NYTimes.com Article: For Frequent Fliers, Awards Seem Scarce

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For Frequent Fliers,  Awards Seem Scarce

June 22, 2004
 By CHRISTOPHER ELLIOTT





When Timothy Placek tried to cash in his miles to fly his
daughter from St. Louis to Houston last year, Continental
Airlines told him no seats were available.

Disappointed, Mr. Placek, who is a Silver Elite member of
Continental's frequent-flier program, asked whether he
could use his points to travel to Omaha, to visit his
parents in January, four months later. No award seats were
available on any of those flights, either.

Well, then, how about applying the miles to a family
vacation he was planning to the Philippines, an
increasingly frustrated Mr. Placek asked. Unfortunately,
the airline replied, that would not be possible; all
standard mileage-award seats on those flights were also
taken.

As his annoyance increased, a phone representative told him
all was not lost. He could use his miles for any of those
excursions if he were willing to spend twice as many as the
standard 25,000 miles for a round trip within the United
States, or 50,000 miles for overseas destinations.
Continental's EasyPass program, she said, would make it
possible.

"I was disappointed," said Mr. Placek, a vice president for
MicroMed Technologies, Inc., a manufacturer of medical
devices in Houston. "I felt as if they were trying to steal
my miles." He reluctantly booked the flight for his
daughter, but not for the other two trips that he had
wanted.

His distress is shared by many business travelers. A survey
by e-Rewards Inc., a consulting firm in Dallas that
specializes in loyalty programs, suggests that many
airlines are quietly cutting the number of seats available
at the 25,000-mile redemption level while promoting their
costlier premium-redemption plans.

In the poll of loyalty-program members, 26 percent
described their recent experiences in booking award travel
as "much more difficult" or "virtually impossible," an
increase of five percentage points from an identical survey
last year. About two out of every five travelers reported
that they had made premium redemptions in the last 12
months, and half of those who did said they had felt they
had no other choice.

Continental says it has not reduced the number of
conventional award seats available to its frequent fliers.
Julie King, an airline spokeswoman, says redemption rates
are up 15 percent this year, with standard rewards
accounting for 75 percent of the total. Ms. King said the
higher redemption levels were meant to "give our customers
more flexibility when seats are in high demand."

But the double-or-nothing proposition has left many
frequent travelers - and some loyalty program experts -
with a different impression.

"This amounts to a covert increase in award levels,'' said
Tim Winship, who publishes FrequentFlier.com, a Web site.

Mr. Winship said the changes made sense from the airlines'
point of view. After all, most major carriers are losing
money and have a reservoir of unredeemed miles that some
industry analysts say could top 10 trillion this year. But,
he said, they ought to be forthright about what they are
doing.

"There's no disclosure about what's going on behind the
scenes, no transparency to the system," he said. "Consumers
don't know what their odds are of getting an award seat.
It's an outrage.'' Even when travelers try to work within
the system, they are often foiled.

"I have had nearly zero luck in getting the award travel I
wanted at the lower mileage amount," said Dana Baldwin, a
management consultant in Ada, Mich. "I've tried making
reservations more than nine months in advance, tried
flexible dates, different airports, leaving from different
cities and arriving at different destinations, all with
little luck.''

Mr. Baldwin believes that airline-capacity controls are
limiting the number of 25,000-mile awards on every flight
to a few seats. That way, he speculates, airlines can say
they have them available.

That is not so, according to at least one airline.
"Customers on frequent-flier award tickets are occupying
more seats now than they were five years ago," said Mary
Stanik, a spokeswoman for Northwest Airlines. Indeed, the
portion of the carrier's revenue passenger miles - an
industry term for the total number of miles flown by paying
passengers - on award tickets rose to 7.5 percent last year
from 6.1 percent in 1999.

Maybe both are right. Bruce Mainzer, a former director for
the yield-management department at United Airlines - the
office in charge of matching prices with demand - says
basic economics are at work. It is not that carriers are
somehow trying to cheat frequent fliers out of the miles
they have earned, he says, it is just that they quite
naturally choose to give priority to paying customers.

"Award seats are made available after all the other
revenue-producing demand is met - in other words, only
excess capacity is allocated to award travel demand,'' Mr.
Mainzer said. "But now there's less capacity, because
airlines are more closely matching seat demand to
capacity.''

Competition from low-cost carriers is driving the trend, he
says. These upstarts mostly serve popular tourist
destinations like Las Vegas and Orlando, Fla., and to stay
in the game, the big airlines have to squeeze as many
pennies as they possibly can from each seat.

"They've pulled back even more seat capacity in the markets
where award travel demand is the strongest,'' Mr. Mainzer
said, "which is why travelers often find that an award seat
is completely unavailable."

If that is the case, then why would seats always seem to be
available for people willing to spend double the miles on
them? For the simple reason that airlines classify them as
revenue producing and thus allocate more of them per flight
than they do ordinary award seats, which they consider
freebies.

They also assume that any premium tickets they allot for
high-demand routes will be snapped up, Mr. Mainzer says.
But he wonders if they are forgetting about the deep-rooted
human dread of being fleeced.

"I think a majority of travelers think to themselves, 'I'm
a loser if I have to redeem that many miles for a ticket,'
'' he said.

At the very least, they are irritated by the prospect of
shelling out more points. Richard Puk, the president of
Intelligraphics Inc., a computer-graphics consulting firm
in Carlsbad, Calif., did not have that many miles. Last
month, he says, he tried unsuccessfully to redeem his Delta
award miles for two tickets from San Diego to Rapid City,
S.D. "I started trying to book the trip in March,'' Mr. Puk
said, "and was never able to find any available award
seats."

Delta told him he could have the tickets if he anted up
80,000 miles, but he had accumulated only 50,000, he says.
Instead, he purchased the tickets for $300 apiece.

He is still angry. "I was very frustrated," he said. "In
the past, I've never had any trouble getting a seat for my
miles. It's almost as if Delta had restricted the number of
award seats to the point where no one could get any.''

The e-Rewards study found that Mr. Puk is in good company.
Almost 44 percent of frequent travelers reported difficulty
in booking an award seat more than once last year. It also
concluded that some business travelers are skeptical about
the future of loyalty programs (see chart). But the biggest
surprise to Bill Russo, the executive vice president at
e-Rewards, was that business travelers remained fiercely
loyal to their programs despite their misgivings. "People
are saying it's virtually impossible to book seats,'' Mr.
Russo said. "People are afraid their programs won't have
any value. Yet more than half of the respondents told us
they're satisfied enough with their primary program that
they would recommend it.''

What is going on? "These are businesspeople, and they
understand the business reasons behind what the airlines
are doing,'' Mr. Russo said. "Of course, when times get
better, it's reasonable to think that they'd expect the
airlines to make reward redemption easier than it is now.''


Readers are invited to send stories about business travel
experiences to businesstravel@xxxxxxxxxxxx

http://www.nytimes.com/2004/06/22/business/22redeem.html?ex=1088914072&ei=1&en=bab9ce313c807933


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