United Airlines has a huge announcement today. Starting March 1, 2015 all tickets will earn miles based on the price of the ticket, not the distance traveled.
United has a webpage that discusses the changes, but here’s what you need to know:
Similar to Delta’s recent announcement, the amount of miles you earn on a specific ticket are based on not only the price of your ticket but your status level, as follows:
General Members: Earn 5 miles per dollar
Premier Silver: Earn 7 miles per dollar
Premier Gold: Earn 8 miles per dollar
Premier Platinum: Earn 9 miles per dollar
Premier 1K: Earn 11 miles per dollar
If these tiers look familiar to you, it’s because they’re almost an exact copy of what Delta released.
Where United’s announcement differs from Delta’s is that is specifically vague when it comes to discussing how you will redeem your miles in 2015. They do say changes are coming, including being able to redeem miles for Economy Plus purchases and checked bags. It’s the last line “And more on the way” that makes me nervous.
Delta has already released part of their redemption chart for the future, with significantly more categories for redemptions, some quite high. It’s possible that the recent Black Friday devaluation that United already delivered was the first part of this announcement and today’s developments are the second. There’s still no specific evidence that United is moving to revenue-based redemption (where the number of miles needed to redeem for a ticket is tied to the price of the seat you’re trying to purchase an award on).
Maybe the airlines aren’t ready to take that plunge yet. Or, maybe it’s a strong sign how much pull partners like Chase have. The Chase Ultimate Rewards cards and co-branded United credit cards generate a ton of miles that ultimately need to get redeemed for Chase to continue to be able to sell that value to their customers. In a world where revenue drives the price of a redemption, partners like Chase likely bring significantly less value to their customers.
It’s important to note that this doesn’t change how folks will qualify for elite status with United. The Premier Qualifying Dollar (PQD) requirement instituted last year to augment Premier Qualifying Miles still seem to be the targets for people to earn elite status.
Bottom Line It For Me, Ed
United devalued it’s program significantly late last year with huge increases in the price of award redemptions to many destinations. While painful, loyal United members could point to an award-winning network and a slim to moderate advantage over competitors in lie-flat business class seats to redeem on those long international flights.
People who wanted to stretch their miles farther were focusing on finding United flights for their international trip to avoid the biggest increases in United’s award chart, partner awards. While their direction isn’t changed by today’s announcement, it’s clear that a lot of those folks will earn less miles.
In some ways, having mid-tier status on more than one airline will be a less prudent path going forward. With the premium that top-tier members earn in terms of redeemable miles per dollar spent, it’s a strong incentive to consolidate your flying if you want to be able to amass enough miles from flying to earn those aspirational redemptions.
United’s operational and financial performance have been in a steady decline, with United losing over half a billion dollars last quarter. For them to make this move is either incredibly shrewd or stupid, not much middle ground. United is betting that their network and fleet will be enough to distinguish them, since Delta is providing as good a fleet and better customer service along with comparable mileage earning. American may not quite have the network but is pretty close and offers better service than United, though they still lag a bit in terms of fleet amidst a huge push to renew their fleet and make it the youngest in the industry.
I don’t see where United has anywhere near the product that Delta does to stick it’s chin out there on something like this and hope customers don’t notice the negative aspects piling up.
This is a copycat industry, and United’s move towards Delta’s plan is a strong indication that American Airlines has plenty of cover to make a similar decision. If American has a relatively smooth integration with US Airways, they end up with a newer fleet and a competitive network to United and Delta, along with better customer service than United.
In that final equation, I just don’t see how United can compete based on these factors. Something will have to change.