By November of 2019, the three largest airlines in the world (American, Delta and United) will all have variably-priced award flights in one form or another. Frequent flyers lament them, but for most travellers, it’s good news.
Countering My Own Analysis, Kind Of
Five months ago, I wrote that variably-priced (or dynamically-priced) award charts hurt loyal but infrequent travellers. This post seems to counter my previous analysis but there are two reasons why it’s not a total u-turn. Award charts help loyal but infrequent travellers (ex. passengers that always fly United but only fly twice annually) plan for award trips. That’s still true. Second, infrequent flyers typically have lower account balances thus less likely to be able to absorb higher prices when awards increase without notice. That’s also still true.
Now for a complete u-turn.
Variably-Priced Awards vs. Fixed Price Award Chart
Traditionally, airline frequent flyer programs established an award chart with fixed rates for routes usually based on distance or regions (North America to Europe, Intra-European flights.) Fixed price awards allow consumers to plan better but are susceptible to limited availability.
Variably-priced awards aren’t directly tied to revenue costs for a flight rather to availability. Those two aren’t the same but often act similarly. Unlike awards with Southwest and JetBlue which are directly tied to the cash cost of a seat, variably-priced awards still seem to hold onto price buckets. For example, Delta might price awards to Europe on emptier flights at 20,000 points roundtrip, whereas Southwest may charge 5,637 points for a one-way to Florida from the Northeast.
Who Benefits From Variably-Priced Awards?
Those who typically fly coach awards and have smaller balances benefit the most. In the past, there was a term “orphaned miles” which described miles that didn’t fit into a mileage balance you were collecting and would be left without a home. For example, assume you took a random flight on Alaska Airlines but otherwise haven’t built a balance large enough to redeem for a one-way award flight, that balance of miles would be orphaned.
With smaller balances, airlines have made those airlines more useful than in the past. An underlying worry to my previous post was that prices would become untenable for many travellers who aren’t on the road accruing hundreds of thousands every year. In a credit to Delta, they have offered a lot of value
Why Frequent Flyers Hate Them
Frequent Flyers have larger balances and generally, know the system better. They routinely find outsized value for premium cabin seats on long haul flights. An award to Cape Town from New York City can cost as little as 102,000 miles roundtrip with ANA. The same route in cash I priced randomly for $3,680-$5,344.
Airplanes have fewer business and first class seats, opportunities for outsized value is diminished with variably-priced awards.
Why Do Variably-Priced Awards Benefit Most Travellers?
The vast majority of awards that are redeemed are coach awards. Every year the Wall Street Journal highlights the best programs with which to redeem miles. Every year, Southwest wins. Why? Because as long as the flight is not completely sold out, they offer a seat in coach (though there is no saver level and they only offer coach so it’s flawed.)
American Airlines (who variably prices awards by but within an award chart) and other carriers report their redemption levels and how many of those seats were offered at saver level. American has made more available at saver level for coach awards, but not business class long haul seats. However, as those are less often redeemed, it’s absolutely true that more travellers benefit from both an increase in seats available and the lower available prices of those seats.
Delta has offered flights at 18,000-30,000 miles to Europe roundtrip during their weekly award sales with suprising consistency. Maybe that’s down to Delta being on their best behavior. But American, who I have otherwise lambasted for their award behavior has made good on offering discount prices for awards on short routes and have improved availability. As much as I personally fail to benefit from dynamically-priced coach awards, most travellers do and that’s good news for flyers.
What do you think? Are variably-priced awards generally better for most consumers? Are they a slippery slope toward award costs increases? Would you move to an airline that has fixed award charts?