is credit cards bonuses and spending. Many issuers partner with airlines to offer a co-branded credit cards or offer the ability to transfer their proprietary points to an airline's program. It is not uncommon for the credit card issuers to offer large sign-up bonuses, among other incentives, to entice users to put purchases on their card. This allows infrequent travelers to be take advantage of various programs. It is not uncommon to accumulate enough miles for an award ticket without ever flying with an airline. Many people make a hobby of accruing large sums of miles. This can be done by signing up with many credit cards, optimizing which card you spend on, and taking advantage of various promotions.^[8]

A non-affiliated travel rewards card, such as Capital One's No-Hassle Card, simply buys the cardmember a positive-space ticket^[9] at his/her desired destination and dates. Unlike standard reward tickets which don't earn miles, these tickets are "revenue" class and thus actually can earn the passenger miles with the airline flown.

Other purchases

Frequent-flyer programs may offer miles through other means, such as purchasing food or merchandise sold by an affiliated company. American engineer David Phillips became known as the "Pudding Guy" in 2000 for purchasing $3,140 of Healthy Choice pudding that awarded him 1,253,000 AAdvantage miles.^[10]

Elite Status

In most programs, a new status level is reached (or the same level is retained) by a member after accumulating the required number of flown miles, called elite-qualifying miles or EQM's, within a calendar year. This determines that member's tier level in the following year, although the member's status starts immediately after the qualifying transaction. As such, bonus miles and other miles not obtained through flying do not count toward elite qualification.^{[citation needed]}

Occasionally, airlines may offer double EQM promotions, which speeds up a member's status ascension (or retention) by cutting flight mileage requirements in half.^[11]

Redemption

After accumulating a certain number of miles or points, members then use these currencies to obtain airline tickets. However, mileage currency only pays for the base fare; the member is still responsible for payment of mandatory taxes and fees.^{[citation needed]}

Flights

Although a controversial topic and a source of frustration among frequent flyers,^[12] award flights are still the primary commodity purchased by members using mileage currency. While alliances and partnerships have facilitated the redemption process for some programs, award seat availability is still subject to black-out dates and seasonal fluctuations, as airlines utilize statistics, yield management and capacity-control formulas to determine the number of seats allocated for award booking.^[13]

This lack of availability has since been circumvented by non-airline rewards programs, such as certain credit cards (see above) and other corporate programs (Expedia Rewards, Starwood Preferred Guest) by allowing the member to use rewards currency to search for and purchase revenue tickets as if using cash.^[14]

Other Products and Services

Depending on an airline's program, members can also redeem their earnings toward cabin upgrades, hotel stays, car rentals and various retail consumption opportunities. On American Airlines' AAdvantage program for example, it is possible to pay for a complete vacation package solely with miles.^[15]

Value of a mile

Travelers frequently debate on how much accumulated miles are worth, something which is highly variable based on how they are redeemed. A typical ballpark figure is approximately 1-2 cents per mile based on discount (rather than full fare) economy class travel costs.^[16]

The airlines themselves value miles in their financial statements at less than one one-thousandth of a cent per mile.^[17]

Accounting issues

Business travelers typically accrue the valuable points in their own names, rather than the names of the companies that paid for the travel. This has raised concerns that the company is providing a tax-free benefit (point-based awards) to employees, or that employees have misappropriated value that belongs to the company, or even that the rewards acts as a kind of bribe to encourage travelers to choose one particular airline or travel unnecessarily. Most companies consider the miles earned by their employees to be a valuable personal perk that in part compensates for the daily grind of frequent business travel, though some governmental organizations have attempted to prevent their employees from accumulating miles on official travel. For example, Australian Public Servants are not permitted to redeem points accrued from official travel.^[18]

Some programs allow for the donation of frequent-flyer miles to certain charities.^[19]

Climate and environmental issues

Frequent-flyer programs have been receiving scrutiny because of the prevalence and rapid growth of air travel, in terms of both the frequency that individuals fly and the tendency toward longer distance travel. There have also been calls for an end to frequent-flyer programs.^{[20][21][22][23]} An increase in the number of hypermobile travelers has been identified as a particular aspect of the issue because of the highly disproportionate contribution of this class of individuals to aviation greenhouse gas emissions, and frequent-flyer programs are a contributing factor.^[24]

Precedent exists for ending frequent-flyer programs. In 2002, Norway banned its domestic frequent-flyer programs in order to promote competition among its airlines.^[25] In the U.S. in 1989, a vice president of Braniff said the government should consider ordering an end to frequent-flyer programs, which he said allow unfair competition.^[26]

Airline frequent-flyer programs

Most larger airlines around the world have frequent flyer programs with a myriad of names, policies and restrictions regarding joining, accumulating and redeeming mileage points accrued.

Mileage run

A mileage run is an airline trip designed and taken solely to gain maximum frequent-flyer miles, points, or status.^[27] If a traveler has already achieved some sort of elite status, then that traveler will earn bonus award miles on top of his or her actual flight miles. Depending on the program, that traveler will reach its goal sooner if the miles he or she accrue are elite qualifying miles.^[27] A mileage run may allow a traveler to (re-)qualify for a beneficial elite level, which requires a minimum number of miles to qualify.^[28] The value of a mileage run is frequently computed in cents per mile (CPM) where the total price of the ticket is divided by the total number of base miles accrued.^{[citation needed]}

See also

• FlyerTalk

References

External links

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