How airlines are devaluing: The levers they pull
In the previous article “Why Airlines are Devaluing Programs” article, we explored the financial and competitive pressures that push airlines toward devaluing their loyalty programs. Here, we turn to the mechanics. When carriers decide to reduce the value they return to customers, they have a familiar set of tactics at their disposal. Understanding these levers helps travellers recognise early warning signs and adjust their strategies to preserve value.
The devaluation trend
The journals are full of stories of airlines devaluing programs. This article will not directly name examples as it would not be fair without the individual businesses being able to state context or reasons directly.
In a recent high-profile case, a major carrier eliminated its longstanding policy of allowing two free checked bags, representing a fundamental downward shift in its value proposition and brand identity. Only members of certain groups defined by fare type and credit card holding have been able to retain some of this benefit. The airline announced a basket of changes to assigned seating options and some red-eye related benefits to help cushion the blow, but loyal customer and critical reaction has been harsh, pointing out that the airline had eliminated one of the major planks of its brand and made it like everyone else.
Another significant loyalty program recently made changes to its point redemption rates that increased premium cabin redemption costs by up to forty percent, causing substantial customer backlash. Rather than running marketing activity around the change, the program attempted to minimise attention by simply updating award charts without clear communication, which only exacerbated negative customer reaction.
A large carrier introduced dynamic pricing which resulted in variability in award flight costs and generally raised award prices overall. This shift has made it more difficult for customers to anticipate the number of miles needed for a given flight and has tended to make it harder to secure award flights on popular routes. Though communicated as creating a more flexible program, customers saw through this messaging, and program members have expressed major concerns as a result.
The devaluation levers
Airline programs can employ multiple tactics to reduce value, either individually or in concert:
- Redemption Value Manipulation: Increasing the number of points required for the same reward or decreasing the monetary value of each point. This is a standard approach across many loyalty program categories.
- Access Restriction: Limiting when and how members can use their points through reduced award seat availability or blackout dates.
- Benefit Elimination: Removing perks that were previously standard at certain membership tiers.
- Status Inflation: Requiring members to spend more or fly more miles to maintain the same elite status level they previously held.
- Program Complexity: Making loyalty programs intentionally confusing and opaque, making it harder for average members to maximise value.
- Short-Notice Implementation: Making significant negative changes with minimal warning or transition periods.
