Passengers who are ready to fly again may prefer to redeem their airline miles rather than trying to earn new miles.
A spate of unused award miles could lead airlines to change their frequent flyer programs in a way that puts some customers at a disadvantage, warns ValuePenguin, one of LendingTree’s financial research websites.
A review of annual submissions from five U.S. airlines – Delta Air Lines, American Airlines, United Airlines, Southwest Airlines, and JetBlue – shows that rewards program liabilities rose to a total of $ 27.5 billion over the past year, a Increase of 11.6% compared to the previous year, according to WertPinguin.
In addition, a rush to redeem miles is to be expected if the ailing airline industry needs cash-paying customers at the ticket counter.
Miles earned but not redeemed
Flying was one of the industries hardest hit by the coronavirus pandemic, but the customers of the five programs analyzed still managed to earn around half (46.2%) the amount of miles they earned in 2020 in 2020 We made credit card spending in 2019, said Matt Schulz, senior credit analyst at LendingTree.
The value of the miles earned
| 2020 | 2019 | 2018 | 2019 to 2020% change | |
|---|---|---|---|---|
| SkyMiles from Delta Air Lines | $ 1.4 billion | $ 3.2 billion | $ 3.1 billion | -54.5% |
| AAdvantage from American Airlines | $ 1.8 billion | $ 3.4 billion | $ 3.1 billion | -47.3% |
| MileagePlus from United Airlines | $ 1.3 billion | $ 2.6 billion | $ 2.5 billion | -49.0% |
| Rapid Rewards from Southwest Airlines Airlines | $ 2.0 billion | $ 2.9 billion | $ 2.7 billion | -33.4% |
| JetBlues TrueBlue | $ 0.3 billion | $ 0.5 billion | $ 0.4 billion | – $ 46.2 |
| total | $ 6.8 billion | $ 12.6 billion | $ 11.8 billion | – $ 46.2 |
| Source: ValuePenguin |
Only a small fraction of those miles have been redeemed.
“Americans only redeemed about a tenth of their available miles last year,” said Schulz. “There were undoubtedly a lot of people redeeming … rewards points for statements for groceries and other necessities, but a lot of people just held onto their miles and waited longingly for the day they could travel again.”
Percentage of miles redeemed
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| SkyMiles from Delta Air Lines | 10.8% | 29.3% | 27.1% |
| AAdvantage from American Airlines | 9.6% | 26.4% | 27.7% |
| MileagePlus from United Airlines | 8.7% | 29.8% | 29.9% |
| Rapid Rewards from Southwest Airlines Airlines | 16.6% | 40.6% | 41.4% |
| JetBlues TrueBlue | 18.4% | 34.5% | 32.7% |
| total | 11.3% | 30.5% | 30.3% |
| Source: ValuePenguin |
According to ValuePenguin, JetBlue customers redeemed the most miles (18.4%) last year, around half of the miles their customers redeemed in 2019. United members have redeemed the least, at less than 9%, up from nearly 30% in 2018 and 2019.
An increase in reward liabilities
As award miles accumulate without being used, that 11.6% increase in liabilities represents a total increase of $ 2.9 billion last year, roughly three times the previous year, according to ValuePenguin.
Liabilities from the bonus program
| 2020 | 2019 | 2018 | 2019 to 2020% change | |
|---|---|---|---|---|
| SkyMiles from Delta Air Lines | $ 7.2 billion | $ 6.7 billion | $ 6.6 billion | 6.7% |
| AAdvantage from American Airlines | $ 9.2 billion | $ 8.6 billion | $ 8.5 billion | 6.7% |
| MileagePlus from United Airlines | $ 6.0 billion | $ 5.3 billion | $ 5.0 billion | 13.2% |
| Rapid Rewards from Southwest Airlines Airlines | $ 4.4 billion | $ 3.4 billion | $ 3.0 billion | 31.4% |
| JetBlues TrueBlue | $ 0.7 billion | $ 0.7 billion | $ 0.6 billion | 10.9% |
| total | $ 27.5 billion | $ 24.7 billion | $ 23.8 billion | 11.6% |
| Source: ValuePenguin | ||||
|
Note: Due to rounding, the liabilities cannot add up. |
Southwest’s Rapid Rewards liabilities rose $ 1.1 billion, the largest value of any airline we analyzed. Its customers have redeemed the most miles of all programs, but also earned the most miles.
JetBlue’s TrueBlue program – the smallest of the five – was the only airline whose loyalty commitments grew less in 2020 than in 2019.
More points, less value
Delta, United and Southwest all devalued their reward points during the pandemic, which means members will now have to pay more points for the same flights, said Sophia Mendel, travel specialist at ValuePenguin. And more changes may be pending.
“Southwest in particular is getting very hot for changing its points program without warning its members,” she said, adding that several international airlines like Qatar Airways have done the same.
CNBC asked the airlines analyzed by ValuePenguin on Wednesday if they plan to change their award programs this year. Delta said it has no plans to change its loyalty program. Southwest confirmed to CNBC that as of April 14th, it needed more Rapid Rewards points to redeem flights for all types of fares.
United and JetBlue did not respond to CNBC’s inquiries.
Mendel said she believes devaluing miles or limiting award redemption is a response to airlines having too many unused miles on their books.
With the pandemic behind us, we can already see airlines reducing the number of award seats available.
Spencer Howard
Founder, straight to the point
But Spencer Howard, founder of the loyalty points website Straight to the Points, isn’t so sure. He said the risk of devaluation is always there, regardless of economic or global health conditions.
“Airlines devalued before and during the pandemic and will do so after we get out of the pandemic,” he said. “Devaluations are inevitable.”
Howard agrees that customers now have more miles, but he said airlines can have control over when they are redeemed.
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“If an airline believes it is selling a seat for cash, it will not give up the seat,” he said. “While we are out of the pandemic, we are already seeing airlines reducing the number of award seats available.”
But not every airline works like that, warned Mendel.
“Southwest and United do not limit their award inventories, so it is fair game to book every available seat with points or miles,” she said, noting that both airlines “use dynamic pricing, which means that the cost of their award seats will rise “. when the demand increases. “
“Overwhelming trend”
While the “overwhelming trend” over the years has been towards devaluation, Schulz said, not every airline is going this way – at least not yet.
Korean Air postponed planned points devaluation from 2021 to 2023 in January, demonstrating the airline’s commitment to immediate revenue for its members, Mendel said.
British Airways’ new policy aims to make it easier to book award seats, according to the airline.
Steve Parsons – PA Pictures | PA pictures | Getty Images
Last month, British Airways announced that it would double the minimum number of award seats on every flight. For example, the number of guaranteed award seats on Euro Traveler flights – the airline’s economy short-haul flights – will be increased from four to at least eight seats. The new policy begins on July 28th, although these flights can now be booked.
American Airlines, one of the airlines surveyed by ValuePenguin, announced changes to its AAdvantage program last week to make it easier for members to get benefits, said Andrea Koos, a company spokeswoman. Members can earn 250 to 1,000 bonus “Elite Qualifying Miles” on flights flown for up to 10 flight segments through August 31st, CNBC told CNBC via email.
Notes on protecting points
Schulz said passengers shouldn’t feel rushed to use their points, but neither should they sit on a pile of unused miles for years.
His advice: “Use points sooner rather than later.”
Miles and points can be redeemed for a lot of different things, although most people redeem them for flights, Schulz said, adding, “that’s usually the way to get the most reward points.”
Howard agrees that air travelers should not hoard miles, but prefers a different method to protect themselves from changes in reward programs.
“I recommend people use credit cards that earn transferable points, such as Amex Membership Rewards,” he said. “This protects you from devaluations, as you have the option of transferring points to various airline loyalty programs.”