Travel News

Who Really Benefits From Frequent Flyer Programs?

frequent_flyerWe’re a nation of addicted frequent flyers who will do anything for those miles, but who is really benefiting?

Frequent flyer miles are a great source of profit for the airlines, but they have no incentive to make miles easier to redeem. Airfares are already up 14 percent over last year and showing no signs of slowing. So, why displace a revenue passenger for miles redemption?

It all comes down to yield (i.e. how much an airline can get for each individual seat). At major legacy carriers, about 70 percent of revenue comes from the top 20 percent of customers. Plus, Delta Air Lines has now changed its frequent flyer mile program to favor premium travelers. Reward miles are earned on ticket prices, not on distance flown—with flyers earning 60 percent fewer points with the policy change. Members are now incentivized to opt for the higher airfare.

For those who pay the premium, there are premium perks. Select first class airlines offer private suites on the plane, private terminals in the airport, and private car escorts to and from the airport. Airlines are catering for the one percent because that is the highest yield.

The bottom line: airlines have made their core product so distasteful that passengers are almost forced to go for the upsell, but even that no longer rewards them. Watch Peter’s CBS This Morning report to see the new class system that’s being created.

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