News about airlines always grabs my attention because both my husband and I are former airline employees. He had worked for Pan Am; I had worked for Iran Air, and then TWA. Probably because we were always opposite the table from management, and are now paying passengers, I’m always sensitive to air carriers trying to “pull the wool over our eyes.” So the Wall Street Journal article “What Airlines Are Hawking” had me wondering “what now?”
We accumulate air miles with a couple of different airlines. We don’t really work at it like a science, knowing how restrictive their use can sometimes be. But we do redeem them from time to time. As a result of what I’ve just read I will, however, start looking at air miles differently. Evidently passengers can redeem them for more than a free trip these days. How about “Plastic surgery, big-screen TVs, IPods, lawn tractors, diamond necklaces, VIP passes to sporting events, casino gaming chips, dinner with the New York Yankees and designer handbags.” And, it seems, the inventory continues to grow. But there’s a catch.
Aha! Didn’t I warn you that the airlines might be up to their usual trickery? What a passenger’s air miles are worth depends upon his or her ranking by the air carrier. How’s that you say? “Airlines charge customers radically different prices, depending on their status and credit card.”
David Yu, who travels so much he has platinum status in Delta Air Line’s frequent-flier program figured he’d be the one to get the best prices. Using miles, he’s bought a computer printer for his college-age daughter, a handbag for his wife and TV speakers for himself.
“I’ve got miles to burn so I consider it free,” he said.
But when he told a co-worker he was thinking of spending 42,600 miles on the Bose headphones, she said she had just purchased the same product from Delta for 34,100 miles. They compared offerings on side-by-side computers, each logging in with their Delta frequent-flier number. Her price was 20% lower than Mr. Yu’s, even though she’s not an elite-level frequent flier with Delta and has fewer miles in her account.
So what’s up? According to Delta, merchandise pricing isn’t based upon a customer’s accrued miles or past buying history. While Yu received a sizeable discount off the regular price, 68,100, of the BOSE headphones, his co-worker got an even bigger discount because she has a Delta American Express gold card. Yu doesn’t. Furthermore a passenger who is a diamond-level frequent-flier and holds a fancy Amex Skymiles card “can get triple the buying power out of each mile than a regular frequent-flier without the co-branded credit card,” according to Jeff Robertson, Delta’s VP who oversees the Sky-Miles Program. United Airlines Mileage Plus managing director, Krishnan Saranathan adds “The more valuable the program member, the better the redemption rate.”
Primary lures for the frequent-flier programs remain free airline tickets and hotel rooms. But with air carriers selling more miles to partners like credit card companies, it makes good financial sense to encourage passengers to redeem miles for “merchandise which gobbles up miles without opening up more airline seats or hotel rooms for award.” Delta now offers 6,000 items and in excess of 30 different gift cards. When air fares are low, redeeming miles for merchandise, mostly travel-related, is popular. When air fares rise, it’s more attractive to redeem miles for air tickets.
There’s been renewed fervor in frequent-flier miles since airline offerings have stepped “outside the box.” For example, Delta “is auctioning a spring training package that includes dinner with New York Yankee manager Joe Girardi and pitcher Joba Chamberlain, and a trip to China to build homes with Habitat for Humanity.” Last year American Airlines “sold three packages to the Kentucky Derby, including passes to special clubs and invitation-only dinners, for a total of 1.6 million miles.” For Paul Terrault, owner of a metals-trading company, who’s on the road more than 100 nights a year,
Winning an auction for 290,000 Hilton HHonors points–a trip with VIP perks to a Formula One race in Montreal with his son in June–hooked him on the program.
“No one gets access like that,” he said of getting into the hospitality suite and Hilton-sponsored garage. “I’m a jeans, gym shoes and Harley T-shirt guy, and they treat you like a million bucks.”
When another Formula One trip, to Brazil, went up for auction, Mr. Terrault grabbed that, too, for 420,000 points.
But there’s a caveat to all this. Buyer beware! While some of the merchandise up for redemption are true values, others aren’t. United Airlines offers a 10-inch Sony digital picture frame for 25,000 miles. The same frame can be had, with memory card, almost anywhere for $150. Instead those same miles could be exchanged for a discounted round-trip domestic ticket on UAL worth a minimum of $300, or even twice that amount.
Beat the airlines at their own game, and…
there’s probably a seat for you on the stock exchange…hugmamma.