Desperately Seeking Seats - using frequent flier programs

Kiplinger's Personal Finance Magazine, July, 1999 by Melynda Dovel Wilcox, Lynn Woods

Frequent-flier reward programs are no prize when they don't get you where you want to go.

It's a chilly November day in Washington, D.C., and thoughts turn to warm, sunny Florida. Figuring you have plenty of frequent-flier miles for a winter getaway, you call a US Airways reservations agent and tell her you'd like to go to West Palm Beach in February.

"Sorry, nothing's available," the agent replies.

"How about Orlando?"

"Nope."

"Any other airport in Florida?"

"Nada."

"Where can I go that week?"

"You could go to Omaha."

Little wonder many airline passengers have decided that frequent-flier rewards don't get them very far.

Airlines see their programs as mutually beneficial. Because most flights have a few empty seats, they can give away something of value to customers that costs them little more than a junior-size snack and a smidgen of jet fuel. But consumers are as ambivalent about frequent-flier mileage as they are about their health insurance: They're generally satisfied until they really need to use it.

* Last November, Ted Gartland of Rochester, N.Y., tried to cash in his US Airways miles for two tickets to St. Thomas in February. No frequent-flier seats were left, according to the airline representative, but Gartland was told he could get two "free" seats if he was willing to use his miles in conjunction with two half-price tickets. Gartland ended up paying $500 plus 40,000 miles--not quite the frequent-flier freebie he'd expected.

* Jan Benini of Washington, D.C., called United Airlines in February to redeem miles for a June flight to Europe. "June of what year?" the reservations agent inquired. All frequent-flier seats for June 1999 were already taken, and seats for June 2000 couldn't be requested more than 11 months in advance.

* One of the authors of this story received a cheerful note from United Airlines letting her know that 18,815 of the roughly 20,000 miles in her account were due to expire on December 31, 1999. The good news? She could redeem those miles at "no cash cost" for magazine subscriptions--which she had to choose immediately or the offer would expire. It expired.

Going nowhere?

In 1998 airlines enjoyed a banner year for revenue and profits. It was also a record year for customer complaints. "Airlines define passengers as air freight with an attitude," grumbles Eileen Shapiro, author of The Seven Deadly Sins of Business, who logs thousands of miles in the air each year. When it comes to taking advantage of frequent-flier perks, that attitude is often frustration.

Airlines insist that they aren't making it harder to redeem miles for tickets and, strictly speaking, they're telling the truth. They're supplying roughly the same number of seats for frequent fliers as they did in the past. But with airlines carrying record numbers of passengers and consumers racking up miles for everything from ordering flowers to buying a computer, the demand for reward seats far outpaces the supply. About 57 million people belong to at least one frequent-flier program, and no fewer than 3.6 trillion miles are sitting in members' accounts, according to Randy Petersen, editor of Inside-Flyer newsletter and WebFlyer (www.webflyer.com).

"The whole pace of travel activity has intensified," says Rolfe Shellenberger, who developed the first frequent-flier program, American AAdvantage, in 1981 and is now a consultant for Runzheimer, a travel-management research firm. "As a result, travelers are rich with miles, and there's more competition for whatever space there is."

Frequent-flier miles have become, in effect, frequent-buyer miles, with almost half the miles earned coming from credit card purchases, mutual fund investments, long-distance phone calls and other transactions.

That represents a major shift in the way airlines give away seats, says Petersen. By selling miles to credit card issuers, phone companies and other corporate partners--who in turn use them to market their own products--the airlines essentially end up making a profit on prepaid, undiscounted seats, while fueling expectations that those seats will be available as freebies.

When they aren't, consumers are understandably irked. "If you put 100,000 miles in your Delta account and try to get a business-class ticket to London from Atlanta, you can forget it," says frequent-flier Gary Stevens, who travels 150,000 miles a year for his job in broadcasting.

The programs work because "the vast majority of people never redeem their miles," admits Craig Andersen, director of frequent-travel marketing at TWA. While free flights are by far the most popular perk, some miles are redeemed for other awards: upgrades, vacation packages and, yes, even magazine subscriptions.

Landing a seat

The airlines also maintain that reward redemptions are up, not down. At United, the percentage of passenger-miles flown as free rewards was higher in 1998 than in 1997, says Jim Davidovich, senior planner for Mileage Plus, United's frequent-flier program. And the number of free miles flown on United's foreign-partner airlines doubled in 1998 compared with the year before, suggesting that more travelers were using their miles for coveted overseas trips.