Airlines Making Traveler Upgrades A Challenging Reward

Business travelers increasingly are running into difficulty when attempting to redeem frequent flyer mileage for a reward ticket or an upgrade. With load factors running higher, premium real estate being reduced at some airlines, elite levels of loyalty programs filling with more travelers and carriers aggressively managing available inventory, it is no wonder problems arise.

Airline officials said as many, if not more, travelers are redeeming reward tickets than in the past, a claim backed by statistics filed in their financial reports, but that is no solace to the individual corporate traveler. "The declining availability of upgrades for frequent flyers with status is the largest frustration out there," said Terry Trippler of Trippler & Associates. "More and more, people are trying to get status that gives them upgrades. Airlines have made that status easier to achieve and might consider making another top level for their most frequent flyers—maybe uranium or plutonium—and change the upgrade rules."

Sally Iott, corporate travel manager for Parsons in Los Angeles, noted a great deal of dissatisfaction among her travelers. "People are shopping around for different programs more than they had been," she said. "It only takes one time to get denied an upgrade before a traveler looks around for other choices."

Tina Itschner, travel manager at HNTB Corp. in Kansas City, Mo., also has been hearing of more troubles in securing upgrades. "We are now noticing that not all flights offer inventory for reward travel," she said. Moreover, the small business programs offered by airlines in which HNTB has enrolled provide incentive tickets that are difficult to obtain. "Those free tickets are like frequent flyer reward tickets," Itschner said, "and getting space is impossible. That is a loss for me."

Reward upgrades, in particular, have become more scarce for certain routes given the shrinking number of first and business class seats available in the domestic system. Yet, many major airlines have introduced complimentary, space-available upgrades for elite level frequent flyers, while concurrently bringing elite level status within reach of more travelers.

"Airlines always want to find the right balance of rewarding customers and making seats available for purchase," said Rob Borden, Delta SkyMiles program director. "The increased attractiveness of the premium cabin does put a little pressure on the ability to use upgrade awards." The increased interest in Delta Air Lines' premium product, Borden said, stems from unlimited complimentary upgrades for Medallion level flyers—introduced this year—an automated process for upgrade requests that does not require customers to make a separate call and a companion upgrade program.

Several other majors offer space-available free upgrades to elite flyers, including American Airlines, which in March began providing the perk to Executive Platinum members. Northwest Airlines this year also is allowing Platinum Elite members to upgrade a companion booked on the same reservation.

Carriers not only have dangled upgrades to elite flyers, but in many cases they also have made elite status easier to achieve. US Airways, for example, increased elite status qualification miles for the remainder of the year for frequent flyers purchasing first, business or full coach tickets on US Airways and alliance partners Lufthansa and United. AA this year increased elite qualifying points for business class and full fare economy purchases. Delta on Jan. 1 also raised the minimum elite status qualification accrual from 500 miles to 750. In other cases, carriers are increasing elite qualification mileage on higher-price tickets and leaving unchanged or reducing qualification on lower-price tickets. AA in April shuffled its fare classes, impacting elite level mileage qualification. Q fares were moved from the Discount category into the Deep Discount category. As a result, Q fares as of last week now only accrue 0.5 elite qualification points per mile flown, down from the full point Q fares formerly accrued. On the other hand, L fares were moved from Deep Discount into Discount and now accrue a full point per mile flown for elite qualification, up from the 0.5 point level.

Northwest said it has not experienced problems in providing frequent flyer rewards. The carrier's internal numbers measuring how often elite level flyers obtain reward tickets and upgrades show either flat or improved success ratios. A Northwest spokesman noted the carrier has not reduced premium cabin real estate and that it offers proportionally more first class seats than carriers of comparable size.

For its part, Southwest Airlines does not control inventory available for reward redemption. Without a premium cabin, it also need not concern itself with upgrade availability.

Statistics filed by carriers in their annual reports indicated a fairly steady percentage of seats available for reward travel. United in 2003 spent 9 percent of total revenue passenger miles redeeming passenger rewards, up from 7.8 percent in 2002. Delta's ratio also was 9 percent, flat from one year earlier. Other carriers' ratio ranged between 7 percent and 8 percent, some increasing slightly from 2002 and others decreasing slightly. At the same time, of course, airlines claim an increasing number of frequent flyer program members. If redemption ratios do not increase at a similar pace, individual program members would have a harder time finding reward availability. Yet, Delta's Borden anticipates higher ratios. "You will see major carriers grow the percentage of reward seats as they face low-cost competitors that have little to offer in the way of a global program," he said. "It will make loyalty programs an even more valuable and competitive tool."