Over the last five years, reward payback value is down 50%
If you think youre going to leverage those miles in your airline frequent flier account and fly somewhere for free, you might be fooling yourself.
A new report says that over the last five years, reward payback value has dropped in half. The yang of the value drops yin is that the prices of rewards (in miles or points) have increased so significantly that they grew seven points higher than the rate of inflation.
In its latest Reward Seat Availability Survey, the IdeaWorksCompany studied Alaska, American, Delta, JetBlue, Southwest, and United flight rewards programs, hoping to answer the question, How costly is points redemption for the most popular basic reward type offered by top US airlines?
Jay Sorenson, president of the company, says that the chief reason for the declining value is that the airlines have developed policies that reduce or eliminate mileage/points accrual for basic economy fares.
Network airlines, such as American and Delta, position these as their lowest fare and as a tool to compete with low-cost carriers. Basic economy has been embraced as an important source of revenue and new customers, and yet airlines actively discourage sales with policies designed to deter consumers from buying these fares, Sorensen said.
What airline offers the most value?
For the average reward price metric, its important to remember [that the] lowest price is best. Southwest leads U.S. airlines with the lowest overall average reward price, Sorensen theorizes.
When he broke that down to how it impacts the frequent flier, he said that consumers can enjoy the perks of reward travel more rapidly on Southwest.
The airline does have an inherent advantage because it focuses on short- and medium-haul routes and frequent flights. Reward prices tend to be lower for shorter flights and demand is more readily met with more flights. The airline has a long tradition for the lowest reward price results in the 15-year history of this survey.
What about the others? The three airlines that Sorensen says significantly reduced point/miles values are Alaska, American, and JetBlue. Basic Economy fares on Alaska, for example, now accrue mileage at 30% of standard fares.
Similarly, Basic Economy on American accrues twomiles per dollar spent, versus the usual multiplier of five. It may come as a shock to Delta fans, but Sorensen said it is the drama queen of the bunch, completely forbidding accrual for basic economy travel.
United? Well, Sorensen certainly liked what he saw in the report. Kudos are due United, which applies the same accrual policy for all of its fares, he said.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-04-04 11:31:45
