The Critical Points: This is why United is choosing to devalue MileagePlus now
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Each week in his column “The Critical Points,” TPG Loyalty and Engagement Editor Richard Kerr presents his opinion on a loyalty program, card product or recent news that he believes is overlooked, unsung or the result of groupthink taking mass opinion in a direction with which he doesn’t agree. His goal is not necessarily to convince you to agree with his position but rather to induce critical thought for each of the topics and positions he covers.
There was a time in the not-so-distant past (circa 2011-2013) where every award flight search I attempted would start at United.com. The MileagePlus engine gave the most comprehensive results, and the routing rules were nice and flexible. Most importantly, however, miles could be strategically saved towards a goal, because award flight prices were based on a published award chart.
Over the last few years, MileagePlus has continually evolved, and as a result, I found my use of the search engine — and United miles in general — waning. When United effectively shifted to a loyalty program based on dollars spent rather than miles flown as of Jan. 1, 2020, my interest level was further strained.
With plenty of mixed reaction (putting it nicely) to the new 2020 MileagePlus program — and with demand for air travel currently non-existent — why is United choosing now of all times to press the matter and further devalue MileagePlus?
Devaluations During COVID-19
After United removed its award chart last year, dynamic pricing gave us domestic itineraries for as little as 5,000 miles one-way. Last week, we noticed those had all but disappeared, with flights consistently pricing at the old (award chart) rate of 12,500 miles. We were only able to find a few short-haul flights bookable for fewer miles.
Then, earlier this week, United capped the number of Premier Qualifying Points (PQPs) you can earn on partner flights, representing a huge devaluation in the ability to earn elite status from Star Alliance and other airline partners. These changes kicked for tickets issued April 29 or later, providing less than 48 hours of notice.
Sadly, United wasn’t content with this update. Just one day later, the carrier removed its Star Alliance award chart without any notice, setting the stage for full-on dynamic pricing for partner awards. Sure enough, less than 24 hours after pulling the award chart, many partner award prices jumped by up to 10%.
This is on top of United doing everything it can to not issue refunds, even for cancelled flights. Finally, for a little icing on the cake, Brian Sumers reports that United is now giving itself an extra two days to find lost baggage before having to pay out to a customer.
What is United’s game plan with this?
Conserving cash is the name of the game with United right now. While not customer-friendly by any stretch, these moves clearly show how the carrier is adjusting the MileagePlus program to ensure it remains a revenue-driver instead of an asset to encourage loyalty. Here’s how these actions are likely being justified within the company:
- Cutting partnership earning rates and discouraging customers from redeeming miles on partners lowers what United has to reimburse those partners.
- In February, Chase and United extended their co-branded card relationship, meaning Chase has already prepaid hundreds of millions of dollars worth of United miles. The carrier banked the cash and can now do what they like with what was already sold.
- The world is caught up with COVID-19, and United likely thinks lumping all of this into a compressed time frame while people are distracted will garner less attention.
Errors behind the thought process
To be blunt, this rationale is flawed, for a number of reasons. Now, I make the following assertions understanding that the demand for air travel is basically non-existent and United has to conserve cash. There are also thousands of jobs and families’ livelihoods at stake, so an airline should do what it can to protect themselves financially.
However, this actually makes the short-sighted nature of these moves even more confusing. Demand for air travel will return — though not quickly and not to pre-COVID levels right away. When it does, how will any of these moves entice frequent flyers to United?
- No-notice devaluations erode consumer confidence in the MileagePlus program.
- United has struggled to stimulate consumer spend on United cobranded cards. That’s largely because Ultimate Rewards earning products have a stronger earn rate on most regular consumer spend. Now, devaluing United miles will only continue to discourage consumer spend on United credit cards — one key area for profitability post-coronavirus.
- There will be added costs when it’s time to fill seats again, and United will have to work with a further demoralized customer base that is already wary of getting on airplanes.
- With travel at a near standstill, airlines should be working to foster brand buzz and stimulate business. This could take a number of different forms, like launching exceptional promotions, creating gamified challenges or initiating shortcuts to elite status through cobranded card spending. These anti-consumer moves are the exact antithesis of what could be a silver lining during the COVID-19 era.
United miles will continue to have their uses from time to time, but I see no reason to earn with United directly instead of banking Chase Ultimate Rewards points — which can then be transferred to MileagePlus at a 1:1 ratio when needed. This also does nothing to facilitate consumer trust or loyalty in the brand. If United happens to be the cheapest flight at the most convenient time when I need to travel, maybe I’ll fly them, but not without second thought.
Perhaps a nine-year Premier 1K traveler summed it up best:
“Watching what United has done over the last 10 days clearly indicates how strongly the airline is focused on…pinching pennies, as opposed to focusing on bringing back loyal customers to increase revenue.”
As the travel industry recovers, it’ll be interesting to see if United alters the current MileagePlus game plan from conserving cash to attracting frequent flyers. Given the moves of the last week, I wouldn’t count on it.
Featured image by Summer Hull/The Points Guy.
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