It’s not how much you fly so much as how much you spend
Budget travelers endured a virtual slap in the face from Delta Air Lines this month when the carrier noted on its website that it was doing away with awarding frequent-flyer points in 2022 on Basic Economy tickets — the most restrictive fares on the plane that usually involve forgoing seat assignments, cancellation credits and early boarding. ¶ “Basic Economy flyers are not chasing high levels of elite status, but it was definitely shocking to see them dropping mileage earning completely,” said Jarrod West, a senior contributor to Upgradedpoints, a website devoted to maximizing loyalty points. “The more casual, price-sensitive traveler wants the cheapest tickets, but they won’t be able to earn any loyalty points to travel on later.”
But don’t tear up your Skymiles card just yet. Airlines are moving to qualify frequent travelers by the money they spend, not the amount they fly. Thrifty travelers willing to fly economy — even Basic Economy on another airline — and get an airline credit card can still play the status game.
No miles, more carrots
The three legacy carriers in the United States — Delta, American and United — got into the Basic Economy business initially to compete with ultra-low-cost carriers like Frontier and Spirit, said Peter Belobaba, an airline pricing and revenue management expert at the Massachusetts Institute of Technology. With these tickets, travelers do not have an advance seat assignment, nor would they be seated with their companions. They would also have to board last and be unable to change or cancel for a refund or credit. United even went so far as to ban domestic flyers in Basic Economy from bringing a full-size carry-on.
“If you’re Delta, and you match a $69 roundtrip price, you’re offering a significantly better product than an ultra-low-cost carrier,” Belobaba added, noting more legroom and complimentary drinks and snacks.
In this economic model, he explained, Delta might offer more Basic Economy seats on lightly trafficked flights to try to win over price-sensitive travelers. They also use revenue-management models to take them away when they know they can sell the higher-price seats. During the busy pre-christmas week, for example, I found some routes without the Basic Economy class entirely, which returned in January.
Though Basic Economy flyers had a reprieve from the most restrictive aspects of their tickets — no changes, no refunds — during the height of the pandemic, most have returned to being largely inflexible. Delta and United, which extended their waivers, will drop them in 2022. Delta plans to make its standard Basic Economy fares a little less punishing, allowing changes for fees running from $99-$199. If a traveler needs to postpone a trip on a
Basic Economy ticket, they would now get a credit for the fare paid minus the change fee.
A Delta spokesperson said that nearly 70% of flyers in Basic Economy are not members of its Skymiles loyalty program.
“People who fly occasionally and are price-conscious don’t care about earning miles on an airline. They care about costs and flexibility,” said Chris Lopinto, the co-founder and president of Expertflyer, a service that helps users find better seats, upgrades and awards on airplanes. “The bet is that people will appreciate the cancellation minus 100 bucks versus worrying about earning miles.”
The move brings Delta’s lowest class closer to the policies of ultra-low-cost carriers, which also dropped their change fee waivers last spring. Spirit has a sliding scale of change fees running from free 60 days or more before departure to $99 two days or less before. Frontier has a similar scale, from free 60 days or more before departure to $79 within six days of departure.
You can, of course, buy your way out of Basic Economy purgatory. Main Cabin, the next level of service, allows you to avoid boarding last, sitting in the middle seat and possibly having to check your rollaboard carry-on at the gate because there’s no overhead bin space left. The difference in fares ran about $30-$50 on a transcontinental round-trip between Boston and Los Angeles, according to a recent search (the airline said the difference in fares between Basic Economy and Main Cabin depends on many factors, including the route and flight).
American Airlines is going the other way.
“Delta wants customers who are brand loyal and care about miles buying more expensive tickets,” said Gary Leff, who writes the airline blog View from the Wing. “It doesn’t seem to me like it is a model that’s matching the moment in the way that American Airlines has gone the opposite direction. They’ve made the mileage program more accessible and flexible,” including eliminating redeposit fees for miles used to book a flight that you decide to cancel, and points expiration for flyers under 21.
Frequent spending over frequent flying
Airlines are increasingly making it easier for travelers to earn points through their credit cards, which they heavily promote. Moreover, carriers from American to Spirit have switched to awarding points based not just on flights, but spending on members’ airline-branded credit cards.
“Even before the COVID crisis, frequent flyer or loyalty programs at airlines were very reliant on third-party credit card spending and not just reliant on business and leisure travelers flying an airline and demonstrating their loyalty to the company,” said Vik Krishnan, a partner in the travel practice at Mckinsey & Co. consultancy, noting that roughly 60%-70% of airline revenues came from credit card spending on airline cards. “That was true before COVID and after, it became more critical, as air travel volume fell off significantly.”
American claims its new earning system, which takes effect in 2022, is simpler, doing away with qualifying miles, dollars and segments in favor of loyalty points awarded for each mile flown and dollar spent. In the past, most credit card spending did not contribute to elite status; now it does.
“American is saying it’s not about spending on tickets,” Leff said. “Our profitable customers engage in different ways.” The pandemic, he added, “created an opportunity to really rethink things.”
In that spirit, perhaps it’s time to retire the term “frequent flyer.” Under the new system, someone who spends a lot on their airline credit card — for business, for example — could conceivably end up with higher status than someone who flies regularly.
“It will more likely lead to more elite members,” West of Upgradedpoints said. “Everyone will still have seat selection and baggage benefits but the sexy benefits like free upgrades to business and first class, especially on long-haul flights, will be more and more difficult to get.”
The environment is a clear winner in the transition: Qualifying through spending does away with the incentive to take “awards runs,” typically needless flights at year end taken by high-status flyers to retain their rank for the next year.
Spend now to maximize miles
As a currency that airlines alone control, the value of miles has a tendency to erode. Points hawks generally advise using them as soon as you can, as airlines may at any time increase the points required to get a free flight.
“The airlines still control how you redeem the miles and the value that you redeem them for,” Krishnan said.
He cited a seesaw scenario: On one hand, many loyalty programs recently got rid of or extended expiration dates for miles, while making more awards seats available; on the other, they raised the minimums for redemptions. Whereas a decade ago, a domestic round-trip ticket might cost 25,000 points on a flat-fee schedule, now it could be 100,000, depending on where and when you fly.
“The value you pay in miles increases with ticket prices on airlines,” Krishnan said.
To keep up with the game, you’ve got to continue earning miles, and the question remains whether American and United will follow Delta’s lead and change their Basic Economy rules. Both responded to inquiries that passengers can still earn points flying in Basic Economy, and American said, through a spokesperson, that “we don’t anticipate any changes.”
“They all look at things with a different calculus,” Lopinto of Expertflyer said. “Delta tends to look with the cold harsh lens of reality.”
“People who fly occasionally and are price-conscious don’t care about earning miles on an airline. They care about costs and flexibility. The bet is that people will appreciate the cancellation minus 100 bucks versus worrying about earning miles.” Chris Lopinto, co-founder and president of Expertflyer, a service that helps users find better seats