Posted by: Alina Comoreanu

Airline loyalty is hard to come by. Most travelers are willing to jump to another jet for the slightest of discounts. Yet roughly 7% of flights are paid for with points or miles, according to PWC. So there’s obviously value in committing to a carrier. You just have to find the right one.

To help you earn more free flights and other assorted perks, WalletHub compared the 10 largest domestic airlines’ loyalty rewards programs across 23 key metrics, ranging from the value of a rewards point or mile to blackout-date policies.

Here are the best frequent flyer programs:

1. Delta SkyMiles 2. Mileage Plan 3. HawaiianMiles 4. AAdvantage 5. MileagePlus

This comparison was based on three hypothetical annual airline budgets: Light ($453), Average ($4,088) and Frequent ($7,722). But you can customize the results to match your own airline budget using the tool below.

1. Personalized Recommendation
2. Main Findings
3. Detailed Scoring
4. Ask The Experts
5. Methodology

Personalized Recommendation

Just enter your annual air travel budget below, and we’ll use the report’s methodology to find your ideal frequent flyer program.

Annual Amount Spent On Airline Travel Best Program Delta Air Lines WalletHub Score: 62.82 Runner-up Southwest Airlines WalletHub Score: 51.25

Main Findings

Delta SkyMiles is the best frequent flyer program for the third straight year, earning an average WalletHub score of 64.13% in the three usage scenarios.

 

Hawaiian Airlines offers the most rewards value ($19.95 per $100 spent), with Alaska Airlines coming in a close second ($19.87 per $100 spent).

 

Four of the 10 largest airlines offered more rewards in 2018 than in 2017, sweetening the pot by an average of 20%.

 

Delta Air Lines and JetBlue Airways are the only two major airlines whose miles do not expire because of inactivity.

 

7 out of 10 airlines do not impose blackout dates on tickets purchased with miles.

 

40% of airlines will retroactively credit members with miles earned on a flight for up to 12 months after the fact.

 

6 out of the 10 largest U.S. airlines allow rewards-program members to earn and redeem miles with partner carriers.

 

*The following airlines are not represented in the chart, as they do not have frequent flyer partnerships with other airlines: Southwest, Frontier, Spirit, and Sun Country airlines.

 

Airline miles cost an average of 62% more than they’re worth when purchased rather than earned.

 

*Sun Country Airlines does not allow for the purchase of miles.

Back to Top

Detailed Scoring

The following table illustrates the number of points that each airline rewards program received in the scoring categories included in our methodology.

Scoring Categories	Maximum Score	American Airlines	Delta Air Lines	Southwest Airlines	United Airlines	JetBlue Airways	Alaska Airlines**	Spirit Airlines	Frontier Airlines	Hawaiian Airlines	Sun Country Airlines
Frequent Flyer Program	-	AAdvantage program	SkyMiles	Rapid Rewards	MileagePlus Program	TrueBlue	Mileage Plan	FREE SPIRIT	EarlyReturns	HawaiianMiles	Ufly Rewards
Number of daily flights	7.00	7.00	6.01	4.16	4.69	1.01	1.22	0.46	0.27	0.22	0.00
Number of countries served	5.00	4.40	5.00	0.55	3.97	1.66	0.12	1.15	0.03	0.38	0.03
Number of destinations served	5.00	5.00	4.77	1.13	4.83	1.16	1.42	0.52	0.83	0.04	0.21
Partner airlines earning and redemption	3.00	1.89	2.17	0.00	3.00	0.32	0.99	0.00	0.00	0.43	0.00
Number of daily flights	3.00	1.80	2.60	0.00	2.51	3.00	1.35	0.00	0.00	0.55	0.00
Number of countries served	1.00	0.48	0.57	0.00	0.77	1.00	0.40	0.00	0.00	0.13	0.00
Number of destinations served	1.00	0.56	0.69	0.00	0.90	1.00	0.47	0.00	0.00	0.18	0.00
Value earned -Frequent Flyer	20.00	3.24	9.93	8.12	5.85	7.42	19.89	0.95	3.43	20.00	3.49
Value earned - Average Flyer	20.00	5.57	12.26	9.03	8.18	0.69	18.16	4.63	7.46	20.00	7.53
Value earned - Light Flyer	20.00	5.61	13.20	16.44	8.57	3.19	18.05	0.86	13.96	20.00	14.07
Miles expiration	7.00	1.87	7.00	2.60	1.87	7.00	2.60	0.04	0.40	1.87	4.07
Booking blackout dates	7.00	7.00	7.00	7.00	0.00	7.00	0.00	7.00	7.00	7.00	0.00
Advance booking	3.00	2.63	2.63	1.58	2.69	1.90	2.62	1.93	0.92	2.63	1.69
Short-notice booking fee	3.00	0.00	3.00	3.00	0.00	3.00	3.00	0.00	0.00	3.00	3.00
Earning limits	2.00	0.00	0.00	2.00	0.00	2.00	2.00	2.00	2.00	2.00	2.00
Earn miles when booking through 3rd party websites	6.00	6.00	6.00	0.00	6.00	6.00	6.00	6.00	6.00	6.00	6.00
Layover in award flight	5.00	0.00	0.00	5.00	5.00	0.00	5.00	5.00	0.00	0.00	5.00
Expired-mile reactivation	1.00	0.00	1.00	0.00	0.00	1.00	0.00	0.00	0.00	0.00	0.00
Retroactive flight credit for members	3.00	1.29	0.86	1.29	0.43	1.29	1.29	0.00	0.43	0.14	0.00
Retroactive flight credit for non-members	1.00	0.00	0.00	1.00	0.00	1.00	0.00	0.00	0.45	0.27	0.18
Award-ticket redeposit fee	3.00	0.00	0.00	3.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Ease of achieving elite status	3.00	0.85	0.33	1.01	0.94	2.32	1.31	2.36	3.00	2.42	2.32
Transferring miles between accounts	1.00	0.00	0.00	0.00	0.00	1.00	0.00	0.00	0.00	0.00	1.00
Membership perks - Frequent Flyer	5.00	4.50	4.50	2.50	4.50	3.00	4.00	0.67	1.00	3.67	3.50
Membership perks - Average Flyer	5.00	4.00	3.67	1.50	4.50	0.50	3.17	0.67	1.00	2.67	0.00
Membership perks - Light Flyer	5.00	0.00	0.00	1.50	0.00	0.50	0.00	0.00	0.00	0.00	0.00
Purchasing Miles	5.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.00
Score not based on consumer spending	75.00	40.78	49.62	33.31	37.60	42.64	29.78	26.46	21.34	27.27	30.51
Frequent Flyer Score	100.00	48.52	64.05	43.94	47.95	53.06	53.67	28.07	25.77	50.93	37.50
Average Flyer Score	100.00	50.35	65.55	43.84	50.28	43.83	51.10	31.75	29.81	49.93	38.05
Light Flyer Score	100.00	46.39	62.82	51.25	46.17	46.34	47.83	27.32	35.30	47.27	44.58

Back to Top

Ask The Experts: Assessing The Value Of Frequent Flyer Programs

With a quantitative analysis in hand, we turned to a panel of leading hospitality and consumer studies experts to learn more about the inner-workings of frequent flyer programs and how they affect the way we travel. You can check out their bios and responses to the following questions below.

1. Who benefits more from airline rewards programs: consumers or the airlines themselves?
2. To what extent do airline rewards programs influence consumer behavior?
3. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty?
4. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years?
5. Why are each airline's miles worth different amounts? How does this affect consumers?

< >

• Amna Kirmani Professor of Marketing in the Robert H. Smith School of Business
• Michel Ballings Assistant Professor of Business Analytics in the Haslam College of Business at The University of Tennessee
• Alison Jing Xu Assistant Professor of Marketing in the Carlson School of Management at University of Minnesota
• Aaron Hackett Lecturer in Marketing in the Scheller College of Business at Georgia Institute of Technology
• Charles R. Taylor John A. Murphy Professor of Marketing at Villanova School of Business
• Donna Wertalik Associate Professor of Practice in Marketing and Director of Marketing at Virginia Tech Pamplin College of Business
• Susan K. Jones Professor of Marketing at Ferris State University
• Yuliya Strizhakova Assistant Professor of Marketing in the School of Business at Rutgers University
• Tatiana Dyachenko Assistant Professor of Marketing in the McDonough School of Business at Georgetown University
• Qihong Liu Associate Professor of Economics at University of Oklahoma
• Jill Avery Senior Lecturer of Business Administration in the Harvard Business School
• Priya Raghubir Dean Abraham L. Gitlow Professor of Business and Chair of the Marketing Department in the Stern School of Business at New York University
• Subodh Bhat Professor of Marketing at San Francisco State University

Amna Kirmani Professor of Marketing in the Robert H. Smith School of Business Who benefits more from airline rewards programs: consumers or the airlines themselves? Although both benefit, I am sure airlines benefit more than do consumers. That's why they have them. Consumers benefits individually, but airlines benefit in the aggregate. These rewards programs are offered to entice consumers to become loyal as well as to reward consumers who remain loyal. Consumers can get used to the perks very quickly. To what extent do airline rewards programs influence consumer behavior? Although they are called "rewards," these programs are as much incentive as they are reward. Airlines rewards programs (like rewards programs in other industries) make it more difficult for consumers to switch to other carriers. The reward program makes consumers look first at that airline's offering on any route; consumers may even be willing to pay more (or put up with an inconvenient route) to travel on that airline. This kind of behavior is especially likely as consumers near an important goal, e.g., achieving the next status level. In turn, what consumers expect and enjoy are the following: 1) the concrete benefits (e.g., free baggage, earlier boarding, upgrade); 2) the feeling of status (I'm special). In fact, as you go up the status levels, it becomes harder and harder to switch to a different carrier. That is because the benefits get larger and harder to give up. I've heard people say that xxx airline sucks, but they travel on it because they have high status. Why are each airline's miles worth different amounts? How does this affect consumers? These miles are worth different amounts because each airline has developed a different system over time. Some reasons are just institutional (i.e., based on the airline's infrastructure, the managers who developed the initial program, etc.). For consumers, it's all quite confusing. It's even more confusing since the airlines changed their system from miles-based to money-based (Starbucks did the same with its loyalty program.) Now, United, for instance, gives you miles based on how much you paid for the ticket. I can't figure it out, and I don't have the time or energy to delve into the exact system. I feel they've made it opaque on purpose. And it's hugely beneficial for them. Michel Ballings Assistant Professor of Business Analytics in the Haslam College of Business at The University of Tennessee Who benefits more from airline rewards programs: consumers or the airlines themselves? Airlines themselves. Two reasons:

1. Airlines work with miles (just like others work with points) and the value of miles (and points) is always vague. Moreover, there are all kinds of exceptions and complexities such as award miles vs status miles.

2. The problem is not just vagueness. Even if airlines would offer cash back (just like major credit cards), the clearest reward available, consumers would still be disadvantaged because it would motivate them to spend more because they will save more. This is a strange psychological technique, but it works.

In short, reward programs motivate people to spend more, and be loyal, for little in return. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? The bigger the alliance, the more choice a consumer has, and still get miles. Therefore bigger alliances result in more loyalty. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? It depends. Scenario 1: one airline overthrows the entire system and starts offering real rewards, in which case the other airlines need to follow. Scenario 2: they play smart and keep things as they are. Why are each airline's miles worth different amounts? How does this affect consumers? This ties into my answer to the first question. Airlines market their loyalty system based on miles. For example, airline A may offer a customer 50,000 award miles to sign up for a credit card. That seems like a big number, but if those 50,000 miles are only worth $100, then that’s not a big reward. Airline B wants to do better, and will offer 60,000, which in turn are also worth $100. The trick is to make sure the actual dollar value of 1 mile is difficult to find, so that a potential customer will go with the airline offering the bigger number of miles (even though these miles may be worth less). Airlines' favorite technique seems to be to send a leaflet with redemption options such as products nobody knows the real value of (or at least it is difficult to find). An example: a watch in return for 80,000 miles (which in reality would only cost $100). Alison Jing Xu Assistant Professor of Marketing in the Carlson School of Management at University of Minnesota Who benefits more from airline rewards programs: consumers or the airlines themselves? Ideally, both customers and airlines should benefit from rewards programs. Airlines use reward programs to retain their current customers and get customers’ life time value. Customers enjoy benefits such as using miles to buy fight tickets, free check-in bags and priority boarding from the airlines that they have been loyal to. However, in reality, because airlines are in ferocious competition to launch more and more attractive loyalty programs, the cost of running loyalty programs keeps escalating, which becomes a big financial burden for most airlines. In my opinion, consumers benefit more from airline rewards programs. To what extent do airline rewards programs influence consumer behavior? Airline rewards programs can have profound influences on consumer behavior. A locked-in consumer may be willing to pay a higher ticket price in order to accumulate miles. Sometimes they may forgo the most convenient flights offered by competing airlines. I have a friend who went from Chicago to Berlin last fall, and she took two connecting flights with the airline she has been loyal to rather than taking a direct flight with a different airline. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? Mergers, acquisition and alliances occur frequently in the airline industry. Those strategic movements often change the benefits that rewards programs may offer to their member consumers. Consumers can easily get confused about those changes and feel frustrated if the changes impose more restrictions in using the miles. Those negative consequences can certainly reduce consumer loyalty to those airlines. Why are each airline's miles worth different amounts? How does this affect consumers? Although the original goal of launching loyalty programs is to retain airlines’ current customers, airlines also try to use rewards programs to attract new customers. Therefore, airlines are in competition to design more and more rewards programs. If all airlines’ miles worth the same amounts or if all rewards programs provide the same benefits, consumers would behave in the same ways as if there were no rewards programs. Airlines need to differentiate their rewards programs to make them more appealing to their target customers. Aaron Hackett Lecturer in Marketing in the Scheller College of Business at Georgia Institute of Technology Who benefits more from airline rewards programs: consumers or the airlines themselves? It’s difficult to quantify who benefits more from airline rewards programs. They are typically considered mutually beneficial, like a 20% off sale might be. The airline enjoys an increased likelihood of repeat purchase, while consumers enjoy credit towards free flights and other valued bonuses, such as class upgrades, early boarding, and free checked baggage. From a consumer perspective, the thinking is not whether consumers benefit more than the airline does, but if the consumer benefits more from the airline rewards program than they would from other travel options. To what extent do airline rewards programs influence consumer behavior? From what I’ve seen, airline rewards programs have a significant influence on consumer behavior. For undergraduate and MBA students who discuss airline brand loyalty, the conversations consistently center around a rewards program. To get a feel for how important the airline rewards program is in purchase decision, I typically ask how much of a price premium the student is willing to pay before going with another airline. Answers in the 20% range are common. In general, the more price sensitive the consumer, the less influence the rewards program has, but even the college student, a generally price sensitive demographic, is willing to pay a premium for rewards benefits. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? Although from an economic perspective, you would expect mergers to increase pricing, from a consumer perspective, mergers could be perceived as positive. Mergers typically result in the airline having more flight options with respect to destinations and times. Assuming flight prices remain within an acceptable range versus other airlines, the perception would be positive. Why are each airline's miles worth different amounts? How does this affect consumers? Airline miles are worth different amounts primarily because it’s difficult for consumers to compare. With a typical retail sale, consumers know regular price and how much a sale will reduce a price. With airlines, there are more variables:

1. Regular prices in the airline industry are dynamic. If you purchase a ticket to the same location as a friend, you would not be shocked to learn your friend paid $100 less for a ticket. Consumers understand that ticket prices are based on such variables as how long before the trip the ticket is booked, seat availability on the flight, flight time, etc.

2. Comparing points for flights on different airlines is complicated by the need to understand the points earned for a flight versus the points necessary to receive a free flight. Additionally, one airline may award points for miles, while another awards points based on ticket cost.

3. The value of other perks may come into play. If such perks as boarding early, checking in a bag free, or the ability to secure priority seating is valuable to a consumer, this would reduce the importance of trying to make a dollar (or mile) to free flight calculation.

When crafting a rewards program, an airline would use key competition as a guide, but would be primarily interested in providing what the consumer required to remain loyal without building too much of a liability. This complexity makes it less likely for consumers to change because it’s not necessarily clear which program is the best. Charles R. Taylor John A. Murphy Professor of Marketing at Villanova School of Business Who benefits more from airline rewards programs: consumers or the airlines themselves? I think both the companies and consumers benefit from loyalty programs, although some customers benefit more than others. Most consumers are not in a position to reap significant benefits if they fly more than one airline so the companies are able to put up a disincentive against flying with the competition. So many do become loyal to a single airline. Beyond price (which the large carriers don't want to rely on) and the inherent advantage a carrier has in its hub cities due to offering more direct flights, these loyalty programs are the only other major factor driving consumer choice of airline regularly. For consumers, and especially those who reach elite status levels, the benefits of the loyalty programs are very real. While it can be difficult (and probably more difficult than it should be) in some programs to redeem free flights, consumers willing to be flexible in the time of the reward flights will generally come out okay. For elite flyers, the benefits of shorter check-in lines, free baggage, customer service hotlines, and occasional or frequent complimentary upgrades are very real. There is little question that most of the major carriers have skewed more benefits to those who are the most frequent flyers. While this has ruffled some feathers due to some benefits being rolled back for general members, it does make sense in the sense that the elite flyers spend considerably more on air travel than most every day flyers. To what extent do airline rewards programs influence consumer behavior? For the reason mentioned above about the limited number of real differentiators in this industry, these programs are a major influence on consumer behavior. Too many other features, such as baggage charge policies, food on flights, price, and convenience of flight times can be easily matched by the competition. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? For the most part, they don't have a lot of impact as the frequent flyer will stick with the company making the acquisition. For instance, when American acquired US Airways in Philadelphia, it was able to retain the vast majority of US Airways flyers as they wanted to retain the benefits of the program they were in - while still receiving the benefits of more direct flights. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? We are on the front end of a trend towards these programs being skewed to those who spend the most on air travel. Delta instituted a change in their program that awards miles based on the fare paid rather than the raw number of miles flow and others seem to be following. So heavy travelers will likely benefit the most. They also offer "choice benefits," which are additional rewards such as upgrade certificates to flyers who reach the highest mileage thresholds. Unfortunately, one thing that seems to be static or even getting worse is the complexity of consumers being able to figure out how to use the benefits in the most effective way. While the benefits are very real, it is often time consuming to take full advantage of them (hence the availability of an industry in paid advice on using frequent flyer miles). Why are each airline's miles worth different amounts? How does this affect consumers? Again, because of the level of detail required to understand these programs, I don't think most consumers have much awareness of differences in the amount of miles needed for award travel on different airlines. There are some seasoned travelers who make posts about changes in programs and this seems to help contribute to at least some level of similarity among the programs. Even within a single airline's program, redeeming for the same route can cost a different number of miles depending on the time of year or time of day of the flight. So it makes comparison very difficult. In the end, this leads to another disincentive to switching. While there may be some limited difference in policies for some specific issues such as policies for upgrades on international flights that consumers with specific needs notice, these programs are more similar than different. As a result, these differences in the value of miles seem to have limited impact on consumers. Donna Wertalik Associate Professor of Practice in Marketing and Director of Marketing at Virginia Tech Pamplin College of Business Who benefits more from airline rewards programs: consumers or the airlines themselves? In general, any type of rewards or incentive program for consumers are designated as “loyalty” programs for a reason. Airlines have been a frontrunner for years on this and built the model. Any brand that seeks to have a loyal consumer needs to invest in that consumer and “deposit” value into the relationship. Essentially, the higher the brand loyalty, the less likely an increase in price will lead to a consumer leaving the product, because they feel it is harder to substitute. In the end, the airline wins, but savvy consumers who know how to leverage their points for upgrades, can often win as well. To what extent do airline rewards programs influence consumer behavior? Marketing is about value and understanding consumers, and why they behave the way they do is an essential part of this. The psychology behind developing brand loyalty. This link is an excellent resource outlining seven key steps in changing behavior to build loyalty among consumers. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? This can impact loyalty in extreme ways, if the customers are not put first. Often times, airlines merge, which can take a long time and create consumer confusion. Changes in airline policy, cancellation fees and usage of points can risk consumer loyalty. This situation rose to a head last spring, when consumers called on Senator’s McDonnell and Reid to adopt measures that assist in strengthening consumer protections. This is a perfect article to cite, regarding a recent and very relevant impact to brand loyalty. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? Airlines have been moving to more of a “bus in the sky” experience, where any additional value has been stripped, when you analyze the offerings from only a decade ago. This past June, American Airlines instituted a new policy with a variety of different “levels” and rewards. This will result in making it harder for economy fliers to earn free flights. The model will continue to move in this direction, with miles tied to dollars on airfare, versus miles flown. In the past, airlines were losing money, since savvy consumers figured out how to leverage the points and were receiving free flights often. Now, it will become much harder and I foresee even a new model, where only a % of your purchase results in rewards. Now, many give 5 points for every dollar spent, but I can see that lessening in the future. Why are each airline's miles worth different amounts? How does this affect consumers? In the end, it becomes a game of break-even and beyond. Airlines leverage different marketing strategies when developing incentive programs and building a true “USP”-Unique selling proposition, therefore providing a program only unique to them and their “members” who are a part of it. From a psychology standpoint, consumers value different levels and view this as achievements when another level is conquered. It comes down to ranking and evaluation from a consumer and which will provide the best value and experience. Consumers determine the importance of points over dollars, what points are transferable for other services and make an educated decision. Again, some consumers are savvy and spend immense amounts of time analyzing all of this (imagine extreme coupons, but for airline passengers!). In the end, the airlines are a unique segment and unlike organizations selling cars or food brands, airlines exist as part of the service industry. In the service industry, various companies compete to offer the best experience despite relatively similar end products. It’s about the value and “experience” for most consumers. Susan K. Jones Professor of Marketing at Ferris State University Who benefits more from airline rewards programs: consumers or the airlines themselves? Certainly, there are benefits to both consumers and airlines. Consumers benefit by enjoying perks and upgrades, while airlines benefit by the potential for more loyalty among their customers and the rich data mine of information they receive. To what extent do airline rewards programs influence consumer behavior? If my friends and family are any indication, consumers try to cluster their flights with one or two airlines in order to maximize their benefits. Another contributing factor would be airline/credit card rewards programs. If a consumer gets free bag check and preferred boarding with the airline where they have their credit card relationship (Delta/American Express Card for example), this can be a great incentive to stay with that airline. For example, I just paid about $80 more to fly with my preferred airline over one where I am not collecting miles and perks. The fact that I will save $25-$30 each way on bag check makes this nearly a non-issue. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? One of the key elements here is the change in routes. As an example, years ago, my husband worked out of Pittsburgh, which was a U.S. Air hub. He was platinum on U.S. Air because he could get just about anywhere very easily out of the Pittsburgh airport. When U.S. Air pulled out of Pittsburgh, they lost my husband as a customer, not because he didn’t like the airline, but because they could no longer serve his needs. For consumers to be able to cluster their rewards under the major alliances, overall, would seem to be a positive. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? I think that airlines will continue to look for ways to differentiate themselves in positive ways. It didn’t take long for airline rewards programs to become “table stakes” for airlines – every airline has the rewards programs and frequent travelers usually have numbers for just about every airline out there. In order to become a preferred airline, ideally an airline would come up with perks that are difficult for competitors to replicate. Why are each airline's miles worth different amounts? How does this affect consumers? Consumers need to read the fine print to understand what it’s going to take to get a free trip or other perks with each airline they fly. This is complicated by the airline credit cards that offer double or even triple miles for travel-related purchases. Many available miles go unclaimed because some consumers are too busy to keep track of what they are “owed.” Those unclaimed miles are something of a liability for airlines – thus their members are offered ways to cash in the miles to help needy children fly to specialized hospitals, for one example, or for magazine subscriptions, for another example. Yuliya Strizhakova Assistant Professor of Marketing in the School of Business at Rutgers University Who benefits more from airline rewards programs: consumers or the airlines themselves? The hope is that both consumers and airlines find benefits in airline rewards programs. Rewards programs are aimed at maintaining positive relationships with customers, as well as building and reinforcing customer brand loyalty. Valuable rewards programs do exactly that – they encourage repeat purchases by offering some extra benefits to customers, so long term both customers and airlines benefit. However, if customers find it hard to redeem their accumulated points or do not get much of any other benefits, then the value and effectiveness of the rewards program is diminished. To what extent do airline rewards programs influence consumer behavior? When customers purchase airline tickets, they compare their choices on a number of factors, such as prices, convenience (e.g., departure time, number and location of connections), type of aircraft, extra charges, etc. Airline rewards programs become one of the additional factors in their consideration set. How important this factor is probably depends on the type of customer, as well as importance of all those other factors. For business travelers and those who travel frequently otherwise, rewards programs are likely to have greater influence on consumer behavior, because the value of the program (getting free tickets, preferential seating, etc.) is greater and easier to accumulate. For less frequent travelers, rewards programs may be one of the factors in their purchasing decision but probably not the most important one. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? As customers, we have fewer choices, and some customers have lost their preferred airlines to these mergers. However, being able to earn rewards through a global airline alliance may actually be even a stronger incentive than a rewards program for a specific airline, as it allows a frequent traveler to have more choices and still accumulate rewards. So, a frequent traveler may not be as loyal to a specific airline but still be quite loyal to a particular alliance. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? If we look back 10 years ago, an airline ticket covered a lot of things that customers are charged extra fees for now, for example, luggage, food, drinks, preferred seating, entertainment, etc. All of these extra fees have a potential to be integrated into a rewards program beyond accumulating points for a ticket. Any additional services that are currently offered or will be offered in the future that you can pay for on board can also be integrated into a rewards program. The more airlines will “compartmentalize” their prices, the more opportunities for integrating the “extras” into rewards. Why are each airline's miles worth different amounts? How does this affect consumers? Each airline tries to differentiate its programs from competitors; hence, you have different amounts for the same number of miles, as well as how easy/difficult it is to redeem them. Each rewards program wants to be distinct but remain competitive and beneficial to the airline. Does it confuse consumers? Sure, it does. It makes their choice more complex and requires time/effort to compare the programs. However, at the end of the day most consumers live near airports where only a few of airlines operate and one/two have the airport as their hub. Hence, customers are still more likely to travel frequently on those few airlines close to their primary location and sign up with their rewards programs. Tatiana Dyachenko Assistant Professor of Marketing in the McDonough School of Business at Georgetown University Who benefits more from airline rewards programs: consumers or the airlines themselves? To what extent do airline rewards programs influence consumer behavior? Why are each airline's miles worth different amounts? How does this affect consumers? These three questions are strongly connected. Loyalty programs in the airline industry became a point of parity long time ago: customers expect an airline to have a loyalty program, the absence of one might negatively impact business, but having the program does not necessarily provide a competitive advantage. There are many components that go into the design and execution of a loyalty program, and a successful loyalty program requires understanding of the target customer's needs and expectations. The special or unique design components that are built on company's knowledge of their target consumer behavior could provide competitive advantage. Evaluating the influence of the rewards program is difficult. The main challenge in evaluating the performance of any rewards program is the difficulty of proving the causality. To start with, many airline customers enroll in a rewards program because they are already flying with that airline and not necessarily because it provides the best rewards program. As a result, showing that your rewards members spend more than non-members is not a good argument for proving the rewards program is working to attract better (higher spending and more frequent) customers. In addition, each airline having a rewards program reassures the customers that they will earn some sort of miles or points no matter which airline they choose. The question of influencing consumer behavior by the rewards program becomes more interesting when fliers become strategic and more forward-looking and try to maximize their rewards to reap the most benefits from their miles or points after several flights. That is where the structure of the program elements and propositions becomes the game changer and differentiator. For example, whether the program focuses on the earning versus redemption values, or emphasizes benefits associated with earning a special status, is usually driven by the positioning strategy of the brand and thus would attract different segments of consumers. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? In the next 5-10 years, I expect the design of the rewards programs to become more tailored and fine-tuned: companies will have access to more data from multiple sources, but also will build stronger competence in processing big data and extracting useful and actionable insights from that data, in order to support the structure of the programs. While companies might try to add more complexity and customization to the programs to leverage the results of data analytics, the execution (planning, operations, analytics, etc.) costs of doing so would force the companies to keep the scale down and find a middle ground between the two extremes: basic segmentation versus highly customizable marketing approaches. Qihong Liu Associate Professor of Economics at University of Oklahoma Who benefits more from airline rewards programs: consumers or the airlines themselves? Reward programs should help major airlines who otherwise may choose not to offer these programs. On the other hand, it amounts to a hurdle for smaller airlines to directly compete with major airlines. Consumers benefit from the rewards, but there may also be negative impacts if rewards programs reduce competition and raise prices. To what extent do airline rewards programs influence consumer behavior? Often times there are time limits on accrued miles so consumers have an incentive to concentrate their travel with fewer airlines. As a result, consumers do not necessarily always fly with the airline offering the cheapest flight, especially if the cost is paid by a third-party (e.g., their employers). How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? M&A and alliances all create larger networks. A larger network is good for both the airlines and consumers. It allows airlines to better exploit economies of scale, and allow consumers to choose from a large set of routes, destinations, more flight time choices etc. It's unclear to me how M&A impact loyalty - it enhances one brand and gets rid of another. For alliance, it makes competing airlines more similar to each other, reducing product differentiation and in turn brand loyalty. But then alliance often occurs between airlines who complement rather than directly compete with each other. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? A major change that happened recently is switching from miles-based to dollar-based reward, creating winners and losers. I would expect to see more changes in the same spirit. The U.S. airline industry is quite concentrated at this moment, so any further consolidation is less likely. Without further economies of scale to exploit, airlines may try to optimize their margin from each passenger. We may also see more U.S. operations from international airlines. Why are each airline's miles worth different amounts? How does this affect consumers? One airline's mile does not have to be the same as that of another airline - they are different "products" after all, just the same as different airlines can charge different prices on the same route. Imagine, for a second, that airlines allow their reward miles to be traded among consumers. Not only would we see a mile's worth differing across airlines, but also across time for the same airline. Jill Avery Senior Lecturer of Business Administration in the Harvard Business School Who benefits more from airline rewards programs: consumers or the airlines themselves? Airline rewards programs are a promotional tactic that could, in theory, provide value to both consumers and the airlines. The airlines could benefit from these programs if they drive consumer preference and loyalty in an industry largely marked by commoditization. However, in a world where having a rewards programs is a point of parity rather than a point of difference, the benefits that accrue to an individual airline are diminished if travelers maintain a stable of rewards accounts with all of its competitors. This leads to an arms race, where each airline tries to make its rewards program more valuable than the others, conceding more value to consumers. Some segments of consumers (primarily those that are either promotionally sensitive or heavy travelers) benefit from these programs in terms of preferred seating, seat upgrades, club amenities at airports, and free tickets. However, not all consumers benefit from airline reward programs. Some airlines make it difficult for the average traveler to redeem points, for example by limiting free seat availability or having blackout dates, as a way to create friction in the system that causes only the most persistent customers from obtaining the discounts or special amenities. Others eliminate the friction points for heavy users, ensuring that the discounts and special amenities are only given to the airline’s most valuable customers. To what extent do airline rewards programs influence consumer behavior? Airline rewards programs add another dimension into the choice situation for fliers. Without reward programs, travelers are primarily making their choice of which airline to fly based on route availability, convenience, and price. An airline reward program can influence a consumer to choose a slightly less convenient or slightly more expensive flight in order to maximize award points, making tiny tradeoffs in the present for a payoff in the future. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? As with most promotional vehicles, airline rewards programs are likely to become more personalized and customized to an individual consumer’s travel patterns. Big data allows the airlines to better predict which consumers on which routes need an incentive to change their behavior, and will enable the creation and delivery of a customized incentive in real time to drive the desired behavioral change. Priya Raghubir Dean Abraham L. Gitlow Professor of Business and Chair of the Marketing Department in the Stern School of Business at New York University Who benefits more from airline rewards programs: consumers or the airlines themselves? Both do -- in different ways. The airlines use reward programs to build exit barriers for their customer; i.e., reduce brand switching and encourage brand loyalty. Improved customer retention is profitable, especially because loyal customers are less price sensitive than those who will switch brands to get the best price. Consumers benefit from rewards programs in multiple ways - to start with, they have the intrinsic benefit of "miles" that they can exchange for tickets, hotel rooms, and increasingly products (including gift cards). Thus, this is another form of currency that they accrue. Additionally, they benefit by climbing up the rewards program hierarchy. For example, United starts off with Premier status at 25,000 miles/ year; moves to Premier Executive or Gold at 50,000 miles, Platinum at 75,000 and 1K at 100,000. They also invite a small group of customers to their "Global Service" customers (I think that is what the designation is). As you go higher up in the hierarchy, you have a variety of actual and social/ status benefits, ranging from free checked in bag, to earlier boarding privilege, to use of lounges for international travel, to free upgrades when available, to upgrade certificates for local and international flights. To achieve the benefits associated with the mileage programs, consumers must give up other things that they may value, such as purchasing a flight at the lowest price, with the best routing, at the most convenient departure/ arrival time etc. To what extent do airline rewards programs influence consumer behavior? One way is increasing loyalty, and reducing price sensitivity. However, this loyalty is behavioral, rather than attitudinal, implying that it does not necessarily stem from increased customer satisfaction. Therefore, sometimes, rewards programs are referred to as holding customer "hostage" rather than building loyalty. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? Alliances are a very important concern for customers as they are able to stay within an airline family for the majority of their travel needs. For example, Star Alliance includes United (along with the routes Continental used to fly) in the US, Lufthansa, Swiss Air, TAP Portugal, and Austrian Airlines (among others) in Europe, and Air New Zealand, Singapore Airlines and Air India in Australasia. In the US, it has hubs in NY, LA, SFO, Chicago, DC, Denver, and Houston (may be others). It is very convenient for the traveler going from the Bay Area to NYC, but not as much for the traveler who travels from Sacramento to Philadelphia. If most of a consumers’ travel is short distance along the West Coast, then SouthWest would make more sense with their standard fares. To what extent, if at all, do you expect airline rewards programs to change in the next 5 to 10 years? The miles are likely to become more and more fungible (that is, one would be able to exchange them for a larger number of things). The Miles and More program that Lufthansa, Swiss Air and Austrian Air have is one example. The entire duty free catalog is priced in Euro, Swiss Francs as well as Miles. You can buy food and drinks on the flight with your miles as well. United has recently launched a number of bars and restaurants, as well as a Miles store at Newark airport. The exchange rate of these miles is less than 100 miles = $1. For example, one item on the menu at one restaurant is:

• Kale Salad $14.50 or 2080 miles, an exchange rate of 143.45 miles per $

The United miles program also prices gift cards differently, depending on their popularity. The rates have become more expensive over time, a trend I expect to continue. For example, recently, the rates for United Gift Cards of $100 were:

• Amazon, Sears, Lowes: 16500

• Zappos, Gap, REI: 15500

• Sephora: 15000

• Groupon, L L Bean, Lands End, Nike, Barnes and Noble, Bath and Body Works: 14000

• Columbia, Container Store, Wine.com, Red Door: 12500

• Callaway: 11000

• Williams Sonoma: 8000

Why are each airline's miles worth different amounts? How does this affect consumers? I do not know if customers compare across airlines as most often they are predominantly loyal to a single program. However, they are likely to compare across products (as above) and wonder why they should pay so much for an Amazon gift card. Subodh Bhat Professor of Marketing at San Francisco State University Who benefits more from airline rewards programs: consumers or the airlines themselves? The airlines benefit financially from the loyalty or patronage of their consumers (more business = more profits) and from the resultant taking of market share from competing airlines (less competition = more profits). The consumers benefit in terms of their award for their loyalty but may often need to evaluate the personal trade-offs they make (e.g., less convenience, longer routes when they choose airlines with loyalty programs they belong to as opposed to more optimal airline choices). Generally, the airlines come out ahead. To what extent do airline rewards programs influence consumer behavior? Considerably. Consumers often make airline choices based on the frequent flyer miles, even when the choices are not optimal in terms of convenience, time spent, flight arrival or departure time, etc. How do you think mergers, acquisitions and alliances of individual brands impact airline loyalty? I don't believe consumers are passionate or even have strong preferences for one airline over another unlike with other consumer brands like Apple. As such, I don't believe consumers are too concerned about loyalty to a specific brand in airline mergers, but probably just wonder how their frequent flyer programs are going to be affected. Why are each airline's miles worth different amounts? How does this affect consumers? An airline miles' worth is based on rational factors such as the type and variety of awards available, extent of awards (e.g., domestic flight at 35,000 miles v. 50,000 miles), and extent or lack of restrictions.

Back to Top

Methodology

This report compared the frequent flyer programs operated by the 10 largest airlines in the U.S., based on number of passengers, using publicly available information and company policies posted online. We did so for three different consumer profiles, designed to illustrate how programs compare across spending levels. Where policies were incomplete or ambiguous, we confirmed them with the respective airline’s customer service department. Once data collection was complete, we reached out to the public relations departments of each airline to confirm our findings. However, Spirit Airlines, Alaska Airlines and Sun Country Airlines either did not meet our deadline for input or did not provide any corrections regarding company policy and pricing.

The scoring framework used to evaluate each program, and ultimately identify the best option for different types of consumers, can be found below. Generally, full points were awarded to the best-performing program for that metric, while the zero-point level was set slightly below the worst program’s value. Most of the metrics were first graded on a 100-point scale. Point allocations for more-binary metrics that did not use this 100-point scale are explained below. Airline ticket cost data is accurate as of January 12, 2018.

Consumer Profiles: We created three consumer spending profiles (Light, Average and Frequent) to evaluate how well each airline meets the needs of travelers with varying budgets. We based the airfare budget of a “Light” flyer on travel expenditure data from the U.S. Bureau of Labor Statistics and household income data from the U.S. Census Bureau. We determined the budget of a “Frequent” flyer by applying average airfare rates to a travel schedule that comprises monthly domestic flights supplemented by an annual trip abroad. The “Average” flyer’s budget was determined by averaging the “Light” and “Frequent” flyer’s budgets. Exact values can be found below.

• Light Flyer: Spends roughly $453 on annual airline travel.
• Average Flyer: Spends roughly $4,088 on annual airline travel.
• Frequent Flyer: Spends $7,722 on annual airline travel.

 

1. Airline Coverage (total score: 17 points)

2. Partner Coverage (total score: 8 points) We chose to grade partner airlines separately in order to avoid overlapping data and the resulting double counting. However, the strength of a given airline’s partnership network is indeed relevant to the value of its rewards program, so it was important that we take this into account where possible.

3. Value Earned per $100 Spent (total score: 20 points) Three underlying components are required to calculate how much value a user would derive from one year of membership in each airline’s rewards program: i. Amount Spent, ii. Miles Earned and iii. Redemption Value. In other words, if you spend X amount, you will earn Y miles, which can be redeemed for Z dollars in airfare. Below we will explain how we calculated each component.

4. Miles Restrictions (total score: 33 points)

5. Additional Features & Policies (total score: 22 points)

from Wallet HubWallet Hub


via Finance Xpress