Yahoo Finance Are airline frequent flyer programs worth your loyalty? Experts weigh in
Travelers are urged to join airline frequent flier programs with the promise of getting perks and free flights down the road. But while earning status on an airline seems like a great idea, it quickly becomes clear that seeing any real benefits is going to take time…and a lot of money.
So is all of that loyalty really worth it? Or would flying be better if travelers just picked the airline with the cheapest airfare?
That question was a hot topic during a panel discussion with “The Points Guy” Brian Kelly, and Airfare Watchdog founder George Hobica, at Skift’s 2016 Global Travel Forum. Both men have made a living sharing travel advice and tips with travelers, but they had very different views on the current status of airline loyalty programs.
Is your loyalty being returned?
It’s no secret that airline loyalty programs are changing. The days of acquiring points based on distance flown are past, with more airlines now rewarding points based on the amount of money a traveler spends. In fact, American Airlines (AAL) switched over to revenue-based awards programs in July. Delta (DAL) and (UAL) a similar switch in 2015. This model makes it harder for regular travelers to earn perks, while offering more benefits to high-spending business-class travelers.
Airfare Watchdog is an online resource that helps travelers find cheap airfare. At the forum, Hobica announced he recently gave up the chance to earn a higher status on American Airlines because he was able to spend $300 less, per ticket, on another airline. He didn’t want to invest in a program that doesn’t give him much in return.
“Why should I be loyal to American?” Hobica said. “From now on, I’m going to shop for the best deal.”
Kelly didn’t agree. “People always say how bad frequent flier programs are, but I think our programs are really lucrative,” he countered. “I think in the US we’re just so used to them being insanely lucrative and now they are less so. But there is no culture of free upgrades in Asia and Europe. So I don’t think it’s doomsday if we don’t get something we didn’t pay for.”
While Kelly makes a valid point, it seems some consumers are feeling disenchanted with programs and their ever-changing rules concerning how travelers earn miles or reach status. According to U.S. News and World Report, American Airlines was the second-most popular frequent flier program in 2015. After switching to a revenue-based program, the airline dropped to seventh on 2016’s list, which was released in August.
When it comes to airlines giving travelers the best quality, Alaska Airlines (ALK) topped the ranking, due in large part to the fact that its program still uses a distance-based rewards model. The Alaska Airlines program is also a member of several carrier alliances (OneWorld and Skyteam), so travelers have more freedom to transfer miles to other airlines.
JetBlue’s (JBLU) TrueBlue loyalty program was a close second, which Kelly attributes to its simplicity. “Jetblue is adding to their program. They aren’t promising free upgrades, but they are promising better experiences, enhanced earning, change flexibility, and same-day confirmations,” he said.
Southwest’s Rapid Rewards Program wrapped up the top three, being labeled as the program most beneficial for budget-minded travelers.
What about those credit cards?
Airlines spend a lot of time and money trying to gain customer loyalty. Personally, I get a flyer from an airline almost every day in the mail, offering me a credit card and promising bonus miles in the airline’s loyalty program if I sign up. The same credit cards are offered to me at the airport and even on the plane during flight attendant announcements.
The offers are certainly tempting: I mean, who doesn’t want a free ticket to a far-off destination? But getting those rewards typically requires card users to spend thousands of dollars in a short amount of time, which Hobica says can lead consumers to spend recklessly in order to earn travel perks.
“I think the people who get those credit cards and spend $3,000 or $4,000 in a few months, they probably buy stuff that they don’t really want, and the banks know that,” he said. In other words, travelers are overspending to earn a “free” plane ticket, instead of budgeting their money to pay for a trip when they can actually afford it.
On the other hand, Kelly says the most popular stories on his website are those centered around how to get the most out of credit card perks. He is adamant that customers can benefit from the spending as long as they know the rules.
“I disagree that consumers are racking up debt,” Kelly said. “These cards are good for smart consumers, and we’re able to educate credit card holders on benefits of the card in ways to maximize the points.”
The conservation quickly turned to the new Chase Sapphire Reserve card, which is being touted by many as the best travel credit card on the market. This is the one time Kelly suggested that straying from frequent flier programs and opting for a bank credit card could be better for consumers because they are less restrictive.
“Why would you put money on an airline card? When you’re investing into one program, you’re overexposing yourself to risk when that program inevitably makes changes,” he said.
Verdict
Unfortunately, there isn’t a clear cut answer on this one.
“I think frequent flier programs have outlived their usefulness,” Hobica said. “They’re expensive to administer for the banks, for the airlines, and I don’t think they provide the value that they did when they were founded.”
For Kelly, the rewards far outweigh the risks.
“I think frequent flier programs are the greatest loyalty marketing instrument ever created. They drive business, they drive jobs, they’re good for consumers when you know how to use them,” he said. “I don’t see a doomsday scenario approaching, they are too much of a big business.”
Where do you stand? Do you think frequent flier programs are worth your time and money?
Brittany is a writer at Yahoo Finance.
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