Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ What to do with the airlines? Use them now, says a report

What to do with the airlines? Use them now, says a report



People willing to fly again may want to prioritize buying their miles from airlines instead of trying to earn new ones.

Overfulfillment of unused miles for rewards could cause airlines to change their frequent flight schedules in ways that could put some customers at a disadvantage, warns ValuePenguin, one of LendingTree’s financial research websites.

A review of the annual bids of five US airlines – Delta Air Lines, American Airlines, United Airlines, Southwest Airlines and JetBlue ̵

1; shows that wage bill liabilities rose to a total of $ 27.5 billion last year, a jump of 11 , 6% over the previous year, according to ValuePenguin.

In addition, hasty buying of miles is expected at a time when the heavily battered airline needs cash-paying customers at the ticket counter.

Miles won, but was not redeemed

Flying was one of the industries most affected by the coronavirus pandemic, but customers of the five programs analyzed still managed to accumulate about half (46.2%) of the mileage in 2020 they did in 2019. This is mainly due to points earned from credit card costs, said Matt Schultz, chief credit analyst at LendingTree.

Value of miles earned

2020 2019 2018 2019 to 2020% change
SkyMiles on Delta Air Lines $ 1.4 billion $ 3.2 billion $ 3.1 billion -54.5%
AAdvantage of American Airlines $ 1.8 billion $ 3.4 billion $ 3.1 billion -47.3%
United Airlines MileagePlus $ 1.3 billion $ 2.6 billion $ 2.5 billion -49.0%
Southwest Airlines quick prizes $ 2.0 billion $ 2.9 billion $ 2.7 billion -33.4%
TrueBlue on JetBlue $ 0.3 billion $ 0.5 billion $ 0.4 billion – $ 46.2
Total $ 6.8 billion $ 12.6 billion $ 11.8 billion – $ 46.2
Source: ValuePenguin

Only a small fraction of those miles were redeemed.

“Americans bought only about a tenth of their available miles last year,” Schultz said. “Undoubtedly there were a lot of people who … cashed points for prizes for food loan credits and other needs, but a lot of people just stuck to their miles, looking forward to the day when they could travel again.”

Percentage of miles earned

2020 2019 2018
SkyMiles on Delta Air Lines 10.8% 29.3% 27.1%
AAdvantage of American Airlines 9.6% 26.4% 27.7%
United Airlines MileagePlus 8.7% 29.8% 29.9%
Southwest Airlines quick prizes 16.6% 40.6% 41.4%
TrueBlue on JetBlue 18.4% 34.5% 32.7%
Total 11.3% 30.5% 30.3%
Source: ValuePenguin

JetBlue customers bought the most miles (18.4%) last year, about half the miles customers bought in 2019, according to ValuePenguin. United members bought at least, less than 9%, compared to nearly 30% in 2018 and 2019.

Jump in remuneration obligations

With accrued miles accruing without being used, this 11.6% increase in liabilities equals a total increase of $ 2.9 billion that occurred last year, which is approximately three times the increase happened the previous year, according to ValuePenguin.

Remuneration program liabilities

2020 2019 2018 2019 to 2020% change
SkyMiles on Delta Air Lines $ 7.2 billion $ 6.7 billion $ 6.6 billion 6.7%
AAdvantage of American Airlines $ 9.2 billion $ 8.6 billion $ 8.5 billion 6.7%
United Airlines MileagePlus $ 6.0 billion $ 5.3 billion $ 5.0 billion 13.2%
Southwest Airlines quick prizes $ 4.4 billion $ 3.4 billion $ 3.0 billion 31.4%
TrueBlue on JetBlue $ 0.7 billion $ 0.7 billion $ 0.6 billion 10.9%
Total $ 27.5 billion $ 24.7 billion $ 23.8 billion 11.6%
Source: ValuePenguin

Note: Liabilities may not be collected due to rounding.

Southwest’s quick prize debt rose $ 1.1 billion, the most of any airline analyzed. His clients bought the most miles of all the programs, but they also won the most miles.

JetBlue’s TrueBlue program – the smallest of the five – was the only airline to see its loyalty obligations grow less in 2020 than in 2019.

More points, less value

Delta, United and Southwest devalued their reward points during the pandemic, which means members now have to pay more points for the same flights, said Sofia Mendel, a travel specialist at ValuePenguin. And additional changes can be saved.

“In particular, the Southwest is receiving a significant amount of heat as it has changed its points program without warning its members,” she said, adding that several international carriers, such as Qatar Airways, have done the same.

CNBC asked airlines analyzed by ValuePenguin on Wednesday if they had plans to change their award programs this year. Delta has said it has no plans to change its loyalty program. Southwest confirmed to CNBC that from April 14 it requires more points for quick prizes to buy flights on all types of tickets.

United and JetBlue did not respond to CNBC’s inquiries.

Mendel said he believes devaluing miles or limiting redemption is a response to airlines that have too many unused miles in their books.

As we emerge from the pandemic, we are already seeing airlines reduce the number of prize seats available.

Spencer Howard

Founder, straight to the points

But Spencer Howard, founder of the Straight to the Points loyalty website, isn’t so sure. He said the risk of devaluation is always there, regardless of economic or global health conditions.

“Airlines have depreciated before and during the pandemic and will do so once we get out of the pandemic,” he said. “Devaluations are inevitable.”

Howard agrees that customers have more miles now, but he said airlines can control when they are bought.

Read more about summer travel

“If an airline thinks it will sell a place for money, it will not vacate the prize place,” he said. “As we emerge from the pandemic, we are already seeing airlines reduce the number of rewards available.”

But not every airline works that way, Mendel warned.

“Southwest and United do not limit their list of prizes, so any free space is a fair game to book points or miles,” she said, noting that both airlines “use dynamic pricing, which means the price of their Rewards places will increase as demand increases. “

“Predominant trend”

While the “irresistible trend” over the years has been toward devaluation, Schultz said, not every airline is on this route – at least not yet.

Korean Air in January forced the planned devaluation of points from 2021 to 2023, in a move that Mendel showed demonstrated the airline’s commitment to its members for immediate revenue.

The new British Airways policy aims to make it easier to book seats for prizes, according to the airline.

Steve Parsons – PA Photos PA images Getty images

Last month, British Airways announced that it had doubled the minimum number of prizes for each flight. For example, the number of award-winning seats on Euro Traveler flights – the airline’s economical short-haul flights – will increase from four to at least eight seats. The new policy begins on July 28, although these flights can be booked now.

American Airlines, which was among ValuePenguin’s proven carriers, announced changes to its AAdvantage program last week that make it easier for members to gain benefits, said Andrea Koos, a spokeswoman for the company. Members can receive a 250 to 1,000 “elite qualified miles” bonus for flights flying through Aug. 31 for up to 10 flight segments, she told CNBC by email.

Tips for protecting points

Schultz said flyers should not feel rushed to use their points, but should not sit on a pile of unused miles for years.

His advice: “Use points sooner rather than later.”

Miles and points can be redeemed for many different things, although most people buy them for flights, Schultz said, adding that “this is usually the way to get the most hit points for prizes.”

Howard agrees that air passengers should not accumulate miles, but prefers another method of protection against changes in reward programs.

“I recommend people use credit cards that earn transferable points, such as the Amex Membership Rewards,” he said. “This protects you from devaluation, as you have the opportunity to transfer points to various airline loyalty programs.”


Source link