The Extra Mile

Airlines offer more elite status, fewer elite perks

March 28, 2005 - At the heart of many companies' marketing efforts is the 80/20 rule, also known as Pareto's Law, for the Italian economist who first formulated the principle. In the world of commerce, the 80/20 rule suggests that 80 percent of a company's revenue is generated by 20 percent of its customers.

For airlines, that 20 percent comprises business travelers, business travelers and, yes, more business travelers. Road warriors fly often; and they are much more likely to purchase high-priced unrestricted tickets than their leisure-travel counterparts.

And it is for them -- to gain and maintain their loyalty, and to sustain the disproportionate profits they generate -- that the airlines have created elite tiers within their frequent flyer programs.

In the loyalty programs of most large carriers, entry-level elite status is earned for flying 25,000 miles during a calendar year. Higher status can be attained by earning 50,000 and 100,000 miles.

To make elite status worth striving for, the airlines reward those who qualify with extra miles, allowing them to earn free tickets faster. But the biggest payoff for the road-weary has been the upgrades and expedited services that help mitigate the discomfort of intensive travel.

With the airlines opening the doors to more elite members, and cutting back on the very rewards most prized by frequent flyers, elite status is losing its luster.

Elite status is easier to achieve

While elite status remains out of reach for most, it's a much less exclusive club than it once was.

Since the advent and proliferation of global airline alliances, members of most major programs have been able to elevate their status by flying not just on the host carrier but on a network of affiliated airlines as well.

And with no end in sight to the financial turmoil roiling the industry, airlines increasingly have been yielding to the temptation to play fast and loose with elite status, featuring it as an incentive in limited-time promotions.

United, which is trying to regain profitability and emerge from Chapter 11 bankruptcy, is offering Mileage Plus members who use their Mileage Plus Visa credit cards to charge airline tickets on united.com one elite-qualifying mile for every dollar charged, up to 5,000 miles, through Dec. 31, 2005. (Normally, credit card miles don't count toward elite qualification.) And in February, United used the lure of instant elite status to sell prepaid travel cards, conferring Premier status on those pre-paying for $5,000 in tickets, Premier Exec status for $10,000 and 1K status for $20,000.

US Airways, which is also in bankruptcy, hoped to spike ticket sales earlier this year by promising members of its Dividend Miles program up to 20,000 bonus miles -- which counted toward elite status -- for US Airways flights purchased at usairways.com.

It's not only bankrupt carriers which are leveraging the allure of elite.

America West is offering Gold elite status to FlightFund members who fly six America West first-class roundtrips, and Silver status for three first-class roundtrips.

And Delta recently reduced from 100,000 to 75,000 the number of miles required to reach its highest elite level.

Elite perks are harder to come by

Meanwhile, the industry is undergoing a pricing evolution, if not a revolution, led by Delta's newly introduced SimpliFares. A key feature of the new ticket prices is a cap on first-class fares, making the comfy seats up front significantly more affordable. With more travelers purchasing first-class tickets, elite upgrades will be fewer and farther between.

Adding to the availability crunch is the industry-wide trend toward reducing first-class capacity. Example: Continental is in the process of reconfiguring its 737-500s, reducing first-class seating from 10 to eight and increasing coach seats from 94 to 106. When complete, the change will amount to a 20 percent reduction in first-class seats over 18 percent of Continental's fleet.

Together with the decrease in first-class fares, which can only increase demand for paid tickets, the elimination of already scarce first-class seats can only be bad news for elite program members who have been promised "unlimited, complimentary upgrades."

Elsewhere, the airlines' ability to direct their best customers to expedited security-clearance lines will be eroded later this year if, as expected, a national registered travel program is implemented, giving flyers willing to undergo a background check access to those same priority lines through airport security checkpoints.

Devalued elite faces uncertain future

As more airlines continue making elite status easier to achieve, demand for elite perks can only escalate, even as the supply of desirable benefits is decreasing. That disconnect spells trouble for both the airlines, which rely upon elite status to keep their most profitable customers from taking their business elsewhere, and for travelers themselves, who have come to value and expect a higher level of service in return for their patronage.

With the devaluation of elite status, is it worth pursuing?

There's no easy answer. But until the airlines revamp the benefits package reserved for their best customers, there's less reason than ever to be slavishly loyal to a single carrier.