The New Rules of Travel Rewards Programs

27.07.2023 - 18:52 / smartertravel.com / Credit Card

For most of the 35 years since American Airlines’ AAdvantage program made its debut in 1981, U.S. travel-rewards programs have measured loyalty in miles. Fly 1,000 miles, earn 1,000 miles. Earn 25,000 miles and redeem them for a free domestic coach ticket.

Miles were never really the point, of course. They were just a convenient proxy for the price consumers paid for their tickets. But by the time airlines had robust computer systems in place capable of tracking customer spending, mileage-based schemes were the industry standard, and for the most part they remained so for decades.

While several airlines toyed with the concept of revenue-based earning over the years, the movement only got real traction less than a decade ago.

When Virgin America launched its Elevate loyalty program in July 2007, it was the first U.S. airline scheme to be thoroughly revenue-based. Program members earned five points for every $1 spent on airfare; and when redeemed for tickets at market prices, points had a set value of around $0.02 apiece. JetBlue converted its TrueBlue program to a revenue-based scheme in late 2009. And, completing the loyalty trifecta, Southwest redesigned its simple flight-based program, Rapid Rewards, to reward members according to their spend in 2010.

RELATED: 10 Best Ways to Use Your Miles and Points

Among the full-service carriers, it wasn’t until 2015 that Delta made the switch to spend-based earning. United quickly followed suit, leaving only American among the Big Three legacy carriers to carry on with a mileage scheme predicated on flight distance rather than revenue.

With the conversion of American’s AAdvantage program to a spend-based scheme in the second half of 2016, the travel-rewards landscape will be fundamentally transformed. Every one of the largest U.S. carriers except for Alaska Airlines will then reward customers’ loyalty in direct proportion to the dollar amount of their spend on airfare.

It’s a change for all members of the affected programs. And for the great majority of program members, who travel infrequently, it’s a change for the worse.

What made mileage-based programs so popular, and among the most successful marketing tools ever devised, was the possibility of squeezing outsized value from them. A 25,000-mile coach-class award could be booked for a ticket normally costing $150, or for a ticket worth $1,500. With the cheaper ticket, a consumer would be getting 0.6 cents in value for every redeemed mile; for the more expensive ticket, the return-on-investment would be a full 6 cents per mile. Savvy travelers knew to save their miles for the pricier flights.

With the transition to spend-based schemes, the value of