To be clear, I am not at all happy about the addition of the revenue component United has introduced to their elite qualification tiers.  It is heavily weighted in favor of those who have someone else buying their tickets (businesses) where money doesn’t matter in the same way as if it were coming out of your own piggy bank.  I get that the airline is a business, and businesses need to make money, but I wish that either 1K had the credit card spending waiver as it does with Delta, or the revenue requirements were at least 25% – 30% lower in order to catch those who fly on somewhat discounted leisure fares.  But, they’re not.  This is the new reality beginning next year, so we might as well look for the upsides, as well as create a strategy on how we will incorporate these changes to future travel plans.

  • The first upside is this doesn’t have any impact if you fly primarily on miles for award tickets.  In fact, it may encourage some to go back to that strategy, which isn’t necessarily a bad thing.
  • If you do qualify for elite status, there may be fewer folks you are competing with for upgrades, especially at the upper tiers.  This may make elite status more meaningful for those who continue to have it.
  • I actually really don’t like mileage runs at all.  I like good fares, and I like short trips to take advantage of those fares, but the idea of true mileage runs where one flies around the country or world without leaving the airport really isn’t my cup of tea.  Perhaps this new model will still encourage people to take advantage of these very good fares that sometimes exist, but the motivation won’t solely be for elite status.  Perhaps people will only jump at them if/when they actually want to at least briefly experience the destination.
  • There is a credit card spending waiver for the first three elite status tiers, and Platinum status really isn’t bad at all.  You can still just put $25K in annual spending on your United credit cards and not worry about the revenue component for all status levels except 1K.  I will probably qualify for 1K this year for 2014, but I already wasn’t sure if I could realistically qualify again next year since so many of my trips are already booked on award tickets.  I’m sure the obsessive side of me would want to try, but the truth is that the Platinum level I have had for over six months is actually really good.  All it is really missing are the system wide upgrades, but life keeps moving even without those.  If Platinum is all I keep going forward, that isn’t such a big deal.  Sure $25,000 on United credit cards is a ton, but it is doable for some of us and that makes the revenue component irrelevant at least for a while longer.
  • Many of us probably already spend much more on United tickets than we realize.  I know some people track every single dollar spent on United and can tell you exactly what their cost was to fly 100,000 miles, but I’m certainly not one of those people.  Since I so rarely do real mileage runs, the majority of my tickets are purchased because I need (or want) to be somewhere.  That means my cent per mile cost is nowhere near the 3 – 5 cents that people may average on mileage runs.  I don’t know if I am averaging at the 10 cents per mile needed via the new revenue model, but I suspect my spending patterns are not terribly far off.  My $500 ticket to a wedding that earned 1,600 miles (31 cents per mile) or my tickets to the family in Kansas that cost $250 but earn 1,050 miles (24 cent per mile) tell me that even if I have some lower cents per mile flights mixed in (like my 4.5 cents per mile tickets to Hawaii), many of my flights are way over the 10 cents per mile average needed.  I couldn’t say for sure how my spending looks as a whole without some quality time with a calculator and credit card receipts.  However, I imagine that most of us who aren’t too heavily slanted toward mileage runs are also not that far off.

The world of miles, points, and travel is always changing.  Sadly some of those changes are ones most of us don’t like, but as long as we get to keep seeing the world, it isn’t earth shattering if we are doing it as a United 1K, a United Platinum, or (gasp) without status – or at least that is what I am telling myself.

What upsides do you see?

 

Posted by Mommy Points | 32 Comments

32 Responses to “The Upside of United’s New Revenue Model”

  1. United needs to step up their game and give Premier Platinum status a 100% mileage bonus instead of the current 75%.

  2. Trajan81 says:

    Gotta give you some credit for being able to find some silver linings in a very dark cloud. The fewer upper tier fliers is the only benefit I can think of.

    One thing that really has me worried though is the thought of more people using miles instead of buying thus crushing reward space.

  3. Michelle S says:

    @Jamison- I think they should give the 100% bonus back to the Golds and MMs!

    @MommyPoints 1ks also get a $60 statement credit with Chase cobranded CCs. It is a lesser known benefit grandfathered in from pmUA.

  4. Santastico says:

    Assuming you fly mainly international routes, would it make sense to skip UA or Delta programs and add miles flown on Delta or United to an elite program on another airline? For example, by flying 70K miles I get the highest elite level on Air France and can use the same benefits on Delta (same Sky Team level) where I would need 125K to become Diamond. Platinum on AF gives me 100% elite bonus. It may not get me domestic upgrades on Delta but since I fly mainly internationally that would not matter much. What are your thoughts?

  5. Robert Hanson says:

    Goose, Golden Egg….

    So United has decided to punish those who buy their less expensive tickets. Especially those darned “mileage runners”. What they are forgetting is that since they are flying the plane anyway, with the fixed costs that entails, those marginal fares are essentially pure profit. When people stop taking mileage runs for status, UA will have the choice of flying with those seats empty, or cutting back on their number of flights. Either of which means cutting back on their market share. Now that’s a winning marketing strategy {not}.

    I don’t see corporate travelers flying UA more, just because the lower percentage of Elite flyers makes them feel more Elite. Those people are going to fly anyway, and in many cases corporate even makes the choice of which airline they fly.

    What will happen is that leisure travelers are going to have much less incentive to favor their main membership program, and so will focus even more on fare and scheduling instead. Forcing UA to compete even more heavily for the marginal fare traffic with lower fares. What a gift to Southwest !

  6. Paul says:

    Great post. Always good to see the other side. Helps us with our 1st world frustrations. An upside for me will be to not get frustrated over getting to 1K and just enjoy club access through my United Club Card and like you said, maybe go more for getting the award miles from credit cards.

  7. patricia says:

    @Santastico : most international elite programs don’t give Y+, and have high YQ for award redemptions

  8. Bobo says:

    Only upside is that the bloggers can continue to get credit card referral fees, there is no upside, I hate the spin that you are attempting, so disingenuous

  9. Danny says:

    Agree with the previous commenter. Personally, I do a mixture of work and leisure flying with AA out of MIA. If they were to switch to a revenue based model, I would make the extra drive to FLL and fly Southwest. There’s just no point in paying a few dollars more when there is no reasonable reward.

  10. Jake from MSP says:

    Well put and impressive look at the silver lining. I think that the spread of this kind of policy will actually level the playing field for a great deal of the country. And by this I mean that it diminishes the inherent advantages enjoyed by non hubcaptive flyers. As an MSP hub captive to Delta, good/great fares are around 10 cpm (no matter what airline) so it has made obtaining and continuing my PM status a costly endeavor at times and has had me enviously looking at MKE/ORD based fliers who seem to be able to Mileage Run regularly under 5cpm and obtain top tier status for comparatively low cost.

    I welcome the move, but that’s purely out of self interest

  11. As a Delta elite who just matched to United, I’m okay with this. But if they want me to pay, they have to play. United needs to keep their elite benefits strong (no selling upgrades to other passengers) as does Delta (end the high fare requirement for SWUs).

  12. Amit says:

    How do you consider most of what you listed as upside? No change to those who primarily fly on miles? That’s upside? Looks more like status quo. And the fact you don’t like mileage runs is an upside of this change? This article/post was pretty useless.

  13. mommypoints says:

    Glad some like looking at the silver lining as I do. I do consider those all upsides. That said, I don’t like the change either, but me not liking it won’t make it go away. Might as well look at the silver or at least semi-silver livings sides of the cloud. Not disingenuous, just a different way of looking at it. At least that is my approach, maybe it is too early for some, or maybe the cloud is just too dark for some situations.

  14. Trevor says:

    I respectfully disagree re: fewer folks you are competing with for upgrades — given UA’s adeptness at selling them (I would argue its still an upgrade, whether sold, received from using an instrument, or complimentary). If fewer folks think they have a shot at a UDU, they may be even more inclined to buy it when offered.

  15. Nick says:

    If the airline stays profitable, invests in new airplanes (did I hear there is an order for 787-10?), adds routes and my experiences improve, I won’t complain. Running the airline as a business means catering to “business” travelers, I expect we will see the business/first class experience improve. Don’t hoard your miles though, I suspect we will be seeing some devaluations soon enough.

  16. Trevor says:

    @Nick — How does running an airline as a business mean catering to “business” travelers? running a business means catering to your customers. There are plenty of probably just as many “business” travelers that are not as profitable to UA as there are “non-business” travelers. Likewise, there are non-business travelers that are buying close-in tickets, which are generally higher value.

  17. A says:

    I’m extremely glad to this requirement. To be quite honest, it weeds out the people who do this for fun (mileage runners, low rev flyers, etc). Don’t get me wrong, I fly mainly on discounted fares, but I spend a lot more than $10k per year (living in Japan and commuting to the easy coast). It’s good to see that they are preserving the 1k level as a true top tier and not expanding global services. I’m sick of being #10 on a waitlisted as a 1k on a high fare class ticket, crazy.

  18. Joey says:

    Just thinking about it, another upside perhaps is some people will be making more mileage runs just to reach the $10k spend on United.

  19. Jeremy says:

    I can’t ever envision having elite status with an airline given the fact that I don’t travel for business so this doesn’t really affect me as long as it stops there.

    Summer, how do you have 1K status without MRs? How often are you flying on paid fares vs miles? Since I’m fairly sure you don’t have a fulltime day job involving business travel it has me wondering as it makes it seem as if it is possible…

  20. Nick says:

    @Trevor, My opinion is that the average American (or even the fairly well off American) doesn’t have the luxury of spending significantly more to fly on one airline vs another. The majority of those buying expensive fares are business travelers.

  21. New strategies needed to get what we need.

  22. jason says:

    I agree with you, need to add, United is selling E+ seats access, cutting on travel perks and trying to weed out the mileage runners. American is not far behind with changes to aircraft config, cutting soft landings and will announce its own qualification requirements soon.

    If your business pays for all your travel, then you should be rewarded, if possible, with a better seat.

    Those seats dont belong to cheap mileage runners who fly on Saturdays or using ultra low airfares, or just paying out of their own pocket to obtain status. They are chasing some fool’s gold.

  23. G says:

    @mommypoints: What is the $25k on credit card you are referring to?

  24. mommypoints says:

    G, all the details are in the linked post at the beginning of this post, but essentially if you spend $25K on the co-branded card like the MileagePlus Explorer or Club Card then there is no revenue requirement for the first three tiers. There still would be for 1K.

  25. G says:

    So there’s not some new $25k in yearly spending status (exclusive of flying) that I was unaware of?

  26. Gene says:

    I’ll look to fly on some paid business/first class tickets to boost my revenue.

  27. Ethan says:

    Only counting United tickets is a huge blow. I flew over 10k miles on United metal, but on a TAM ticket that had a good fare. Really hurts in that department. Likewise, leisure travelers who fly a few trips to Europe on the cheapest fares may be out of luck.

    That said, business travel helps bump up spend. A mileage run could still be useful if you’ve met your spend threshold, for someone like me that tends to do high-value short haul flights. I like your positive outlook, but am still definitely on the side that dislikes this change.

  28. AAExPlat says:

    @mommypoints. That last point you make is almost certainly incorrect. I would be the farm that almost ALL the UA elites overestimate how much they spend on ticket purchases. I was a pmCO Platinum for a long time, and when they were tracking spend for Presidential Platinum status, it was unreal to see how large a percentage of total airfare goes to taxes and fees now. And to top it off, the spend tracker was often off to the low side. If you think you are spending $10k, you are probably really only spending 75-80% of that….

    Mark my words. This will have much wider implications than it seems like right now.

    • mommypoints says:

      AAExPlat, I think it depends on your travel patterns. As a primarily domestic traveler taxes are a pretty small fraction of my ticket price, however if you traveled internationally that would likely be a bit different. It will be interesting to see the actual spending tracker (assuming there will be one).

  29. Jamie says:

    I am almost certain this won’t affect me (well, ok, I’m not united elite, so of course it doesn’t right now) and it doesn’t sound like it will affect you, MP or a lot of people. The flight we take most is chi-Florida (mco, jax, etc). Those flights are all around <2000 miles, and I don't remember ever flying for less than $200. Yes, taxes aren't included, but fees are. Anything carrier imposed.
    But it's always bad when they add more hoops for us to jump through. One more thing to keep track of. So, it's even more of a "game". Expect double PQD promos (ht:vftw) and more complicated ways of getting around this ( bonuses for higher levels of credit card spending?)
    The sky is not falling, but with United's upped change fees for award tickets, things are getting more complicated and less rewarding. Maybe this will keep people out of the game. Good for availability, but sad, because travel is such a good thing and I don't like anything that's going to make people do less of it.

  30. ShaneInTulsa says:

    We can safely say the first upside is now gone. United didn’t take long making changes they like to that.

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