Balancing the Frequent Flier Equation

The Texas Star Telegram reports that the airline industry shakeup has changed the way customers perceive and value frequent flier programs.

The sale of miles to credit card partners is a key source of revenue for the flailing airlines. But the increased access to miles has created a demand for more free tickets than ever before. Since the initial intent of frequent flier plans was to create customer loyalty while filling seats that would have otherwise remained empty - the increased demand cannot be met without cutting into sorely needed profits from full-fare passengers. To curb the demand, airlines have imposed restrictions on when and how passengers can use their miles, causing frustration and breaking down the very customer loyalty the programs were originally designed to encourage.

The airlines have made their miles worthless by flooding the market. It’s the same thing that happens when governments print too much of their own currency: rampant inflation. Frequent flier miles just aren’t worth what they used to be.

Historically, it takes either a revolution or a huge currency buyback to get a country out of such an inflationary pickle. The same could be true for the airlines. My prediction is that the first airline to allow travelers to use additional miles to get around blackout dates, while simultaneously cutting down on the number of miles available for purchase will be the first to see a turnaround from the brink of Chapter 11.