Virgin America, Virgin Atlantic Link Mileage Programs

While progress has been slow and sporadic, Virgin America has been taking steps to address the key weakness of its mileage program, Elevate.

When it comes to airline loyalty programs, bigger is better. And Elevate was among the smallest.

Where a fully built-out program like American’s AAdvantage boasts thousands of program partners awarding miles for everything from mortgage loans to online shopping to Netflix subscriptions, Elevate members were limited to earning miles with just a handful of other companies.

That’s been changing.

Most recently, Virgin America added a small group of boutique hotels, Joie de Vivre, to the program. That brings to three the number of options Elevate members have for earning points for hotel stays, including Hilton with its extensive portfolio.

And in April, Virgin America linked Elevate to Velocity, the loyalty program of both V Australia and Virgin Blue, giving Elevate members the opportunity to earn points for flights to Australia and other Asia-Pacific destinations.

More important for Elevate members, the ability to redeem points for award flights on V Australia and Virgin Blue will be in place later this year.

The latest move to expand Elevate’s reach seemed inevitable, and, at least in theory, the most significant enhancement so far. But there’s a troubling disconnect in the new partnership’s implementation that significantly undermines its value to program members.

Two Virgins, United Reluctantly

Earlier this week, Richard Branson, founder and president of the Virgin Group, announced that members of the Elevate program can now earn points for flights on Virgin Atlantic, and members of the Virgin Atlantic Flying Club can earn miles for Virgin America flights. Reciprocal redemption won’t be available until the second quarter of 2011.

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So far, so good. Virgin Atlantic is a fine airline, and the ability to earn and redeem points on its flights would appear to be a decided positive for the Elevate program. But when they look into the details of the tie-up, Elevate members are likely to be underwhelmed by the earning rates.

When flying on Virgin Atlantic, Elevate members will earn from 10 percent of the actual flown miles for promotional economy to 60 percent for business class. So, for example, a round-trip flight from New York to London using a promotional economy fare would net 692 Elevate points for the 6,916-mile trip.

Because the Elevate program uses points as its currency, rather than miles, and award prices are based on the market price of paid tickets, it’s difficult to directly compare these earning rates with those of a typical program that awards one mile for every mile actually flown and prices awards at 25,000 miles for a domestic flight.

But here’s a quick calculation for comparison purposes.

Elevate points are generally worth somewhat less than 2 cents apiece, according to my calculations. So that London flight would generate Elevate points worth around $13 toward the purchase of a Virgin America ticket. At that rate, it would take 27 Virgin Atlantic flights to earn enough Virgin America points for a domestic ticket with a market price of $350.

Compare that to the earning and reward scenario of a traditional legacy carrier. To earn the 25,000 miles required for a domestic award ticket, a program member would have to complete only four New York-London flights.

The value gap between earning Elevate points on Virgin Atlantic and earning miles on a legacy carrier is positively jaw-dropping.

My advice to Sir Richard and his marketing minions: Go back to the drawing boards—you got this one completely wrong. Style is one thing, substance another. Consumers know the difference.

This article originally appeared on FrequentFlier.com.