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

by on June 20, 2013 · 27 comments

in Elite Status, United

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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 United.com as United codeshares (United flight numbers, which is needed to qualify for elite qualifying dollars)

Los Angeles to Tokyo booking ANA on United.com is more expensive than booking through ANA.

Booking an ANA Los Angeles to Tokyo flight on United.com 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 United.com 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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  • Rachel

    The rule that at least 4 flights must be on United is not new. It’s also waived if you have the United Club Card with no spending requirement.

    I don’t fly that much (I currently have silver status with United) and I never found the 4 flight minimum that big of a deal. One round trip with a connection, and you’re done. Pretty easy especially if you don’t live in a hub.

  • Geoff

    Isn’t Diamond Medallion for Delta still going to be 125K MQMs or has this changed with the new program?

  • Jim

    I am new to this. What do the abbreviations “PQM/MQM” mean?

  • Joe

    I’m pretty certain Delta will remain at 125K for Diamond, not 100K (boy don’t we wish!)

  • answer

    Premier Qualifying Miles (United) / Medallion Qualifying Miles (Delta). Basically miles that count towards your elite status (usually ones earned by flying)

  • DWT

    Thanks for the excellent analysis! Definitely agree with your argument re: cheap elites. The in-flight product is so inferior on some of the legacies that elites often put up with a lot to fly them.

  • Wandering Aramean

    You don’t need a UA flight number to get credit for partner flights, just to have the ticket issued on 016 stock. You should be able to do that with the partner code, though it isn’t easy.

  • thepointsguy

    Yes 125,000- fixed

  • http://www.batteredluggage.com/ W Brian Duncan (aka IPBrian)

    Thanks for these thoughts Brian. As an AA flier I am holding my breath (figuratively) to see what AA does. Eventually I know what will happen, it is just a question of how soon. I am hoping for another year due to the merger. This is all very interesting to me as I cant imagine the number of Mileage Runners is crippling the system.

    For those hoping for more upgrades because of fewer elites, I would say additionally to your comments above, we have already seen small but apparent changes to the numbers of Domestic(especially) F seats on AA’s planes. I think this F squeeze will only continue as time goes on making upgrades even more difficult on all carriers. Sure they may thin the herd, but they will likely reduce availability as well.

  • thepointsguy

    What Answer said :-)

  • thepointsguy

    Correct- the annoying new rule is the dollar requirements mandating at least 10 cents per elite mile on average, which may be difficult to do.

  • John777

    Isn’t there a spend requirement for Delta Diamond?

  • Ngoc

    Do the miles transferred from Ultimate Rewards qualify for QEMs? For example, if I transfer 60K from the Chase Ink signup bonus to United Airlines, does that qualify me for elite status?

  • Flyer Fun

    Airlines are a break even business. In a micro terms, this implies that on average each plane is flying close to break even. That is, the last low fare customer, even if he is a miles runner or elite chaser, represents the profit on that segment. In the past, the airlines could advertise a low cost fare, or do a double miles promotion, since they had a pool of mile runners or elite chasers to draw upon, flyers would book flights. These customers then made routes marginally profitable instead of unprofitable. Take this to the next level, suppose the airline has a route that is below break even. The airline runs a promotion for a low fare. Since there is pool of customers trying to make the next level of elite, those customers purchase tickets: Voila! the route is profitable. The revenue requirement will get rid of that pool of elite chasers. Now when United/Delta runs a promotion, since there is no pool of customers that will travel or reroute to travel on that route, seats will be empty. Consequently, routes may become unprofitable and therefore be cut. If enough routes are cut, then the feed to routes that are not cut will be less and those routes might drop below breakeven. This could easily be a downward spiral.

    The United/Delta management probably knows what they are doing, but I wonder if there are some unintended negative consequences of their blowing up the miles based frequent flyer system. Maybe it will produce less, not more revenue.

  • Blue

    No matter the code, if you book on ANA’s website it won’t be 016 ticket stock and therefore won’t count towards PQD. United is essentially charging a $200+ fee for booking through united.com and earning PQDs.

  • Blue

    The idea that fewer 1Ks will increase upgrades is naive. Even if there are fewer elites competing for CPUs wouldn’t United just offer more TODs to make even more money?

    So if there are 3 business seats left open United might have previously given 2 as CPUs and sold 1 @ $500. Now, if there are fewer elites to keep happy they can give only 1 seat as CPU and sell the other 2 @400. So now they’re giving away fewer seats, elites are still fighting over CPUs, and United makes $800 instead of just $500.

  • richstreet

    I’m not a mileage run guy, but I do work for a non profit and I am usually allowed to choose my airline that I fly (within reason) but I can never purchase a business fare or a Y class full coach fare. I’m afraid that this new revenue requirement is going to squeeze me out of 1k. As a 1MM I do have Premier Gold for life so there is no incentive for me to go after 1K besides a 50% mileage bonus. I have gone for 1K for the last 7 years because I receive 6 GPU a year which helps a ton since all of my trips are international. Now, since I’m going to be in coach where ever I am I might as well request a status match with another airline and then just choose my carrier based strictly on the cheapest airfare and schedule. Am i missing something?

  • vortix

    Nope.

  • thepointsguy

    Nope

  • Guesty McGuesterson

    Brian / TPG,
    You have a couple of examples in the post about how UA has higher prices than ANA for the identical RT itinerary which involves UA and at least one other carrier. Couldn’t you just purchase the tix on UA and then get the print out of the ANA fare you find and then demand the difference from UA, based on the best price guarantee they have?

  • Michael T

    I ended up with Lifetime Gold when CO and UA merged. I suppose that makes me a winner since this doesn’t affect me.

    PS I only take a couple of trips per year nowadays, so other elites don’t need to worry…I’m not taking away any upgrades from anyone. (Not that golds get upgrades anyway…)

  • Marc

    What about when you book a flight on Ultimate Rewards? You still get PQMs on those flights but do they count towards the $10,000 spend?

  • jg8675

    One other thing to keep in mind with the spending thresholds is that taxes do not count towards the limit. From UA’s site: “Government imposed taxes, fees, and charges are not eligible for Premier qualifying dollars (PQD). For qualifying tickets, only the base fare and carrier-imposed surcharges count as PQD.” I don’t know what percentage this works out to on average, but it effectively increases the amounts that customers will need to spend in order to qualify.

  • Evan

    Brian, I live in NYC and travel 20k-30k for work (all domestic and a bunch of transcon) I want to choose ONE airline to earn my points with . Currently make Silver on DL every year with the rollover strategy but thinking of switching (to American or just flying Jet Blue and Virgin for the better product) as I might not spend enough to hit 2,500 every year and don’t want to put all my points on one card to hit the 25k spend threshold – any suggestions? What would you do?

  • Brian

    Great analysis. I’m currently AA EXP, and if these type of requirments were implemented, I would probably start shopping for the lowest fare, and lean more towards airlines like Southwest, Jet Blue, and Virgin America- airlines that actually care about their passengers are don’t just look for ways to squeeze every dime possible out of them.

  • Alan Y.

    FYI: I just contacted United (as a newly minted United 1k; Yay!) and asked “Do 2014 purchases of United Award Accelerator with Premier Accelerator option added count towards 2014 Premier Qualifying Dollars spend?”. The very polite and kind agent did some research and responded that “Management has not yet decided as to whether this product will be counted towards Premier Qualifying Dollars spend.”

    Granted, using Award Accelerator with the Premier Accelerator is not a “cheap” cost efficient way buying PQM’s, but in a pinch (especially if you’re just short of 1k near the end of 2014) this might be a way to keep 1k status.

  • churnmaster

    I’ve always achieved elite status by lots of travel cheap…and i can see that will be difficult to achieve in the future but what chaps me the most is if I spend 7500$ on a round trip first class to europe why shouldnt that alone be enough to qualify for elite status…if what they care about is a minimum expenditure annually why shouldn’t everyone who expends it be rewarded. The rewards program got it’s name from frequent flying….now they should call it the 7500 club

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