United Reverses Course, Cuts Frequent Flyer Fee

After almost three decades in and around the travel industry, I'm rarely surprised by anything the airlines do.

But this morning's announcement from United that it will eliminate the last-minute ticketing fee for frequent flyer awards booked on or after July 30 was a stunner.

Currently, United charges $100 to book an award ticket for travel within six days of the departure date, and $75 for travel within seven to 20 days.

Not only will the change choke off a significant revenue stream, it will inevitably lead to an increase in award redemptions. With flights running almost 85 percent full, such an increase will either cut into the sale of revenue tickets (diluting United's profits) or swell the number of Mileage Plus members frustrated by the lack of award seats (diluting good will). Most likely, it will do both.

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So the question is: Why?

The official quote from United's news release—which should never be taken at face value, of course—is as follows: "Being the first airline to eliminate the last-minute booking fee will make it easier for our members to use their miles, and it is one of the many steps we are taking to make Mileage Plus the most rewarding loyalty program for them."

Reading between the lines, United appears to be signaling that it recognizes the need to upgrade its competitive position among other major airlines.

While I've recently praised United for its unilateral award discounts, those were limited-time promotions.

American meanwhile has introduced its new Flex awards—a significant benefit for AAdvantage members, and a permanent one.

Delta, following its merger with Northwest, is flexing its marketing muscle as the world's largest airline with the world's largest frequent flyer program. And its current double-mile promotion is far superior in size and scope to anything on offer from other airlines.

So United, number three among U.S. mainline carriers, has been losing ground by standing still.

Dropping the rush fee for awards certainly will earn it the gratitude of Mileage Plus members. If the move forces other major carriers to drop their frequent flyer award fees, it will earn United at least a footnote in the history of mileage programs, in the slim chapter entitled "The Curious Case of the Disappearing Nuisance Fees."

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