Frequent flier programs were intended to create brand loyalty, particularly among business travelers, thereby creating a margin for competition other than price. Over the years, airlines have debased frequent flier miles as a currency by “printing money” – creating vastly more miles than they intend to allow customers to redeem. Airlines sop up these excess miles by unilaterally raising the “price” of frequent flier tickets, directly (by increasing the number of miles required to redeem) or indirectly (such as by restricting the number of seats eligible for awards). They have to be careful, though, because this undermines efforts to encourage brand loyalty.
The most recent restrictive practice in frequent flier programs is to award miles based not on mileage flown but on dollars spent. That has predictable effects on the market, and as a recent article shows, it exacerbates a longstanding conflict of interest between business travelers and the companies that pay them to travel. Read More →