When Delta Air Lines announced a revenue-based earnings chart for 2015, I predicted that it would only be a matter of time before United Airlines would match, though I did not expect it to happen so soon. Copying Delta almost exactly, United has announced revenue-based earnings will replace distance-based earnings starting on 01 March 2015 for redeemable miles on United issued tickets. Elite miles will still be distance-based and tickets issued on other carriers (except for United flights) will earn miles as before.
Here’s the official word–
Today we’re announcing changes to how MileagePlus members will earn award miles in 2015. We’ve posted complete details and a FAQ on united.com, but I wanted to share an excerpt of the key points with you directly: As of March 1, 2015, the award miles you earn on most United and United Express tickets will be based on your ticket price (that is, base fare plus carrier-imposed surcharges) and your MileagePlus status, instead of the distance you travel. The new criteria for earning award miles will look like this:
- Member: 5 award miles per US dollar spent
- Premier Silver: 7 award miles per US dollar spent
- Premier Gold: 8 award miles per US dollar spent
- Premier Platinum: 9 award miles per US dollar spent
- Premier 1K and Global Services: 11 award miles per US dollar spent
The changes to earning award miles will apply to all MileagePlus members worldwide, and will be based on status at the time of flight on or after March 1, 2015. These changes will not affect the qualification requirements for 2015 Premier status. PQM and PQS will still be based on the number of paid flight miles traveled and the fare purchased. And where applicable, PQD will still be determined by the base fare and carrier-imposed surcharges.
As mentioned above, there are more details and a FAQ posted online, and over the next few days we’ll be communicating this information to our members.
United has lacked innovation for years and this policy change is simply a copy of what Delta has already done. I thought United would at least observe how the change worked for Delta before implementing it itself, but Smisek and Co. have the lemming syndrome when it comes to the word devaluation in any form.
For tickets issued by other partners (such as a Lufthansa flights issued with Lufthansa), MileagePlus members will still earn award miles as before (though I predict next that United will gut partner earning rates). If you book United flights with Lufthansa, your redeemable miles earned will be calculated at the new rate.
A max of 75,000 miles can be earned on a single ticket, so a Global Services member who purchases a $25,000 first class ticket and would normally earn 11 points per dollar (275,000 miles) will earn only $75,000 instead, a 70% reduction. That’s customer friendly™…
The True End of Mileage Running
This policy change sounds the death knell on mileage running and here is why–
Let’s say I am going from Los Angeles to Newark and United has a $300 r/t fare. Say I decide to route it via San Francisco so that I can earn extra miles. Right now, as a 1K member who earns a 100% redeemable miles bonus on revenue tickets, I would earn (500+2565+2565+2565) x 2 = 12,262 award miles on the trip. With the new program, my earnings drop to about 2,750 miles, not even 300×11= 3,300 because you don’t earn miles for taxes.
(you can play around with hypos with this tool)
United flyers are facing a two-front attack: awards charts are devalued as it simultaneously becomes significantly more difficult to earn miles. Those who buy pricey tickets will continue to earn a fare chunk of miles, though less so than they may assume, but aspirational awards for budget-conscious travelers will now become significantly more difficult to obtain.
Why United’s Move is Unlike Delta’s
United has mimicked Delta, but consider the huge differences between the airlines. Delta has, of course, reported a very healthy profit while United has reported losses and seen high-value travelers flee (see WSJ graphic to the right) but more fundamentally, Delta runs a modern fleet with premium amenities for all cabins, wi-fi on nearly every domestic flight, and great customer service.
United offers a fine business class seats, but poor IFE, poor meals, highly unpredictable service, a horrid economy class product on many aircraft, and no internet on the majority of the fleet. Delta has earned the right to gut mileage earnings: United has not.
American will Follow Next
AA AAdvantage has the golden opportunity to differentiate itself now, but it would be placed at a comparative disadvantage if it continued to allow mileage earning at a more generous rate (distance-based) than its two main competitors. With Doug Parker running the show, it is only a matter of time before AA also announces a change.
The Importance of Credit Cards
Miles-earning credit cards will become even more valuable now. I can only imagine that Chase is livid at United for disincentivizing the majority of travellers from earning United miles and thus using United-branded credit cards, but the result may work out for Chase – people will go out of their way to use their credit card just because miles are so much more difficult now to obtain. I certainly will, even living in cash-loving Germany.
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There is no upside to this new–the only consoling point is that we saw it coming.