United Airlines appears poised to follow American Airlines model for an entirely revenue-based loyalty program. Here are three leading reasons why.
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.
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?