United: Fliers earn miles based on fare, not distance
United Airlines is making a sweeping change to its Mileage Plus frequent-flier program, saying customers will soon earn miles based on the fare they pay, not how far they fly.
United becomes the second of the big "legacy" carriers to make such a change, following the lead of Delta. It was in February that Delta said it would tie frequent-flier miles to the cost of a ticket.
Low-cost carriers — including Southwest, JetBlue and Virgin America — already employ a "revenue-based" system of earning frequent-flier points. But Delta's change, which launches Jan. 1, has been viewed as a fundamental shift among the three big network carriers that control much of the domestic U.S. market.
With United going to such a system, that leaves American as the last of the USA's three big global network carriers still using a traditional distance-based scheme for earning miles. That seems all but sure to stoke speculation about whether American — now the world's largest airline following its merger with US Airways — will follow the lead of rivals United and Delta.
United's changes won't take effect until 2015 — March 1, to be exact . But once they do, United's customers will earn miles using a formula that combines fare and their frequent-flier status.
The changes are a mixed bag for fliers, says Brian Karimzad, director of MileCards.com, a website that lets users compare travel credit cards based on where they want to fly.
Karimzad says business travelers who fly overseas in business class or those who fly frequently domestically on short-but-expensive routes likely will come out ahead with the changes. Those expected to lose out in the change are leisure fliers and business fliers who fly cross country on cheap fares. In the middle are business travelers who fly on a mix of business and economy fares, Karimzad says.
"Many business fliers will do well," Karimzad says. "A single international business class ticket can earn what ten typical domestic flights do today. The big losers are road warriors for companies that will only pay the lowest coach fares."
At the low end of the spectrum, United customers with no elite-level status on United will earn five award miles for every dollar spent on base fare and carrier-imposed surcharges.
Elite-level members of United's Mileage Plus program will earn at a higher rate:
Premier Silver: 7 miles per dollar
Premier Gold: 8 miles per dollar
Premier Platinum: 9 miles per dollar
Premier 1K: 11 miles per dollar
Despite the new system, however, United customers will continue to earn elite status based on the current system. United Mileage Plus members currently earn status with the airline through a combination of distance-based mileage earning — 25,000 miles in calendar year is needed for Silver status — and by hitting certain spending thresholds.
As for United's new earning structure, it will apply to most tickets booked on United and United Express flights. The company says United-issued tickets — those beginning with a "016" ticket number — will earn miles based on the new system.
For example, a ticket issued by United that includes a connection on Star Alliance partner Lufthansa will earn miles under the new mileage-earning system.
Tickets issued by United's partners will earn miles on the current distance-based system if the itinerary doesn't include a United flight.
As with the current system, certain special fares — such as those used for bulk and "opaque" fares — will not be eligible to accrue miles.
United says it will cap the number of miles earned under its new revenue-based earnings system at 75,000 award miles per ticket. That presumably won't affect a large number of fliers; non-elite customers would need to buy a $15,000 ticket to earn that many miles. A "1K" top-tier elite would have to spend about $6,800 to hit the award mileage cap for a single ticket.
As part of the overhaul to the way customers earn miles, United intends to introduce new options for using miles sometime next year. For example, the carrier says customers soon will be able to use miles to purchase Economy Plus seats on single flights or to buy the airline's Economy Plus and checked-baggage subscription packages.
United says Tuesday's move doesn't include any changes to award redemption thresholds.
"These changes are designed to more directly recognize the value of our members when they fly United," Thomas O'Toole, United's senior vice president of marketing and loyalty and president of MileagePlus, says in a statement announcing the change. "We are also pleased to give our members new redemption options that expand the usefulness of their MileagePlus miles."
Next, industry observers say they'll be keeping a close eye on American to see if it matches the changes made by Delta and United. The carrier is currently in the process of merging with US Airways, which may mean the company will put off such a big change until it is farther along with its merger integration.
Most industry watchers expect American eventually will make a similar change, but -- for now -- MileCards.com's Karimzad says there may be a window of opportunity for fliers who don't like the changes at Delta and United to make a statement.
"American is happy to welcome disgruntled fliers, but -- unless that happens en masse -- expect them to rework their program," he predicts.
