New Revenue Based Elite Status Programs: Key Details And My Take On The Winners and Losers

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This week United joined Delta in instituting revenue requirements for their elite status program. While many of the comments about these changes have been negative, these aren’t necessarily bad for everyone.

Based on the spending and mileage requirements for each tier, United and Delta are basically saying that you need to spend at least 10 cents per elite qualifying mile to qualify for elite status – or spend at least $25,000 on a co-branded credit card. Historically, mileage runners (those who fly cheap fares to get elite status) would be able to book fares at 3-5 cents per mile to attain status on the cheap. Not any longer – at least not without jumping through a couple other hoops.

As a reminder, here are the new elite status qualifications:

  • United Premier Silver/ Delta Silver Medallion: [25,000 PQM/MQM or 30 segments] and $2,500 PQD (Credit card exemption at $25,000 in spend)
  • United Premier Gold/ Delta Gold Medallion: [50,000 PQM or 60 segments] and $5,000 PQD (Credit card exemption at $25,000 in spend)
  • United Premier Platinum/ Delta Platinum Medallion: [75,000 PQM or 90 segments for United/ 100 on Delta] and $7,500 PQD (Credit card exemption at $25,000 in spend)
  • United Premier 1K: [100,000 PQM or 120 PQS] and $10,000 PQD (No credit card exemption)
  • Delta Diamond Medallion: [125,000 MQM or 140 segments] and $12,500 MQD (Credit card exemption at $25,000 in spend)

Let’s take a look at who stands to win and lose once these programs go into effect next year for 2015 qualification year.

Potential Winners
1) Frequent flyers that already spend these requirements, which a lot of business travelers do thanks to paying for higher fare classes like last-minute economy and business class tickets, refundable economy fares and regular business class fares. Since there will now be more hoops to jump through the elite pack will be thinned, so those who have elite status and don’t have a hard time meeting the spending requirements might see higher complimentary upgrades and fewer folks competing for standard benefits like priority check-in and boarding.
***(Note: Also see number 4 under the Losers section below)

2) Those who are exempted by co-branded credit cards. Even if they don’t meed the spend requirement, they can still qualify based on elite miles/segments. Not everyone can qualify for a co-branded credit card, so they are at an advantage.

3) Those elites living abroad who don’t have to worry about the spending threshold. They get the benefit of the thinned-out herd without having to do anything special.

Potential Losers
1) Those who qualify on discount fares – or even just a lot of coach travel – might have a hard time meeting these requirements.

2) Those that fly a lot on partner airlines. One of the new provisions is that at least 4 flights must be on United, United Express or Copa, so if most of your travel is on their partners, you’ll have to be sure to fly them at least 4 times a year to qualify. Additionally, partner flights don’t count towards spending  requirements unless booked as codeshares. Often the codeshares are more expensive than the cheapest available, which won’t be allowed through many corporate booking platforms that require the cheapest fare.

3) United 1Ks who don’t get the spend redemption via credit card. No fair – everyone else does!

4) The elites who may think that the thinned herd will equate to more complimentary upgrades. Delta and United have already begun aggressively selling first/business class upgrades to non-elites, so don’t be naive and think that the airlines will simply reward their “true” elites more. These requirements have been rolled out with absolutely no mention of any more perks to reward those that hit these spend requirements, so don’t think this is the airline “truly trying to reward their best customers”. This is a revenue play to make more money. Period. And both airlines have jacked up fees recently (on both revenue and award tickets) and I imagine they are eyeing huge revenue increases with these new elite programs. So don’t just sit there and pat yourself on the back that you can easily hit the elite spend and you will be rewarded handsomely- I highly doubt that will happen.

Losing Circumstances – How This Will Likely Just End Up Causing Higher Fares
One circumstance where I can see this happening for a lot of premium or business travelers is when booking flights overseas on United’s partners since even though a flight might be a codeshare, it won’t qualify as one of your four required United flights for the year, and pricing is sometimes quite different depending which airline you book through.

For example, a flight from LAX to Tokyo on ANA would cost you $1516 when booking through as United codeshares (United flight numbers, which is needed to qualify for elite qualifying dollars)

Los Angeles to Tokyo booking ANA on  is more expensive than booking through ANA.
Booking an ANA Los Angeles to Tokyo flight on is more expensive than booking through ANA.

However, the same codeshared flights booked on ANA’s website is just $1,272 – that’s a $244 difference and almost 20% of the cost of the cheaper ticket.

The same flights LAX-Tokyo Narita for $300 less on ANA's site.
The same flights LAX-Tokyo Narita for $244 less on ANA’s site.

For flyers who take advantage of United’s Star Alliance partners and codeshares to earn lots of qualifying miles on fares that can be significantly less expensive when booking through those partners, these new requirements that you actually spend your money on United tickets (meaning via United rather than booking through a partner’s site) are going to make it much harder to get the best deal on flights like these if you are aiming for elite status qualification.

Not only that, but even on itineraries that are mixed codeshares where there is a United flight and a partner flight, United still prices them out higher in certain cases. Take this roundtrip flight in business class on a popular route from Chicago O’Hare ORD to Tokyo Narita. The outbound is on ANA and the return is on United.

Screen shot 2013-06-19 at 6.02.58 PM

United prices this out at $5,430, while ANA prices out the same exact itinerary at $4,986 – a difference of $444. What’s worse is that one of the flights is even on United! So how can United flyers, now forced to make their airfare purchases through United if they hope to hit the spending requirements to qualify for elite status, expect to find the lowest or even just comparable prices on international itineraries when prices out codeshares that even involve United flights higher sometimes?

Screen shot 2013-06-19 at 6.03.09 PM

For business travelers who must report their travel expenses, chances are their companies have policies in place where they must book the cheaper ticket, so that might keep them from spending the dollars they need to on United to qualify for a particular status tier.

United Mid/Long-Haul Flyers on Discount Fares
Another situation to look out for is for flyers who qualify on cheap domestic flights like your typical transcontinental road warriors to benefit from those long 2,500-mile transcon flights that can go for about $350 roundtrip, like the one below.

Los Angeles-New York is roughly $350 round-trip.
Typical transon flights such as Los Angeles-New York will run about $350 round-trip.

Right now, if you fly 10 times a year, you’ll hit Premier Gold status without a problem, and you’ll only be spending about $3,500 to do so on flights like the ones above. However, under the new rules, although you’ll have the mileage necessary for Gold, you’ll still be about $1,500 short of the spending requirement for that tier.

Why Hate On Leisure Travelers?
I don’t believe that those who fly on discount fares are loss leaders for the airline. In fact, I believe that “cheap elites” bring incremental revenue to the airline by not choosing to fly with better airlines that have traditional provided less valuable rewards (like Virgin America, JetBlue and Southwest). As airlines hack away at elite status perks (like United taking away the ability for Silvers to select Economy Plus at time of booking), tack on more fees  and at the same time require more effort to achieve these watered-down miles and elite status, more travelers will hit the road and start flying carriers that give them a better flying experience.

Time to Rethink Strategy
Credit card rewards are at an all-time high – from lucrative sign-up bonuses and category spend bonuses on everyday spend – so while these new program rules may be consumer-unfriendly, I actually think they will help people who are stuck in the elite status hamster wheel and who requalify simply out of habit/addiction. A smarter strategy might be to focus on ramping up rewards earned from spending and then focus on redeeming miles or buying the cheapest fares and using them to upgrade instead of paying thousands to maintain elite status that no longer has the value it once had.

Don’t Think These Changes Are Pro-Consumer
The bottom line is that this is a revenue play by the airlines and not an attempt to further reward certain elites. If that were the case, we would have seen new benefits added for those who achieve these new levels of qualification. And for the record, I have nothing against the airlines making money, they are businesses after all. However, my priority is educating the consumer on what’s actually happening, so you can make the decision to do what is best for you. No doubt many of you will stay with Delta and United and ride it out, especially since many of you don’t have other options as hub-captive flyers. But for those of you who do have a choice in what airline you fly, you may want to start thinking about other strategies, because these new revenue qualifications will likely make it more expensive to qualify for status and for many the value proposition will no longer be there.

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