Frequent-flyer program


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 free air travel; for other goods or services; or for increased benefits, such as travel class upgrades, airport lounge access or priority bookings.

Contents

History

The first modern frequent flyer program was created at Texas International Airlines in 1979.[1] But lacking the computer resources of its larger competitors, TI was overtaken by American's introduction of AAdvantage in May 1981. During the early days, several other carriers experimented with reward programs, including Braniff International and Continental (OnePass).[citation needed] American's program was 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 (Mileage Plus) and Delta (SkyMiles), and in 1982 from British Airways (Executive Club).[2]

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.[3]

Miles 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. In Europe, for example, a number of airlines offer a fixed number of points for domestic or intra-European flights regardless of the distance (but varying according to class of travel).[4] 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.

The calculation method can become complicated, with additional points awarded as a 'cabin bonus' (usually as a percentage multiplier over the standard economy-class milage) for flying first or business class, and often fewer or zero points given when flying on many economy tickets sold through travel agents, online vendors, or the airlines' own web sites. Additional bonus points are sometimes granted after members reach specific levels of flying activity.

Programs differ on the expiration of points. Some expire after a fixed time, and others expire if the account is inactive for an extended period (for example, three years). [5]

Miles accrual: partnerships and promotions

Many programs also allow points to be obtained not only by flying but by favoring airline 'partners' on the ground. This includes staying at participating hotels, or renting a vehicle from a participating company, or shopping at a particular department store. Other methods include credit and debit cards that offer points for charges made to the card, and systems which allow earn miles by eating at participating restaurants and charging the meals to registered cards.

Using credit and debit cards to earn points, as well as taking advantage of special promotional offers, can allow some people to earn an exceptionally high frequent flyer points with relatively minimal outlay.

Customer status

Many frequent flyer programs identify travelers who fly more than a few times per year by awarding them different status levels, which in turn give a number of benefits. Status levels vary from scheme to scheme, but benefits can include:

  • Access to business and first class lounges with an economy ticket
  • Access to other airlines' lounges
  • Increased mileage accumulation (such as doubling or tripling)
  • Reserving an unoccupied adjacent seat
  • The ability to reserve specific seats, such as exit row seats with more leg room
  • Free or discounted upgrades to a higher travel class
  • Priority in waitlisting or flying standby
  • Preference in not being bumped if a flight is oversold
  • Priority of luggage (to be prioritized on transfer and to be displayed on the belt first)
  • Waived or reduced fees (e.g. baggage fees, service charges)
  • Ability to grant status to another person
  • Eliminating of program's miles expiration rules

Some programs even permit elite members to reserve space on sold-out flights, giving members the ability of bumping regular passengers. In the US, member status is based on elite qualifying miles (EQM) or number of flight segments, not redeemable miles. Typically one elite qualifying mile is earned for each mile flown on a paid ticket, although there may be a percentage bonus for flying full-fare economy, business, or first class. In addition, the airline may offer opportunities to earn elite qualifying miles in non-flying ways, often in connection with their branded credit card. There are usually many more ways to earn redeemable miles (which can be used for free tickets and other benefits) without flying than ways to earn elite qualifying miles. Some airlines will recognise a customer's status with a competing airline, and grant them the same benefits.

Some airlines offer accelerated admission to their elite programs through special promotions, such as flying 10,000 miles (16,000 km) of non-discounted coach fares or 20,000 miles (32,000 km) of discounted fares within three months gains a higher tier membership normally reserved for passengers flying 50,000 miles per year.[6]

There is anecdotal evidence of flyers having frequent-flyer privileges taken away for undertaking booking ploys.[citation needed]

Value of a mile

Travellers frequently debate how much accumulated miles are worth, something which is highly variable based on how they are redeemed. A typical ballpark figure is approximately 2 cents per mile based on discount (rather than full fare) economy class travel costs.[7] However, most airlines have stringent capacity constraints on the number of "award" seats available, so some people argue that this ballpark figure is an overstatement. In this case, the value of a mile drops below a cent per mile. The airlines themselves value miles in their financial statements at less than one one-thousandth of a cent per mile.[8]

In contrast, calculating the value of a mile based on full-fare business class travel costs can yield a figure several times higher, but only if the customer would personally be willing to pay the multiple thousands of dollars such tickets would cost otherwise. However, a person paying a full business fare will be able to change flights on short notice without extra cost; a person flying business class on a free award ticket may find that last minute changes result in no award seat availability with the result that a ticket must be bought.

Air New Zealand found a unique solution to this problem, by pegging their Airpoints scheme so one point (an "Airpoints Dollar") has the same value as one New Zealand dollar when purchasing. This approach has also been adopted by Canada's WestJet Airlines.

Bankruptcy

All airlines include provisos in their program agreements reserving the right to modify or eliminate them on relatively short notice. But since miles are a strong customer incentive, troubled airlines avoid their elimination in bankruptcy proceedings, and indeed may expand them or make them more generous to elite members and high fare passengers in order to win sales.

Historically, the record is mixed. U.S. airlines have usually honored miles held in the accounts of acquired airlines. For instance American Airlines converted members of TWA's "Aviators" program to its own, as did Air Canada for Canadian Airlines' "Canadian Plus" program members. Sometimes, miles were honored by a close partner; Continental Airlines assumed Eastern Air Lines' program when it failed, as did Delta of Pan Am's. Bankrupt Swissair miles were transferred to Swiss International Air Lines TravelClub who were transferred to Lufthansa's Miles & More after the acquisition of the Swiss carrier.

Members are at greatest risk of losing their miles when an airline liquidates. All miles and privileges were lost, without recognition from any other carrier, as in the cases of Midway, Braniff, and Ansett Australia.

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 travellers 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.[9]

Some programs allow donating frequent flyer miles to certain charities.[10] While the Canadian government will honor these donations as a charitable gift, the difficulty here is getting a tax receipt for those points from the company itself. This policy also appears to conflict with the position that reward points are taxable in the first place.

On the airline side, the points represent potential non-revenue travelers on its books. These must be carried forward on balance sheets as an outstanding contractual debt for an indeterminate time, although the actual value (or loss) may be difficult to determine for any particular period.

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.[11][12][13][14] An increase in the number of hypermobile travellers 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.[15]

Precedent exists for ending frequent flyer programs. In 2002, Norway banned its domestic frequent flyer programs in order to promote competition among its airlines.[16] 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."[17]

Airline programs and expiration policies

Global

Oneworld

Asia

  • Air China Phoenix - Miles expire 2 complete calendar years after they are earned.[18]
  • All Nippon Airways ANA Mileage Club - Miles expire 36 months after they are earned,[19] except for ANA Mileage Club Diamond elite members.
  • Asiana Club - Expiry dates vary upon level of membership. Silver and Magic level members' miles expire after five years, Gold and higher level members' miles expire after seven. Corporate members have only one year to claim mileage.[20] Miles earned before 30 September 2008 will never expire.
  • Bangkok Airways Flyer Bonus - Miles expire 36 months after they are earned.[21]
  • Cathay Pacific / DragonAir Asia Miles expire 36 months after they are earned.[22]
  • EVA Air Evergreen Club - Miles expire 36 months after being earned.[23]
  • Japan Airlines Mileage Bank - Miles expire 36 months after being earned.[24]
  • Jet Airways - Miles expire after 13 quarters.[25]
  • Korean Airlines SKYPASS - Miles expire 10 years after being earned.[26] Miles earned before 30 June 2008 will never expire.
  • Malaysia Airlines Enrich - Miles expire one year after being earned, but members can extend the validity of their miles for an extra year after paying a fee to do so or by becoming Enrich Platinum elite members.[27]
  • Philippine Airlines Mabuhay - Miles expire 36 months after being earned.[28]
  • Singapore Airlines KrisFlyer - Miles expire 36 months after being earned (can be extended up to 12 months for a fee).[29]
  • Thai Airways International Royal Orchid Plus - Miles earned in one calendar year will expire at the end of the third calendar year after accrual.[30]
  • Vietnam Airlines Golden Lotus Program - Miles earned will expire two years after two years on the member's sign up anniversary month.[31]

Europe

  • AirBaltic BalticMiles - Reward miles expire after 3 years after the day they are first earned[32]
  • Miles & More (Lufthansa, Air Dolomiti, Augsburg Airways, Contact Air, Eurowings, Austrian Airlines, Brussels Airlines, LOT Polish Airlines, Swiss International Air Lines as well as regional airlines: Adria Airways, Croatia Airlines and Luxair) - Miles expire 36 months after date of earning for non-elite members with no Lufthansa-branded credit card, or 36 months after loss of elite status for currently elite members.[33]
  • Turkish Airlines Miles&Smiles - Collected miles (flight, hotel stay, car rental) expire at the end of the third full calendar year following their collection.[34]

Middle East

  • Skywards - Miles expire at the end of the month of the traveller's birth, 3 years after earning (however, you can use them to book a reward ticket that is valid for up to 12 months).[35]

North America

  • American AAdvantage - Miles expire after 18 months of account inactivity.[36]
  • Air Canada Aeroplan - All mileage in an account expires if the Aeroplan member has not accumulated or redeemed Aeroplan Miles for a period of 12 consecutive months. Mileage in an account expires 7 years (84 months) after the date of accumulation. Mileage may expire without further notice.[37]
  • Continental OnePass - Miles don't expire, however, accounts may be closed or miles forfeited after 18 months of account inactivity.[38] Will be phased out by December 31, 2011 and to be combined with United's Mileage Plus program.[39]
  • Delta SkyMiles - Miles never expire.[40]
  • United Mileage Plus - Miles expire after 18 months of account inactivity. Will absorb Continental's OnePass program on approval of merger with Continental Airlines [41]
  • US Airways Dividend Miles - Miles expire after 18 months of account inactivity.[42]

Mileage run

A mileage run is an airline trip designed and taken solely to gain maximum frequent flyer miles, points or status.[43] If a traveler has already achieved some sort of elite status they will be earning bonus miles on top of their actual flight miles, and consequently they will reach their goal sooner.[43] A mileage run may allow a traveller to (re-)qualify for a beneficial elite level which requires a minimum number of miles for qualification. [44]

Those who deliberately book mileage runs are known as mileage runners.[citation needed]

See also

References

  1. ^ David M Rowell (August 13, 2010). "A History of US Airline Deregulation Part 4 : 1979 - 2010 : The Effects of Deregulation - Lower Fares, More Travel, Frequent Flier Programs". The Travel Insider. http://thetravelinsider.info/airlinemismanagement/airlinederegulation2.htm. Retrieved September 21, 2010. 
  2. ^ Ben Beiske (2007). Loyalty Management in the Airline Industry. GRIN Verlag. p. 93. ISBN 3638777170. 
  3. ^ "Frequent-flyer miles". The Economist. 2005-01-06. http://www.economist.com/opinion/displaystory.cfm?story_id=E1_PVPGTSR. 
  4. ^ [1][dead link]
  5. ^ "Definitive list of FFPs mileage expiry - FlyerTalk Forums". Flyertalk.com. http://flyertalk.com/forum/showthread.php?t=593589. Retrieved 2010-09-08. 
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  7. ^ Adrianus D. Groenewege. Compendium of International Civil Aviation. 
  8. ^ >
  9. ^ "APS Values and Code of Conduct in practice". Apsc.gov.au. 2009-05-06. http://www.apsc.gov.au/values/conductguidelines12.htm. Retrieved 2010-09-08. 
  10. ^ Frequent-flyer points donation a tricky tax issue[dead link]
  11. ^ Storm S (1999) http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.138.3305&rep=rep1&type=pdf Air transport policies and frequent flyer programmes in the European Community: a Scandinavian perspective. Unit of Tourism Research, Recearch Centre of Bornholm (p.1-105).
  12. ^ Cognac M, DeLozier M (1997)http://www.sbaer.uca.edu/Research/sma/1997/PDF/toc.pdf. Frequent Flyer Programs Promotion: An Analysis Of A Paradoxical Industry. Southwestern Marketing Association (p.1-12).
  13. ^ Tretheway MW (1989) http://trid.trb.org/view.aspx?type=CO&id=302286. Frequent Flyer Programs: Marketing Bonanza or Anti-Competitive Tool? (30:1), p.445.
  14. ^ Cohen S, Higham J, Cavaliere C (2011). http://eprints.bournemouth.ac.uk/1716 Binge flying: Behavioural addiction and climate change. Annals of Tourism Research
  15. ^ Gössling S, Ceron JP, Dubois G, Hall CM, Gössling IS, Upham P, Earthscan L (2009). Hypermobile travellers. Chapter 6 in: Climate Change and Aviation: Issues, Challenges and Solutions; http://alicante.academia.edu/documents/0076/1866/chap06_copy.pdf
  16. ^ Aftenpost (2002). Sterling polishes plans for new routes, by Nina Berglund, 19 Mar 2002.
  17. ^ Orlando Sentinel (1989). Braniff Will SlimDown, Keep Flying, by Kenneth Michael, 4 Oct 1989.
  18. ^ "Air China International". Air-china.us. 2009-12-31. http://www.air-china.us/en/phoenixmiles/accrual/notes.html. Retrieved 2010-09-08. 
  19. ^ "ANA SKY WEB | ANA Mileage Club | FAQ". Ana.co.jp. http://www.ana.co.jp/eng/amc/reference/faq/tameru/index.html#D01. Retrieved 2010-09-08. 
  20. ^ "Asiana Club FAQ- Asiana Airlines". Us.flyasiana.com. http://us.flyasiana.com/Global/US/en/homepage?fid=CLUB19000&sCtg=FAQ1_2&searchWrd=expire. Retrieved 2010-09-08. 
  21. ^ "Bangkok Airways - FlyerBonus". Flyerbonus.bangkokair.com. http://flyerbonus.bangkokair.com/ffp/home.aspx?param=5. Retrieved 2010-09-08. 
  22. ^ "About Asia Miles > Frequently Asked Questions". Asia Miles. http://www.asiamiles.com/am/en/about/faq. Retrieved 2010-09-08. 
  23. ^ "EVA Air Global Website_English_Evergreen Club_Mileage Rules_Mileage Validity". Evaair.com. http://www.evaair.com/html/b2c/english/club/Mileage_Rules/Mileage_Validity.htm. Retrieved 2010-09-08. 
  24. ^ "JAL Mileage Bank - JMB Rules and Conditions". Jal.co.jp. http://www.jal.co.jp/en/jalmile/rules.html. Retrieved 2010-09-08. 
  25. ^ "Jet Airways India | Terms & Conditions - JetPrivilege". Jetairways.com. http://www.jetairways.com/EN/US/TermsAndConditions/JetPrivilege.aspx. Retrieved 2010-09-08. 
  26. ^ "Korean Air". Korean Air. http://www.koreanair.com/. Retrieved 2010-09-08. 
  27. ^ "FAQ – Enrich by Malaysia Airlines". Malaysiaairlines.com. http://www.malaysiaairlines.com/my/en/loyal/enrich/services/faqs/faqs.aspx#B. Retrieved 2010-09-08. 
  28. ^ https://www.mabuhaymiles.com/faq.jsp#6
  29. ^ "Singapore Airlines". Singaporeair.com. http://www.singaporeair.com/saa/en_UK/content/krisflyer/customerservice/terms.jsp?v=-1815763081&. Retrieved 2010-09-08. 
  30. ^ "Hand Book ROP Eng 09.indd" (PDF). http://www.thaiair.com/frequent-flyer/download/Handbook-EN.pdf. Retrieved 2010-09-08. 
  31. ^ "Vietnam Airlines - Bringing Vietnamese Culture to the World". Vietnamair.com.vn. http://www.vietnamair.com.vn/wps/portal/en/site/frequent_flyer/program/terms/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3hnd0cPE3MfAwMDZ2cLAyNzDx8T49BQQ4NQU6B8JJK8u6-vG1A-1MI8yNXP0MDAlIBuL_2o9Jz8JKA94SCbcav1NUCTR7PJ2wy_PMglIHkDHMDRQN_PIz83Vb8gN6Iy2DPLBAB7NBQi/dl3/d3/L3dDb0EvUU5RTGtBISEvWUZSdndBISEvNl9DR0FINDdMMDAwQ0M4MDI3SEw0M1VVMTAxMg!!/. Retrieved 2010-09-08. 
  32. ^ http://www.balticmiles.com/en/4bd530b630546.html
  33. ^ "Miles & More - Terms & Conditions - Miles & More Terms & Conditions". Miles-and-more.com. http://www.miles-and-more.com/online/portal/mam/uk/program/information?nodeid=2522607&l=en&cid=1000243. Retrieved 2010-09-08. 
  34. ^ "Miles&Smiles Terms & Conditions - Turkish Airlines - TK - International Home Page". Turkish Airlines. http://www.turkishairlines.com/en-INT/miles_and_smiles/about_us/terms_and_conditions.aspx#37. Retrieved 2010-09-08. 
  35. ^ Emirates Webpage, FAQs
  36. ^ "AAdvantage Mileage Retention Policy". Aa.com. 2007-12-15. http://www.aa.com/aa/i18nForward.do?p=/utility/mileageExpiration.jsp. Retrieved 2010-09-08. 
  37. ^ "Aeroplan Terms & Conditions". aeroplan.com. 2011. http://www2.aeroplan.com/terms_and_conditions.do. Retrieved 2011-09-28. 
  38. ^ "Continental Airlines - OnePass Member Advisory". Continental.com. 2010-03-01. http://www.continental.com/web/en-US/content/onepass/rules/advisory.aspx. Retrieved 2010-09-08. 
  39. ^ Mileage Plus to be the Loyalty Program for the New United Airlines
  40. ^ "What's Ahead With Miles". Delta.com. http://www.delta.com/skymiles/about_skymiles/skymiles_program_updates/index.jsp. Retrieved 2011-03-01. 
  41. ^ "United and Continental Merger". InsideFlyer.com. 2009-03-06. http://www.insideflyer.com/articles/article.php?key=6182. Retrieved 2010-09-08. 
  42. ^ "Dividend Miles Membership Guide". usairways.com. https://membership.usairways.com/en-US/dividendmiles/programdetails/memberguide.html. Retrieved 2011-09-24. 
  43. ^ a b David Grossman (2005-11-14). "The art and science of the mileage run". USA Today. http://www.usatoday.com/travel/columnist/grossman/2005-11-11-grossman_x.htm. Retrieved 2006-09-26. 
  44. ^ "InsideFlyer.com: Wild About Miles: Inside the Mind of the Mileage Junkie". www.insideflyer.com. http://www.insideflyer.com/articles/article.php?key=2168. Retrieved 2010-06-25. 



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