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Thu February 27, 2014
Delta To Reward Dollars Over Miles In Frequent Flier Program
In the early ’80s, major airlines introduced frequent flier mile programs that closely resembled one another. Over time, airlines have rolled out new incentives, tiers and rules.
Delta has announced that it will be changing its frequent flier mile program in 2015 to focus less on miles flown and more on dollars spent. Derek Thompson of The Atlantic joins Here & Now’s Meghna Chakrabarti to detail the plans of Delta’s new program.
MEGHNA CHAKRABARTI, HOST:
And if Monica's story got you interested in, say, visiting Truth or Consequences, or quite frankly, traveling to any American city for that matter, the miles you fly to get there might not add up to as many frequent flier points as they used to if you fly Delta.
The airline just announced that it's revamping its sky miles program so that you gain award points, not based on how many miles you travel, but on how much money you spent. It's part of an industry-wide trend that's rewarding business and first-class travelers.
Derek Thompson, senior editor at The Atlantic, joins us. Welcome back, Derek.
DEREK THOMPSON: Good to be here.
CHAKRABARTI: So first of all, explain to us, you know, how does Delta's big change to its frequent flier system work.
THOMPSON: I'm going to get to the how, but first, the why. You might have heard of Garrison Keillor's imaginary town, Lake Wobegon, where it is famously said every child is above average. Well, in a real world, if everybody's above average, then nobody is above average. And that's actually precisely the problem with too many frequent flier programs today. They're not elite anymore. And Delta feels like it's giving too many goodies to people who aren't actually spending the most money, and they're not preserving their best rewards for their highest paying, most lucrative customers. So the new deal is this: It's not about the miles, it's all about the dollars.
Frequent flier miles will be rewarded by dollars spent, not by miles flown. The change starts on January 1st, 2015. So get on your cheap flights today. A quick example, let's say you buy a $400 roundtrip ticket from San Francisco to New York, $400 roundtrip across the country. Today, that would get you about 5,000 miles, as frequent flier aficionados probably know. But according to the new system, that same flight would earn 2,000 miles starting next year.
CHAKRABARTI: Right. So, Derek, it feels like the end of an era, even though there have been major changes in frequent flier programs before. But we have to say, this reminds us of the 2009 film "Up in the Air." There's a scene where George Clooney's character is doing whatever he can to rack up 10 million frequent flier miles. So we've got this clip. Here's Clooney with co-star Anna Kendrick.
(SOUNDBITE OF MOVIE, "UP IN THE AIR")
ANNA KENDRICK: (As Natalie Keener) OK. You got to fill me in on the miles thing. What is that about? Are you talking about, like, frequent flier miles?
GEORGE CLOONEY: (As Ryan Bingham) You really want to know?
KENDRICK: (As Natalie Keener) I'm dying to know.
CLOONEY: (As Ryan Bingham) I don't spend a nickel, if I can help it, unless it somehow profits my mileage account.
KENDRICK: (As Natalie Keener) So what are you saving up for? Hawaii? South of France?
CLOONEY: (As Ryan Bingham) It's not like that. The miles are the goal.
CHAKRABARTI: Sadly, the miles are no longer the goal. Derek, are we going to see this trend, sort of, grow from Delta to other airlines?
THOMPSON: This is really interesting. I think it's important to realize that the George Clooneys of the world who are the one percent of the one percent of the one percent of frequent fliers. I mean, these guys are rare. They still are Delta's best customers, and they deserve to be rewarded in some way if they're spending the most money. Right now, the top four percent of Delta customer, Delta paying customers, they account for 25 percent of the airline's revenue, according to The Wall Street Journal. This is a top heavy business. And so they want to reward these kind of fliers.
And with any sort of system like this, there are winners and losers. The winners are Delta's frequent business travelers who spend more for tickets, often because they can write it off. The losers, though, will be probably most of the people listening to the show right now, the leisure travelers who book their tickets way in advance to save money. These people will see that they're going to get less - fewer frequent flier points than they used to, and they're probably not going to be too happy about it. But I do expect other airlines to follow suit if we see a lack of belly grumbling about this.
CHAKRABARTI: I think there will be some grumbling, but we'll see just how much. Derek Thompson, senior editor at The Atlantic, thank you so much for joining us.
THOMPSON: Thank you.
CHAKRABARTI: From NPR and WBUR Boston, I'm Meghna Chakrabarti.
JEREMY HOBSON, HOST:
I'm Jeremy Hobson. This is HERE AND NOW.
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