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Frequent-Flyer Programs: The End of an Era?

We've had a good run, but it is beginning to look like the era of "cheap" business class awards is coming to a close.

More and more airlines are dropping their "reward charts" which show you fixed mileage levels for redemptions based on class of service and geographic area.  The latest to phase out "fixed rewards" is United.  While the fixed levels still seem to apply (for now) for economy class redemptions, there's virtually no seats being offered at the traditional mileage level for business class. 

As an example; if you were to scan for a business class seat to Buenos Aires (from Canada/USA, it should be 55,000 points), you'll see only offerings at 150,000 or more points for months forward.  Not a single business seat at the fixed points level!

The airlines call this model "dynamic pricing," where the amount of points required for a redemption will vary from flight to flight based on market conditions.  If the flight is filling up and only selling at a higher fare level, for instance, or if the flight falls in a high-demand season, the airline will ask more points for this than something that is wide open and operating in an off-peak season.  While this model might be good for the rare case where you actually want an unpopular flight or route, for the most of us, given we're no different than anyone else, we'd tend to be looking for space during high-demand periods.

The airline program most of us in Canada care most about is Aeroplan.  The fact that Air Canada is taking back control of the program in 2020 is ominous.  They have already gutted the Aeroplan status program.  If you have Diamond status, for instance, the benefits to you in 2020 will be negligible.  Aeroplan has offered a "Market Level" (ie. ridiculously high) award system for years; so in that respect they already are ahead of the curve.  Look to see this part of the program to expand, and possibly see the "fixed rewards" concept phased out over the next year or so.

To be fair, the fixed award levels for business class on airline programs has always been a bargain.  You spend 25% more points for a product that sells retail for 150 - 200% more than an economy ticket.  The way we used to explain it was: you get less than 2 cents a point value when you redeem for economy class travel (don't do it!) and between 6 and 8 cents a point value when you redeem for business class.  Business class travel on points has always been a great deal.  And it put regular credit card rewards programs (all based on the 1-2 cents per point formula) to shame.

This may be the end of an era.



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