Frequent Flyer Programs deliver lower reward value in the era of basic economy fares and co-branded cards

03.04.2024 - 12:11 / traveldailynews.com / Theodore Koumelis / Airlines

The 2024 Reward Seat Availability Survey reviews Alaska, American, Delta, JetBlue, Southwest, and United flight rewards.

SHOREWOOD, WISCONSIN, USA –  The IdeaWorksCompany Reward Seat Availability Survey answers the question, “How costly is points redemption for the most popular basic reward type offered by top US airlines?” This year’s survey assesses six US airlines and repeats the same methods used 5 years ago in 2019.

Key overall findings include:

Basic economy fares have a significant influence on the results of this survey. Network airlines, such as American and Delta, position these as their lowest fare and as a tool to compete with low cost carriers. Basic economy has been embraced as an important source of revenue and new customers, and yet airlines actively discourage sales with policies designed to deter consumers from buying these fares. For example, basic economy is non-refundable and often does not accrue miles/points in the same manner as other fares. Nevertheless, this survey focuses on the lowest prices available because that’s what most consumers seek.

For the average reward price metric, it’s important to remember lowest price is best. Southwest leads US airlines with the lowest overall average reward price. Simply said, consumers can enjoy the perks of reward travel more rapidly on Southwest. The airline does have an inherent advantage because it focuses on short- and medium-haul routes and frequent flights. Reward prices tend to be lower for shorter flights and demand is more readily met with more flights. The airline has a long tradition for the lowest reward price results in the 15-year history of this survey.

Mileage/point prices have climbed 28% overall since the last survey five years ago. The US Consumer Price Index has increased 21% during this period, and this can explain some of the increases posted by frequent flyer programs. The primary reason is the larger flow of miles/points from co-branded credit card accrual, which created more demand and prompted airlines to increase reward prices.

Frequent flyer programs traditionally perform their best revenue magic for their airline masters when members are encouraged to buy more tickets and fly more often. This logic seems lost in an era where the loyalty factor has been disrupted by the rush to generate billions from co-branded card portfolios. Reward payback is a metric that reflects the reward value returned per dollar spent on base fares. The below graph displays reward payback results for 2019 and 2024.Southwest has the top result of 6.7% for 2024 which represents reward value of $6.70 for every $100 spent on base fares. Reward payback decreased since 2019 and the reason at most carriers is the arrival of basic economy