Where You Can Take Advantage of Delta's and United's New Status Rewards Programs

Summary

• On average, United flyers will benefit on 60% of routes under the new program which launches in March 2015
• After Delta’s SkyMiles policy changes are made in January 2015, 56% of routes will earn more miles
• Both policies favor short routes that have a higher dollar per mile cost, but both are ultimately worse for consumers on the airlines’ top markets
• The popular EWR (Newark) - PVD (Providence, RI) route on United has the largest increase at the Member level,  earning 2,000 miles under the new system and only 320 under the old

Existing Miles programs

In the past four months, two major US airlines, United and Delta, have announced a shift from miles-based rewards programs to fare-based rewards programs. They will be the first traditional airlines to do so, joining low-cost carriers JetBlue, Southwest and Virgin America as the only US-based airlines with a fare-based rewards system. The shift in programs will help the average consumer, as United currently has the 4th highest dollar per mile ($0.19, Table 1), while Delta has the second highest ($0.21) making it more expensive, on average, for fliers to earn rewards. Spirit and Frontier have the lowest dollar per mile, at 8.1 cents and 8.8 cents, respectively. This means that, overall, a Spirit customer can fly over 1,200 miles for just $100, while United and Delta customers would only be able to fly 526 miles and 476 miles, respectively. The announcement of United’s new program came just three months after Delta announced they would be switching to a fare-based rewards program in January 2015.  

Airline

Dollar per Mile

Rewards System

Spirit Airlines

$0.08

Miles

Frontier Airlines

$0.09

Miles

Hawaiian Airlines

$0.09

Miles

Virgin America

$0.09

Points

JetBlue Airways

$0.10

Points

Alaska Airlines

$0.14

Miles

United Airlines

$0.19

Miles

American Airlines

$0.20

Miles

Delta Air Lines

$0.21

Miles

US Airways

$0.21

Miles

Table 1: Average dollar per mile for largest US airlines (Note: As of today, only Virgin American and JetBlue have fare-based rewards programs)

United Shifts to Fare-based Rewards

On June 10th, United Airlines announced that they would be switching from a miles-based reward system to a fare-based reward system effective March 1st, 2015.  Under the current program, flyers earn miles for each flight taken based on the number of miles flown, their status with United’s MileagePlus program and their seat class. For economy seats, the return ranges from 100% (Table 2, “Member” level), to 200% (“One K” level). For example, if a Member-level flyer flew from JFK-LAX on United (a 4,950-mile round-trip route), they would earn 4,950 miles, while a “One K” level flyer would earn 9,900 miles for the same trip. As of March 1st, 2015, this will change to a multiplier on the pre-taxes ticket price, ranging from 5 miles granted for every dollar spent on a ticket (“Member”) to 11 miles granted for every dollar spent on a ticket (“One K”).  

Status

Miles Earned oer Miles Flown (Old)

Miles Earned per Dollar Spent (New)

Member

1

5

Silver

1.25

7

Gold

1.5

8

Platinum

1.75

9

One K

2

11

Table 2: United’s MileagePlus program,where new policy will take effect March 1st

Comparing the accumulated miles benefits of the two United programs, Hopper found that the new system will benefit flyers on 60% of routes; ranging from 57% of routes for Member level to 63% of routes for Silver level. However, overall, on the routes where consumers benefit from the new miles program, the miled collected will only increase by 2%.  More importantly, the most popular United routes will see a negative impact, where miles collected will decrease by 11% (Table 3).

For routes where the new system is better, it outperformed the old system by an average 80%, while the routes prefered under the old system only realized a 56% lift. Overall, Silver level flyers will see the biggest benefit, as 63% of their routes are preferential under the new policy and those routes will earn them 84% more miles than the miles-based system.

Status

Markets Better Under New Program

New Miles Earned / Old Miles Earned (Mkts. Improved under new program)

Old Miles Earned / New Miles Earned (Mkts. Improved under old program)

Avg. Change in Earned Miles (Member, All Markets)

Avg. Change in Earned Miles (Member, Pop. Markets)

Member

57%

75%

62%

-4%

-16%

Silver

63%

84%

51%

7%

-6%

Gold

60%

80%

56%

2%

-11%

Platinum

59%

77%

60%

-1%

-14%

One K

62%

82%

53%

5%

-8%

Table 3: Percentage of routes with a better return under the new system, incremental improvement for return for better system

  The new system favors low-mile, high-cost flights: 9 of the top 10 routes with the largest increase in returns are under 85 miles. Of popular flights, EWR (Newark) - PVD (Providence, RI) has the largest increases at the Member level,  earning 2,000 miles under the new system and only 320 under the old. PSP (Palm Springs) - LAS (Las Vegas) and  DEN (Denver) - GJT (Grand Junction) also see increases of over 300%.  

Origin

Destination

Distance (mi.)

Price

Miles Earned (New System)

Miles Earned (Old System)

Change

EWR

PVD

320

$400

2,000

320

525%

PVD

EWR

320

$400

2,000

320

525%

PSP

LAS

347

$354

1,770

347

410%

DEN

GJT

423

$427

2,135

423

404%

GJT

DEN

423

$427

2,135

423

404%

Table 4: Popular markets with the highest increase in earned miles for Members

  Conversely, United flyers will learn fewer miles on popular routes such as IAH (D.C.) - BOS (Boston), SFO (San Francisco) - FLL (Fort Lauderdale), and LAX (Los Angeles) - BOS (Boston), earning less than a third of what they would have previously.  

Origin

Destination

Distance (mi.)

Price

Miles Earned (New System)

Miles Earned (Old System)

Change

IAH

BOS

3,191

$197

983

3,191

-69%

BOS

IAH

3,191

$197

983

3,191

-69%

SFO

FLL

5,158

$346

1,730

5,158

-66%

FLL

SFO

5,158

$346

1,730

5,158

-66%

LAX

BOS

5,211

$354

1,769

5,211

-66%

Table 5: Popular markets with the biggest decrease in earned miles for Members

Delta Updates SkyMiles Rewards

The United changes come three months after Delta announced in late February that they would be switching to a miles-based rewards program. Similar to United, the new structure ranges from 5 miles granted for every dollar spent on a ticket (Member level) to 11 miles granted for every dollar spent on a ticket (Diamond level).  This is in comparison to the current program which rewards anywhere from 1 to 2.5 miles for every mile flown.  

Status

>Miles Earned/Miles Flown (Old: 500 min. return)

Miles Earned / Dollar (New) (mi.)

Member

1

5

Silver

1.25

7

Gold

2

8

Platinum

2

9

Diamond

2.25

11

Table 5: Delta’s SkyMiles program, who’s new policy will take effect January 1st

The new Delta program will be beneficial on 56% of routes, with only 43% of routes seeing a benefit for Gold-level passengers and 62% routes being beneficial for Silver-level fliers. On routes where passengers will see an improved return on miles granted. fliers will earn an extra 75% in miles while the preferred routes under the old system earned an extra 64%. However, overall consumers are losing, as the new system has an average increase of miles granted of only 1%, and top markets actually see a decrease of 22% in miles granted (Table 6). Once again, the rewards program is heavily targeting high cost per mile flights.  

Status

Markets Better Under New Program

New Miles Earned / Old Miles Earned (Mkts. Improved under new program)

Old Miles Earned / New Miles Earned (Mkts. Improved under old program)

Avg. Change in Earned Miles (Member, All Markets)

Avg. Change in Earned Miles (Member, Pop. Markets)

Member

58%

76%

59%

2%

-18%

Silver

64%

86%

49%

14%

-8%

Gold

47%

65%

81%

-18%

-35%

Platinum

53%

73%

70%

-8%

-26%

Diamond

58%

78%

62%

0%

-20%

Table 6: Percentage of routes with a better return under the new system, incremental improvement for return for better system

Data and Methodology

The flight data presented in this analysis comes from Hopper’s combined feed of Global Distribution Service (GDS) data sources which includes about 10 million queries and 1 billion trips per day.  Demand is represented as the number of queries not actual ticket purchases, and is calibrated across all GDS sources for each market.  Good deal prices are represented by the 10th percentile prices.  For example if the 10th percentile price is $800 dollars it means that only 10% of trips are priced at or below this price.