United Airlines appears poised to follow American Airlines model for an entirely revenue-based loyalty program. Here are three leading reasons why.
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United Ends Status Matches, Changes Leadership
This week, United Airlines ended its status match and quietly announced a new program was coming soon. In recent weeks, United appointed an executive to head MileagePlus with no demonstrable experience in the airline loyalty industry space. It was my speculation some weeks ago that United would shift to a new model to mirror American Airlines which introduced a revenue-only loyalty model earlier this year.
@xJonNYC @garyleff united is ending its premier status match program. No more start dates after September 3rd. Will still accept backdated requests. New program expected to launch in 2024, will look much different…
— Xavier (@Xavier38220123) June 19, 2023
The end to status matches (though perhaps not those assigned or given to corporations) and the signaling that a new program is coming is reason enough to believe that not only is change afoot, but specific change that further amalgamates the US airline industry.
Why United Would Want To Make The Shift
American Airlines changed its loyalty program to one that treats every transaction as a status-earning Loyalty Point. For example, if travelers shop through its shopping portal and earn 1,000 points, that counts toward status. Every point that American Airlines sells to a vendor is nearly pure profit according to its own reporting. If the Wall Street Journal wants to give a commission in the form of miles to earn new subscribers, American Airlines wants to be the point currency consumers turn toward. The more miles sold, the more money American Airlines makes.
It’s easy to see why United would want to make a similar shift. A few years ago, Delta offered its Diamond Medallion status to those spending $250,000/year on a co-branded credit card. Why? Because Delta gets to sell those miles to American Express and it’s worth dangling a carrot out there for those with the means to achieve it.
As one American Airlines investor pointed out, the business is essentially a loyalty program that happens to fly people and cargo. Loyalty Points likely expedited that movement further and put American in a better position going forward.
Plainly, United will make far more money if consumers are engaged throughout the journey to elite status so if that means that status is awarded at the end, so be it.
What This Means For The Rest Of The US Airline Market
After a decade that included the first revenue requirements, rather than just flying requirements to earn status, and then an increased in said required revenue of as much as 70%, this too will be a case of monkey see, money do. It’s but a matter of time before Delta “reinvents” SkyMiles with the same theme.
Business owners or those that can place high ticket purchases will win in this new environment. Those who do not hold the purse strings for their businesses but do travel often for work will be the biggest losers in this equation along with borderline elite travelers who were barely making the lowest (25,000 point) status levels. They will be edged out by consumers who can make enough purchases and jump ahead of them in line.
Conclusion
Based on the information above, United’s actions, and their newly appointed leader, it seems only obvious that United will switch loyalty models – yet again – to a revenue model. When American did this, they were, in practice, saying the quiet part out loud. While American appears not to have suffered any significant blowback from the move, that doesn’t mean consumers won’t unilaterally reject the model and fly carriers that value them for the travel business and not their overall spend. Time will tell but we have only a few months left to wait for the unveiling of the new MileagePlus.
What do you think? Is United moving to a loyalty-to-revenue model? If so, does that change how you interact with the brand?
Lol, the ol’ raise the price then offer a fantastic discount trick…
Except here, let’s make it easier to earn miles then devalue the miles even more.
/0
United already has a revenue based model in the form of PQPs, which are solely based upon price of the ticket
The American model has created a cottage industry of people figuring out how to best earn the status for the least amount of dollars spent. The craziest to me is booking hotel rooms through their portal with zero intention of using them. Vegas is the main location where they earn 30x miles by booking rooms and then no showings, saving the resort fee.
I’ll admit as a frequent flyer I miss where status was earned by flying but I understand this makes the airlines more money.
So what, their third loyalty overhaul in a decade?
Airlines don’t care. Get cash back and invest it.
It will be interesting to see if they add any tangible value to program. I’m not holding my breath. Plus Points have limited value, difficult to get upgrades from waitlist, and impossible to get an upgrade at booking. Now we get an email they are expanding instant upgrade space because many of us have lots of points to burn before the end of July. I have over 700. So now we get the honor of paying double points in order to use something they had been making difficult to use in the first place. I’m all for them making money. But as a consumer there comes a point where you say screw it, this isn’t worth it anymore. Balance is shifting in that direction.
you hit the nail on the head… for me, at least the routes I fly… you can’t get upgraded… 660 plus points in my account and the missing one I used for other people…
If I want to be upfront, I have to book it or use cash to upgrade.
On paper, I do like the plus point program over the pervious one… However, they have made it next to impossible to use.. Keeping in mind the people that have these points have to fly a lot to earn them… yet, with all that flying, somehow we can’t seem to use them? LOL
Agree 100% Darn Plus Points are near impossible to use. Frustrating. This may be end for me. I’ll buy 1st and become a free agent. UA since 1978. My wife and her friends will miss the shared status however. Meh
Agree 100%. I have 960 plus points and have never been awarded an upgrade as a 1K’er
Citing a tweet from a user who only joined Twitter in September 2022 and has a string of numbers in the username that suggests it is a bot, not a real person, is not what I would use to back up the premise of an entire post…
Relax, they have 6 followers. They’re legit.
It could also be the burner account of a legit industry insider who’s not authorized to release info.
Their leadership changes align with this. If status matches stop in September as claimed, it will be confirmed. You’re right in that it’s hearsay but American doesn’t seem to have had any trouble with the switch and it’s clear that this is a higher revenue strategy.
What wasn’t at all clear to me was whether “new program” referred to status matches or the the broader MileagePlus program.
Here is my deal… I’m not sure if this is actually going to be bad.. but
I fly with United 50-70 paid segments a year, booking in fist. I do type and book way out, but still not super cheap flights.. I spend enough or super close to meet the 1k status requirements(PQF + PQP; not PQP alone). On top of that, I fly another 12-24 segments using miles (that now count towards 1k status). And on top of that, I use 1 personal (United club) and 1 United business cards that earn status in 500 PQP blocks after 12k in spend. This year I’ll earn probably another 4,000-6,000 PQP by using the cards.
If that’s not enough loyalty for Untied… I guess I’m not the type of customer they are looking for? *Shrug*
It’s also worth remembering that these airlines have customers all over the world, yet the serious credit card stuff is only really available in the US (perhaps also Canada?). KLM fly to more UK airports than BA do, but there isn’t even a Flying Blue credit card available in the British market.
It depends on the details. I was UA 1K for a number of years, but have dropped to Plat, and probably Gold next year, due to UA raising the criteria, as well as Polaris having become more money for less service than the EU airlines. And status on UA is worth less, since it is so hard to se PPs. I have a ton expiring at the end of the month, including 80 waitlisted that I don’t expect to go through.
And the new AA program does have me spending on their card. I can use AA points for very inexpensive BA business class flights and AA status to pick my seats free.
Does anyone know whether the AA change increased or decreased the number of their elite status holders? I am not a UA frequent flyer, but I certainly don’t relish the prospect of *A lounges getting even more crowded.
If in fact the base Mileage Plus program changes as suggested, wonder what will become of the UA Million Miler Program. Also wondering if UA will offer a way to count spend for other people’s tickets.
I certainly hope UAs million miler program does not change. The fact that DEN is about to be the largest hub and that it’s in the middle of the US makes me think that the Million Miler will not change much. In fact it’s the hardest yet generous of all of the US3.
AA doesn’t match to Plat Pro or Exp and DL has 3 levels of silver but all MQMs are included where United only counts flown butt-in-seat miles without any multipliers (hard to gain). UA would be dumb if they switch to counting anything else (bonus PQP, cc spend, etc.) Anyways how many people are actually earning million miler status who have earned it in less than a decade… not many and especially not now in this environment where spending means more than the number of miles you travel.
This is just flat out wrong: “that doesn’t mean consumers won’t unilaterally reject the model and fly carriers that value them for the travel business and not their overall spend.”
The great thing about the Loyalty Program is that it values both. I’m an AA EXP – earn about 80% of LPs through flying and about 20% through other stuff, mostly hotels. I don’t have an AA credit card. I fly mostly discount economy fares, with a bunch of long-haul international. The Loyalty Points program allows me to keep/maintain EXP on a flying-only profile that probably wouldn’t make that under an EQD based program.
So 80% is 160,000 base miles if you just meet the ExP minimum or $15,000 in non tax spend on flights. Doesn’t matter where or how many miles, you are spending $15k on flights, which was enough under the old system to be ExP. The problem is now there are people who only fly a few times above you on the upgrade list because they are getting 250,000 miles on gimmicks. AA doesn’t care but I’m just saying you SHOULD be the customer they want, but they don’t.
Welcome to the reality of airlines in 2023, they don’t want you to fly with them. Just use your credit card to get monopoly airline money.
I left United for Delta when they changed to their current program a few years ago. My flights are mostly NY-LA and so a distance-based program works best for me. If United moves to the American model then my hope is that Delta will benefit somehow from its unique (i.e., old-fashioned) distance-based scheme. Time will tell, but nothing stays the same forever.
Why does it not make sense that a business is providing the most loyalty rewards to the customers that generate them the most profit? How does that not make sense?
Another way to put that is whether they need to reward loyalty at all (or provide decent service or food, for that matter) if they are still filling planes. And I suspect that is what UA leadership is asking themselves.
This is the system that everyone wants. How could profit at all costs not lead to pretty unsavory outcomes?
it’s probably not your dime putting you in that coach seat – it’s most likely your company’s dime (and their corporate travel policy). Anyone who travels several times per month probably has more miles to use than they could in a lifetime. If you want to sit up front – spend those miles (at whatever redemption cost) and sit up front. I pay for first class seats for my wife and I out of my own pocket. Loyalty has nothing to do with this. It’s about those that PAY to sit up front.