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Why Do Frequent Buyers Get the Same Perks as Frequent Flyers?

Dear Tim,

I read your column with great interest. Why should anyone with accumulated frequent flyer miles be surprised that they can’t use these miles on their airlines of choice? Real frequent flyers are being pushed out by anyone with a credit card who purchases several rolls of toilet paper and a carton of milk. I never quite understood this system. Perhaps you can explain the airlines’ rationale for granting air miles for every dollar spent using a credit card.

Carl M.

Dear Carl,

The airlines are trying to have their cake and eat it too, with predictable results.

On the one hand, the sale of frequent flyer miles to credit card companies (among other program partners) is extremely lucrative. It’s even more lucrative than the business of flying people from point A to point B. American, for example, sold more than $1 billion in frequent flyer miles during 2004 to CitiBank (which issues the AAdvantage credit card) and other partners. The partners awarded those miles to AAdvantage members for every imaginable type of product and service.

Increasingly, miles are racked up by program members who earn the majority of their miles for buying rather than for flying. That’s good for the airlines but problematic for the programs. With all those frequent buyers earning all those miles, many travelers have been finding it increasingly difficult to obtain a free ticket. Frequent flyers have been particularly frustrated with this trend because they feel that their loyalty entitles them to easier access to program perks.

On the other hand, the airlines do want their programs to maintain enough value to consumers that they retain a modicum of incentive power, enough at least to keep travelers focused on buying their tickets rather than their competitors’.

In order to do so, the airlines would have to moderate the availability of frequent flyer miles, thereby reducing the demand for award seats and, ultimately, making it worthwhile for travelers to participate in the programs and allocate their loyalty accordingly.

Because the airlines are currently desperate for cash in the short term, the sale of frequent flyer miles is trumping their focus on keeping the programs viable for real frequent travelers. This attitude leaves you and other genuine frequent flyers feeling that your loyalty is being undervalued.

My best guess is that the pendulum will swing back in the other direction when the airlines regain their financial footing. But I’m not sure we will ever see a return to the days when frequent flyers enjoyed special status and frequent buyers were treated as second-class program participants.

The airlines make money from frequent flyer program members whether they travel or not. Viewed from this perspective, program members who earn their miles from buying are every bit as valuable as members who are awarded their miles for flying. And that suggests that the change in the programs’ orientation may be more fundamental than cyclical.

There’s a hint of this shift already deeply embedded in American’s program. While AAdvantage members cannot earn annual elite status for non-travel purchases, they can earn lifetime elite status by earning one million miles in total, from any sources whatsoever. With that precedent in mind, it’s not hard to envision an airline awarding elite-qualifying miles for anything and everything.

That would be the ultimate sign that the airline schemes that began life in 1981 as frequent flyer programs have truly evolved into frequent buyer programs.

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