PwC Report Highlights Winners, Losers of New-Look Frequent-Flier Programs
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Despite having been around for three decades, frequent-flier loyalty programs have undergone a significant shift of late as more airlines transition to revenue-based models that reward travelers for how much they spend rather than how far they fly.
Ismat Sarah Mangla of the International Business Times points out that major carriers like United (MileagePlus) and Delta (SkyMiles) have made the switch in 2015, and as with any major change there stands to be winners and losers.
A new report released by consulting firm PricewaterhouseCoopers (PwC) this week details what kind of travelers will benefit from the new models and which will suffer as a result.
"Airlines are adjusting their loyalty programs to better fit their business models," said the report's co-author and PwC transportation and logistics analyst Jonathan Kletzel. "Leisure travelers are the ones who stand to lose the most, while business travelers will fare the best."
Roughly 39 percent of the flying public—travelers who travel on last-minute fares or business fares—are likely to benefit the most from a loyalty program based on spending. The reason being that these travelers aren't concerned so much with price as getting to their destination is a necessity.
Interestingly, the report reveals that only a small percentage of those travelers will gain from earning 500 or more points in a spend-based program.
The biggest winners under a program valuing spending over miles are most likely to be business travelers flying mainline carriers and flying shorter routes. Mangla points out that "that's because the average fares for the major U.S. airlines are about 15 percent higher than the average fares for all airlines" and "the average fare per mile flown is higher for short distances than it is for longer ones."
While a handful of air travelers (14 percent) are unlikely to experience much of a change as a result of their frequent-flier program shifting to a revenue-based model, roughly half of the flying public (47 percent) consists of leisure travelers, many of which are likely to lose out as a result of the shift in philosophy.
Because many leisure travelers are booking fares well in advance and often in search of deals, they are poised to earn fewer reward points under a program based on spending.
Nearly a quarter of air travelers (24 percent) will experience a reward earnings decline of 500 or more points.
Essentially, air travelers whose livelihoods depend on their ability to travel are less likely to let cost get in the way of booking fares and therefore are more likely to benefit from a program that puts a premium on spending.
Therefore, the more widespread these type of loyalty programs become, the more likely airlines are to alienate select leisure travelers.
More by Patrick Clarke
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