Sunday, October 26, 2008

Delta and Virgin Make Major Changes to Frequent Flyer Program


Delta and Virgin America recently instituted potential game-changers for frequent-flier programs. Delta’s new three-tier mileage award program is now officially online, and Virgin America’s new award schedule looks like one that the big airlines would do if they could start over. Virgin America also announced some changes in its fare structure that show its pricing policy is “It’s the business traveler, stupid.”

Delta is now up and running with the three-tier program I described as in the works several months ago. It replaces Delta’s previous two-tier program – a pattern that Delta’s big competitors still follow:

• The base award level gives access to a highly limited inventory of seats – the seats that range from difficult to impossible to obtain. Delta calls it the “low” level; in my earlier report, I called it “fat chance.” For the most part, “low” mileage requirements are the same as before; the difference, if any, will be still fewer seats available. Sample round-trip requirements in coach/economy are 25,000 miles for the United States, except Hawaii, and 60,000 miles to Europe (up 10,000 miles). Sample premium-class awards are 45,000 miles in the U.S. and 100,000 miles to Europe (also up 10,000 miles).

• A new intermediate “medium” level provides access to a larger but still limited inventory of seats. Sample requirements are 40,000 miles for the U.S. and 90,000 miles for Europe in economy, 80,000 miles for the U.S. and 200,000 miles for Europe in premium. Those mileages are only slightly below the previous any-seat requirements.

• Delta reinstates availability to the last open seat; Delta calls it the “high” level. Samples in coach/economy are 60,000 miles for the U.S. and 125,000 miles to Europe; in premium, they’re 100,000 miles for the U.S. and a punitive 350,000 miles for Europe. Delta obviously doesn’t want its frequent fliers scoring many trans-Atlantic seats up front.

It’s not clear how Delta’s new system will interact with partner airlines or whether any other lines will follow. Delta says its new award chart also applies to awards on SkyMiles partners, but presumed merger partner Northwest hasn’t altered its award schedule yet. My guess is that if the merger succeeds, the merged company will adopt Delta’s formula. Also, other lines are likely to take a close look.

Whether a three-tier system will be “good” for frequent fliers depends entirely on how many seats the lines allocate to the “low” level. I suspect most travelers will find the only way to score a seat is to go up to the “medium” level.

Virgin America’s program is unique among American carriers:

• You earn points based on how much you pay for your ticket rather than how many miles you fly.

• You use points to “pay” for award trips based on point prices that vary with demand, just as fares do.

• You can use points for any available seat – instead of limited seat allocations, inventory is managed by the “price” you have to pay.

Overall, Virgin’s system is generous to travelers who buy expensive tickets, stingy with those who buy cheap tickets. I suspect that’s exactly what Virgin wants – a bias in favor of business travelers – and what the other airlines would do, as well, if they could start over again from scratch.

Virgin’s revised fare policy for its new premium economy level, “Main Cabin Select,” shows the same bias. It provides for coach seating in bulkhead and exit rows, with extra legroom, plus refundability, “free” meals and beverages, preferential screening and boarding, dedicated overhead bin space and a few other amenities.

Who will buy into Main Cabin Select? The pricing tells the story: For a flight from New York to San Francisco, Main Cabin Select is $464. That’s more than three times the regular coach fare starting at $134. Obviously, Virgin wants to limit the extra room to the expense account set: Leisure travelers looking for an escape from cattle-car crowding can find extra legroom for far less extra fare with either United’s “Economy Plus” or JetBlue.

Stumble Upon Toolbar

0 comments:

Google