People who are ready to fly again may want to prioritise redeeming their airline miles over earning new ones.
According to ValuePenguin, one of LendingTree’s financial research websites, a glut of unused reward miles may force airlines to change their frequent flyer programmes in ways that may disadvantage some customers.
According to ValuePenguin, a review of annual filings from five U.S. airlines — Delta Air Lines, American Airlines, United Airlines, Southwest Airlines, and JetBlue — reveals that reward programme liabilities increased by 11.6 percent last year to a total of $27.5 billion.
Furthermore, a rush to redeem miles is expected at a time when the airline industry desperately needs cash-paying customers at the ticket counter.
Only a small portion of those miles were redeemed.
“Last year, Americans redeemed only about a tenth of their available miles,” Schulz said. “There were certainly many people who… cashed in rewards points for statement credits for groceries and other necessities, but many people simply held on to their miles, eagerly awaiting the day when they could travel again.”
According to ValuePenguin, JetBlue customers redeemed the most miles (18.4 percent) last year, accounting for roughly half of the miles redeemed in 2019. United’s members redeemed the fewest, at less than 9%, down from nearly 30% in both 2018 and 2019.
With reward miles accumulating without being used, that 11.6 percent increase in liabilities translates to a total increase of $2.9 billion last year, which is roughly three times the increase from the previous year, according to ValuePenguin.
Southwest’s Rapid Rewards liabilities increased by $1.1 billion, the most of any airline studied. Its customers not only redeemed the most miles of any programme, but they also earned the most miles.
JetBlue’s TrueBlue programme, the smallest of the five, was the only one whose loyalty liabilities increased less in 2020 than they did in 2019.
During the pandemic, Delta, United, and Southwest all devalued their reward points, requiring members to pay more points for the same flights, according to Sophia Mendel, a travel specialist at ValuePenguin. And more changes could be on the way.
“Southwest, in particular, is taking a lot of heat for changing their points programme without informing their members,” she said, adding that several international carriers, including Qatar Airways, have done the same.
ValuePenguin examined the airlines on Wednesday to see if they plan to change their rewards programmes this year. Delta has stated that it has no plans to alter its loyalty programme. Southwest confirmed that, as of April 14, more Rapid Rewards points are required to redeem flights on all types of fares.
Mendel believes that devaluing miles or capping award redemptions is a reaction to airlines having an excess of unused miles on their books.
“Airlines devalued prior to and during the pandemic, and they will continue to do so after the pandemic is over,” he said. “Deflation is unavoidable.”
Howard agrees that customers now have more miles, but he believes airlines can control when they are redeemed.
“If an airline believes it can sell a seat for cash, it will not release the award space,” he explained. “As we emerge from the pandemic, airlines are already reducing the number of award seats available.”
However, Mendel cautioned that not every airline operates in this manner.
“Southwest and United do not limit their award inventory, so any available seat can be booked with points or miles,” she explained, adding that both airlines “use dynamic pricing, which means the cost of their award seats will increase as demand increases.”
While the “overwhelming trend” in recent years has been toward devaluation, Schulz claims that not every airline is following suit — at least not yet.
Korean Air pushed back its planned point devaluation from 2021 to 2023 in January, demonstrating the airline’s commitment to its members over immediate revenue, according to Mendel.
According to the airline, the new policy aims to make booking reward seats easier.
British Airways announced last month that it would double the minimum number of reward seats on every flight. The number of guaranteed rewards seats on Euro Traveler flights — the airline’s short-haul economy flights — will, for example, increase from four to at least eight. The new policy goes into effect on July 28, but these flights can be booked now.
American Airlines, one of the carriers studied by ValuePenguin, announced last week changes to its AAdvantage programme that make it easier for members to earn benefits, according to Andrea Koos, a company spokesperson. Members can earn 250 to 1,000 bonus “elite qualifying miles” on flights flown through August 31 for up to ten flight segments, she said in an email.
Flyers, according to Schulz, should not feel rushed to use their points, but they should also not sit on a pile of unused miles for years.
“Use points sooner rather than later,” he advises.
Miles and points can be redeemed for a variety of items, but most people use them to book flights, according to Schulz, who adds that “that’s typically the way to get the most bang for your buck with rewards points.”
Howard agrees that air travellers should not hoard miles, but he prefers another method to protect themselves from changes in reward programmes.
“I recommend that people use credit cards that earn transferable points, such as American Express Membership Rewards,” he said. “This protects you from devaluations because you can transfer points to a variety of airline loyalty programmes.”