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Frequent Flier Programs: Been Great to Know You

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A few weeks back, I received a letter from Continental OnePass indicating that, based on my 2005 travel with the airline, I was eligible for Silver Elite status with OnePass for 2006 -- for an upfront fee of $350.

I thought about it for a couple minutes, reckoning this simple payoff: cut a check and I can cut lines. Check-in lines, security lines, gate seating process lines (and the ensuing fights over overhead bin space). Ultimately I passed: you'd have to cut an awful lot of lines to cover $350 of your time.

Because that's what it comes down to -- with automatic upgrades at all-time lows; with access to airport lounges available only to OnePass Platinum members (or first and business-class fliers on international flights); with most of the other benefits of only peripheral interest to the average traveler -- all my $350 would buy was the right to stand in the short line at check-in, to pass through the expedited line at security, and to get a head start on the overhead space. I wasn't sure I could make up $350 worth of time saved by cutting a few lines; if you are a minimum wage worker, you would need to save about 50-60 hours/year.

Meanwhile, American Airlines is celebrating the 25th anniversary of the AAdvantage program, the nation's first and largest frequent flier program. American is planning all sorts of "fun" promotions and giveaways, many of which result in one thing for the recipients: more miles!

Granted, they're going all out -- giving away 42 million miles, including 25,000 mile vouchers to 1700 people on 10 flights nationwide. The shtick: American picked ten flights in May, and gave 25,000 miles to every passenger on the chosen flights.

Also, several of the deals reduce the number of miles required for award travel; the first of American's 25 Deals in 25 Days promotions is 25 percent off the mileage required to redeem select MileSAAver awards. The normal restrictions apply -- "seats for award travel are subject to capacity controls and may not be available on all flights" and the like -- so while you may need fewer miles, there may not be any seats for the taking. (That said, if my inbox is any measure, American does as good or better job of doling out awards than most airlines; the last time I wrote about these programs, several readers wrote to say as much.)

42 Million A Drop in the Unredeemed Mileage Bucket
To promote the event, American offers these "Fun Facts" (I was surprised they didn't print this "Fun FAActs"):
There are 50 million AAdvantage members. That figure represents:

  • 83.3 times the population of Boston
  • 5 times the population of Los Angeles County, CA
  • 21.4 times the population of Miami-Dade County
  • 6.25 times the population of New York City

    Etc. etc -- all of this to say that the program is very popular - so popular that there are potentially 50 million people jockeying to use 18,500 miles instead of 25,000 on the domestic flight you want to take. Good luck beating those odds.

    I'm exaggerating of course, but the numbers are clearly against you. Estimates indicate that there are 14 trillion unredeemed miles sitting in frequent flier accounts worldwide. At the commonly accepted "penny per mile" value of a frequent flier mile, which is the low-end of the range at which airlines sell miles to credit card issuers, The Economist magazine estimates that, as of January 2005, "the total stock of unredeemed miles was worth more than all the dollar bills in circulation."

    Loyalty Gives Way to Lucre
    Back in 1981, American's original plan for their frequent flier plan was to engender "loyalty" from their customers, who subsequently felt like they were getting something back from the airlines for all the money and miles they put in. Of course, the airlines were actually handing over seats that would have gone empty - so they too got something back out of this "unsold inventory" in the form of loyalty, which translated directly into future sales. As the programs matured, estimates from the 1990's indicated that the average business traveler was willing to pay up to $170 more per 1000-mile trip to be able to fly on their "preferred" airline in order to rack up more account miles. Click here to read the report.

    Today, there are much easier ways to rack up miles; it is much faster to rack up miles on your credit card than by actually getting on a plane. The world's most prolific mileage accumulator has racked up around 25 million miles by putting all his company's postage on his credit card; it would take 2083 days (5.7 years) in the air traveling at 500 mph to rack up 25 million miles in flight; but doing the same on a corporate credit card is a different thing altogether. Big mileage tallies are almost routine for millions of people who simply use a credit card daily. As a result, most travelers, including business travelers, make purchase decisions on a combination of fare and flight times, rather than how many miles they can rack up.

    It gets easier to sign up for mileage cards all the time, and even actual flight miles are easier to collect. Surely one of the reasons these programs have become so large with respect to membership as well as outstanding miles is the greatly improved ease of enrollment and award claims (if not award redemption). Where previously you had to send snail mail all over the place, find slips of paper with your account number when you called to book a flight, etc. etc., today most booking engines can save your account information and automatically apply miles. And when you book travel using the airline's Web site, if you don't have an account, you can sign up for one right there at the time of purchase.

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