Here’s what airline loyalty programs might look like after coronavirus
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In just a few short months, the coronavirus went from nonexistent to rapidly spreading around the world. In the process, it turned the travel industry upside down, with the TSA reporting record-low passenger numbers and airlines seeking government assistance to stay afloat. And since people aren’t flying, airlines have had to make huge changes to their loyalty programs to ensure that customers return when travel resumes after the virus is contained.
We’ve already seen many of these changes go into effect — for example, all of the major U.S. airlines have extended elite status and unveiled other perks. Looking to the future, though, I think we’ll see major airlines make more immediate and ongoing changes to their frequent flyer programs and reshape the airline loyalty landscape as we know it.
I’ll discuss the changes airlines have already made in response to the coronavirus and take a look at what airlines should be doing. Then, I’ll give some insight into what we might expect after the virus is contained and travel returns.
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What airlines have already done during the pandemic
Airlines have already done a lot for their members, mostly related to elite status and mileage earning. Here’s a look at some of the industry trends we’ve seen put into motion since the start of the global coronavirus outbreak.
All major airlines have extended elite status
If you’ve been following the travel news cycle over the past couple months, you’re well aware that all of the major airlines have extended elite status. Delta started the trend and American, Alaska, United, Southwest and JetBlue followed suit with extensions of their own. In all of these cases, the airlines outright extended elite status through the 2021 calendar year.
This trend isn’t limited to the U.S. either. Many international airlines have opted to extend elite status too, like Air Canada, Qantas and others. It’s great to see this trend both here and abroad — especially considering that I initially thought airlines would only offer reduced elite status requirements.
In my eyes, this is a win both for the airlines and customers; it lets flyers continue to enjoy their rightfully-earned elite status benefits and also helps with customer retention. Simply put, current elite members will be less likely to jump ship (or is it plane?) to another airline once travel restarts if they know that their elite status is intact. This will be especially important for travelers as airlines start to offer enticing elite-status deals in a post-coronavirus world — more on that in a minute.
Airlines are lowering qualification requirements, too
In addition, a few airlines have lowered elite-qualifying requirements for those looking to earn for elite status or upgrade to a higher tier in 2020. United announced that it’s reducing qualification requirements by 50%, and American reduced qualification requirements based on tier. In addition, Southwest added qualifying miles to all accounts, making A-List and Companion Pass status easier to achieve.
While Delta isn’t offering lower requirements this year, it’s rolling over all Medallion Qualifying Miles earned in 2020 to 2021. This is good for elite members that already have Medallion status, but not so great for those who are starting from scratch.
Airlines lowering elite requirements alongside an extension makes a lot of sense. If the coronavirus is contained by the end of the year, airlines will want to entice new frequent flyers. This wouldn’t be possible for many would-be elites without lowering requirements due to the shorter travel year.
Cobranded credit cards are becoming more powerful
We’ve also seen a slew of new perks added to cobranded credit cards. While airlines can’t take all the credit for these perks (the issuing bank likely helped put these in motion), it’s good to see these credit cards offer additional benefits while travelers are grounded through the virus’ outbreak.
One of the more popular perks we’ve seen is increased mileage earning. Delta’s American Express cobranded credit cards now offer 4x SkyMiles per dollar spent at grocery stores through July, which is a great value as TPG values Delta SkyMiles at 1.2 cents apiece, giving you a solid 4.8% return on all grocery purchases.
Likewise, United is offering 3x to 5x miles per dollar spent on up to $1,500 in grocery purchases per month on its Chase cobranded credit cards through the end of June. The United Explorer Card earns 3x points per dollar while the higher-end United Club Infinite Card earns 5x points per dollar spent. I wouldn’t be surprised if this bonus was extended if the coronavirus outbreak isn’t contained by the end of June.
United has also boosted the number of Premier Qualifying Points (PQP) that cardholders can earn in the 2020 calendar year. United Explorer Card and United Business Card members can now earn 2,000 PQP per year while United Club Infinite Card and United Club Business Card members can earn 4,000 PQP. This is up from the standard 1,000 PQP limit, making it easier for United cardholders to earn or upgrade elite status (up to Premier Platinum).
While American Airlines isn’t offering bonus miles, all miles earned on these American cobranded cards between May and December 2020 will count towards Million Miler status. This will help inch American loyalists closer to lifetime Gold or Platinum status, something that’s particularly important given that many of these flyers aren’t flying for the foreseeable future.
Mileage sales are becoming an important revenue stream
We’ve also seen many major airlines offer buy-miles promotions over the past month or so, offering both discounts and bonus miles. Some of the best deals we’ve seen include a 110% bonus on Aeroplan miles, 75% bonus on British Airways Avios and a 60% bonus on Alaska Airlines miles.
These sales provide airlines with immediate cashflow while letting customers effectively prepay for future travel. While we don’t usually advocate for buying miles, it can make sense in situations where you’d otherwise pay for a cash ticket at a higher price. For example, if you can buy $800 worth of miles and redeem for a $1,600 flight, it makes sense to buy the miles.
As always, run the numbers on these sales and see if they make sense for you. Further, know that airline miles can be rendered worthless if the airline goes bankrupt, so only buy miles from airlines that you think will make it through the coronavirus outbreak without too much financial hardship.
Mileage expiration is largely suspended
While airlines like Delta, United, JetBlue and Southwest have already done away with mileage expiration, some airlines have continued to require activity in order to keep miles from expiring. In North America, these holdouts include American, Alaska Airlines, Air Canada, Frontier and Spirit.
Thankfully, these airlines have all opted to accommodate members with expiring miles. Some have simply extended miles that are set to expire while others have temporarily paused expiration altogether. This is good to see, especially since most people aren’t flying or spending as much money, meaning that it’s harder to extend mileage expiration by earning or redeeming miles.
What airlines should be doing right now
These changes are a good start, but airlines could still be doing more to help loyal customers during the coronavirus outbreak. Additionally, we’ve seen some airlines (see: United) make some not-so-good changes during the outbreak as well, and we’re hoping that other airlines don’t follow suit.
Get rid of elite status spending requirements through 2021
Back in the day, you could earn airline elite status purely on miles flown. Sure, this still exists in some form — namely with Alaska Airlines and British Airways — but the vast majority of North American carriers now require you to spend a set amount of money in order to earn elite status.
For example, Delta requires its members to earn $3,000 to $15,000 Medallion Qualifying Dollars (MQM) per year to earn elite status. This is in addition to mileage requirements, so the airline is effectively only giving elite status to members who pay a considerable amount of money to the airline each year. You can waive this requirement with credit card spend, with the Diamond Medallion waiver requiring an ultra-high $250,000 in spend during a single calendar year.
United has taken this a step further by dropping mileage requirements and awarding elite status based on the newly introduced Premier Qualifying Points (PQP). These are directly correlated to how much you spend on airfare, and the airline has significantly limited how many PQP you can earn on partner flights. In short, this is United saying that it only wants to award elite status to big spenders.
Don’t get me wrong, I can see why airlines implemented these policies. In a normal travel year, it makes sense for airlines to want to award status to high-spenders to up their bottom line. However, I don’t think it makes sense for 2020 and 2021.
This is largely due to the fact that travel will be in significantly lower demand for the foreseeable future, which could mean airlines offering lower fares in an effort drum up demand. If this ends up being the case, it will be harder for frequent flyers to requalify for status in 2021, even if they’re flying the same amount as they were in past years.
Likewise, the coronavirus outbreak has also put a huge damper on the economy, and consumers will likely be spending less money until the economy recovers. This makes credit card spending waivers less attainable, further making it more difficult for elites to requalify for status.
That said, airlines should completely waive these requirements for the 2021 status qualifying year. Doing this will ensure that airlines continue to award status to frequent flyers, even if they’re spending less on a credit card or flying on cheaper fares. Not doing this could mean that frequent flyers will become less loyal to a single airline and spend less on cobranded credit cards.
More transparency is badly needed
Another gripe I’ve had with airlines throughout the coronavirus is a lack of transparency. Not all airlines are guilty of this, but two major examples are United and JetBlue.
For example, United quietly devalued its program with no notice when it scrapped partner award charts in April. Introducing this change with zero notice doesn’t inspire confidence with United loyalists and — frankly — is very disappointing to travelers who are already going through tough times.
On the other hand, JetBlue stayed quiet about elite status for months after the coronavirus outbreak started. While the elite status extension eventually came, Mosaic elite members were kept in the dark while other major airlines were extending status and announcing other elite changes. This caused many loyal Mosaic members to feel like a second thought during the outbreak, something that can undoubtedly affect future loyalty.
Now is the time for airlines to be transparent with loyalty members. This doesn’t mean that airlines should rush major decisions out the door, but they owe it to customers to be 100% transparent about things in the pipeline. Likewise, changes — no matter how negative — need to be clearly communicated to members well before they go into effect. This will keep trust high and ensure that loyal customers stick around after the virus is contained.
Now is not the time to devalue loyalty programs
United massively devalued its award program mid-way through the coronavirus outbreak. It started when it put a cap on partner PQP earning, and continued when the airline dropped its partner award charts, raising the price of partner award tickets by 10% in the process.
As TPG Writer Zach Griff said in a recent article, these changes couldn’t have come at a worse time. Flights on all airlines will be cheap in the months following the coronavirus’ containment, so it will be less attractive to book Star Alliance tickets if you’d earn more qualifying miles by booking on another airline.
Plus, United miles are becoming significantly less valuable than they once were. This makes it less attractive to earn United miles through cobranded credit card spending, Ultimate Rewards transfers and shopping portals. United makes a ton of money by selling miles to these partners, so if demand drops, United could see MileagePlus become less of a moneymaker. This is especially important when you consider that travel demand will be low for the foreseeable future, so alternative sources of income will be more important.
Introducing these changes in the middle of a global pandemic isn’t a great look, either. It leaves a bad taste in the mouths of travelers and — as a United elite myself — makes me consider a move to another airline. I firmly believe that it’s in the best interest of airlines to delay future devaluations to a time when the world isn’t in the middle of a pandemic; this will put on a better face and show that the airline in question cares about its customers.
What airlines might do in the future
But changes don’t stop when the coronavirus outbreak is contained. The travel landscape will be forever changed by the coronavirus, and airlines will need to change their loyalty programs accordingly. Here are a couple of ways that airlines may change their loyalty programs in a post-coronavirus world.
Emphasis on earning elite status through credit cards
After months of forced remote working, we may see many companies reduce business travel in a post-coronavirus world. If this ends up being the case, airlines will have to provide more incentive for loyalty in a world where a consultant may only get on a plane twice a month instead of twice a week.
One way this could happen is by opening up more avenues for earning elite status through credit cards. Delta has been at the forefront of this for years now, and it’s possible to earn Medallion elite status solely through credit card spending on the Delta SkyMiles® Reserve American Express Card and Delta SkyMiles® Platinum American Express Card. This has made Delta’s cobranded credit cards an important revenue stream for the airline, especially in a time when flying is at an all-time low.
I believe that other airlines will follow Delta’s lead in a post-coronavirus world if business travel decreases. These travelers will still want preferred treatment that comes with having elite status and can supplement less time in the air with spending on a credit card. This will help the airlines recoup lost revenue, too — banks will have to purchase more miles from the airline as spend increases.
More flexibility for award travel
I also believe that we’ll see more flexibility in award travel. While we may not see the big three U.S. carriers adopt Southwest’s ultra-flexible change policy, we may see airlines start to offer lower fees for canceling tickets or give customers a set time period wherein they can cancel award tickets without a fee.
We’ve already seen American Airlines do this. The airline recently tweaked its change and cancellation policy, offering free changes and cancellations to all members so long as the change is made at least 60 days prior to departure. This change applies to all American award tickets, including Web Special tickets which previously couldn’t be changed at all.
I strongly believe that other airlines will follow suit in this decision. Delta currently charges a flat $150 fee for canceling an award ticket, which is impractical in a post-coronavirus world where the virus could reappear. Changing this policy would not only be good for customers, but also for both their brand image and phone representatives who will likely be dealing with heightened cancellations for years to come.
Now for the fun part: In a world where travel demand is lower than ever, we’re likely going to see airlines do anything they can to drum up demand. This could come in the form of cheap fares, heightened credit card welcome bonuses, and shortcuts to elite status.
But this is nothing new — when the world was recovering from the 2008 market crash, we saw airlines run some of the most lucrative promotions of our time. Some that come to mind include the U.S. Airways Grand Slam promotion and the infamous 100,000-mile American Airlines cobrand credit card offers.
U.S. Airways’ Grand Slam promotion was one of the most exciting promotions of the recent past. With this promotion, you could earn up to 110,000 bonus miles when shopping with U.S. Airways’ various retail, credit card, hotel and rental car partners. This helped the airline earn extra revenue through its partners, and gave customers a way to earn miles when they may not have been flying for work.
In addition, credit card companies and their respective airline partners will be itching for new credit card signups in a post-coronavirus world. The easiest way to do this is by rewarding customers, so we’ll likely see heightened credit card welcome bonuses on cobranded credit cards once the world is in the process of recovering from the coronavirus outbreak.
The travel industry is changing before our eyes and airlines are quickly adapting, offering elite status extensions and other perks to their most loyal flyers. And while there’s no way to tell what the future holds, we’re confident that the travel industry will rebound once the coronavirus is contained — albeit, with some major changes to airline loyalty programs.
Featured photo by Jaromir Chalabala/Shutterstock.
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